Investing in San Diego is a great idea, and there are plenty of opportunities in the residential real estate market. You’ll find there are single-family homes in established neighborhoods as well as newer, HOA neighborhoods, and multi-family buildings that have two, five, or even more than 100 units. Deciding which type of investment is best for you depends on several factors.
Consider Your Investment GoalsFirst, you’ll have to consider why you’re investing in rental real estate and what you’re hoping to gain. For example, if cash flow is your main objective, you’ll probably do better with a multi-family investment property that already has tenants in place who are reliable, have strong lease agreements, and are likely to stay in place for the long term. This will allow you to maximize your rental income every month. However, if appreciation is really what you’re after and you’re looking for a property that you plan to hold onto for 10 or 20 years, consider a single-family home. If you own a well-maintained property and keep up with the updates and upgrades that reflect market demand, you’ll have high occupancy levels and you’ll watch the value of your investment increase over time.
Think About Vacancy RiskYou’ll also have to consider your tolerance for risk. In the San Diego rental market currently, there aren’t a lot of vacancies. Good tenants are plentiful, and attractive properties in desirable neighborhoods are being rented quickly. But, vacancies do occur. Tenants move out, and when they do, you’ll be faced with vacancy and turnover costs. A multi-family property will help you manage that risk better than a single-family home. When you invest in one single residence, all of your income relies on the tenants in that one property. But when you have a duplex, you have two income streams. If one tenant moves out, you’re still earning something. If you have a six-unit building or a 10-unit building, there’s even less of a risk that you’ll be hurt financially when a tenant moves out. This is a good argument in favor of multi-family homes.
Think About Your Tenant Pool
Many of the most qualified long-term tenants will be looking for single-family homes. It’s simply the economics of what today’s renters are seeking. They want to care for and maintain a home that has a yard, a garage, and is in a good school district. They’re usually willing to pay higher rent for a great neighborhood and additional things like a community swimming pool or an easy commute to work. This is a good reason to buy a single-family home; you’ll always have high quality tenants interested in your property, especially if its location and condition are enviable. You can charge the most rent and be as selective as you want with your rental criteria.
If you’d like some help examining the rental properties available in San Diego, please contact us at Mercer Properties. We’d be happy to help you find an investment property that fits your needs, whether it’s a single-family home, a multi-family building, or one of each.