Investing in San Diego real estate does not have to mean counting on long term appreciation and tolerating neutral or even negative cash flow in favor of the larger investment picture. It’s positive to gain positive cash flow in San Diego, and we’re here to share some ideas that may help.
Consider Multi-Family Investment Properties
Investors are naturally drawn to single-family homes, especially new investors. If you want to earn cash flow, however, you’ll need to think outside of that box and look at some diverse investment opportunities. Multi-family properties mean multiple rental streams. That’s going to earn you more cash every month. If one unit in a four-unit property is vacant, you won’t suffer as much because you still have rent coming in from three other units.
An even better way to maximize your cash flow is to purchase a small building or a multi-family property and live in one of the units yourself. This will keep your own costs in check and your mortgage paid. You’ll also earn at least a few hundred dollars a month in cash flow from your neighboring tenants.
Invest in Upgrades that Raise Rental Value
A modern, updated, and well-maintained property will attract high quality tenants who are willing to pay top dollar to live in your home. There’s no need to pay for a complete remodel; that’s only going to eat into your cash flow. But, replacing aging appliances with stainless steel or tearing up faded carpet in favor of hard floors will add value to your unit. Even fresh paint or new fixtures on sinks and cupboards can help you earn a little more in rent every month. This will put you on the positive side of the cash flow equation.
Avoid Vacancy and Turnover Costs
Keep your tenants in place. When you have long term tenants who pay rent on time and don’t cause problems or request unnecessary and cosmetic maintenance help, you can begin to cash flow your property by collecting consistent rent, saving on turnover and vacancy costs, and making rent increases from year to year.
Use Tax Tools like a 1031 Exchange
Perhaps you’re not currently achieving a positive cash flow on your property but you know you have a lot of equity in it. Instead of selling and paying capital gains taxes, sell and do a 1031 exchange, where you’d buy a similar property within a specific amount of time. You can use the equity you’ve earned in your original property to make a favorable purchase and immediately begin earning cash on your new property (or properties) every month.
While earning positive cash flow should always be one of your investment goals, remember that it’s not the only way to measure the success of your rental property. San Diego is only growing more desirable as a real estate market. The equity you’re building in your investment combined with the climbing real estate values will make you a healthy profit when you’re ready to cash out.