San Diego Income Property Is Much Like Many Regions — B-List — Your Area?
Posted @ 6:36 pm - Filed under Builders, Buying Income Property, RE investment strategies, Real Estate Markets, San Diego Property Owners, Tax Shelter
Short ‘n sweet tonight — or not, depending upon your outlook. I’m biased big time towards San Diego as an area for real estate investment capital. That said, there’s personal bias, and real life data. The facts are not kind to our local product, regardless of the opinion held by those who’ve lived here since the ’60’s or earlier as I have.
Investors look at the big picture, then drill down in order to come as close as possible to comparing apples and apples. Factors like location, income/price ratio, tenant quality, current and potential trends, property age, demographics, and many more play huge roles in the decision making process.
Does this describe your region? It’s a description of the vast majority of San Diego’s income property.
San Diego still sports small income properties (1-4 units) with prices reflecting price/rent ratios of 10-13 or worse. Strike 1.
Typically the age of these properties range from 20 on the low side (rare indeed), to over 50 years old. This just about guarantees future if not current functional obsolescence, significantly higher operating expenses, and/or all three ’till the investor bites the bullet, spending the boatload of capital it’ll take to provide the remedies. Strike 2.
Trends in San Diego since the mid-1980’s show a distinct preference for builders/developers putting up owner occupied housing, not duplexes/fourplexes or apartment complexes. The analysis is what drives their decisions, and regardless of the current downturn and impending recovery (don’t read anything definite in the word ‘impending’ please), I don’t see the numbers favoring a change in outlook any time soon. Strike 3.
The depreciable base of San Diego property is usually much lower than the competition in outa state regions. Why? Simple, a 40 year old property will make it difficult for the investor to claim a low percentage of land value to acquisition price. The higher percentage applied to the ‘improvement value’ of a property, the higher the annual tax shelter. Strike 4.
I could go on, but for to what end? This is why I’m willing to help local folks who simply can’t be talked out of their local bias, but insist they understand they’re buying what I rate as B-List product. It wasn’t very long ago that I wouldn’t even entertain the idea of being a party to San Diego property acquisition. As I said earlier, San Diego ain’t the Lone Ranger when it comes to these points. If your area meets some or all of the ‘downside factors’ mentioned above, you might wanna start treating that denial you’re harboring. 
It’s down the road, when you’re ready to make the next move that the unsavory consequences of your current acquisitions will come home to roost. Sidestep those woes today by opting to overcome your biases for local B-List product. There’s plenty of A-List stuff to go around — really.
‘Nuff said.
Ready to get started — or to make your next move? Maybe you’re wondering if a move is even in your best interest at this point. Find out by talking with me. 619 889-7100 will find me every time just as an email will. Have a good one.
This entry was posted on Wednesday, July 22nd, 2009 at 6:36 pm and is filed under Builders, Buying Income Property, RE investment strategies, Real Estate Markets, San Diego Property Owners, Tax Shelter. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
