San Diego real estate investing considerations

Few places in the country can beat San Diego as a desirable place to live. Blessed with nice weather year-round, sunny with minimal rain, along with scenic beaches and mountains, America’s Finest City also boasts a good job market, a strong economy, and relatively low crime. 

But how desirable is San Diego for real estate investing? According to a recent report from Zillow, San Diego is California’s hottest housing market in the year 2020. This is not a new trend as the appreciation level of property in SD has been steady for years. During the two-decade span from 1998-2018, the median home value in San Diego rose by 217%, making investing in San Diego real estate very lucrative for investors.

As high as San Diego home prices have risen, trends continue to point toward further appreciation. One factor driving this trend is San Diego’s strong rental market. Demand for rentals has grown year in and year out as more and more individuals and businesses choose to locate here. A relatively low home ownership rate points toward continued demand for rental units, which is a favorable sign for investing in San Diego real estate.

Working with the right professionals

When owning investment properties, it’s critical to align with the right professionals.

There are many San Diego real estate brokers to choose from, and you’ll want to research their background and reputation. “The realtor you partner with must know the price/rent dynamics of the property,” said Mary Beth Kellee of Coldwell Banker West. “Without that knowledge, it can be hard to find the right deal in today’s San Diego market.”

It’s also very important to work with an experienced tax professional. Real estate investing can offer many tax advantages, but it’s also relatively easy to go afoul of the regulations. The rules change from time to time, so your tax professional must be up on all the latest rule changes.

Looking beyond residential real estate

Investing in San Diego can be a full-time job for those who flip houses or own and manage rental properties. But there are also less time-consuming opportunities to include real estate part of an individual’s diversified portfolio. Various REITs, funds and Limited Partnerships allow participation in many types of real estate, not just residential rentals. And if you are living in San Diego, you can diversify geographically by investing in other regions.

For many families, the high value of San Diego homes has left them with a lot of real estate equity. It’s tempting to consider the equity in your primary residence part of your retirement portfolio. A word of caution, though: if you hope to cash in your home’s equity and use it to live on in retirement, know that buying a replacement home in San Diego may cost more than you expect.

Knowing your “location”

Real estate investing can be riskier than other forms of investment. Long downturns in the real estate market may leave you in financial distress if you over-extend yourself. It’s critical to have a clear picture of your financial situation before investing.

As financial advisors to many families who own real estate, our job is to consider all your resources as part of your personalized financial plan. Whether you already have a sizeable amount of liquid investments or if you are thinking of shifting your portfolio to increase its liquidity, our investment management services can help.

We’re here to ensure your investments are working for you. We can help manage your portfolio, offer advice on future investment strategies, help optimize your tax planning in collaboration with your tax preparer, and help you plan for a comfortable retirement. 

About Jon Beyrer

Jon Beyrer, EA, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Compliance Officer. As a lead advisor, he focuses on helping families achieve their goals with sound wealth planning. In the community, Jon serves on several boards and is co-founder of the Professional Alliance for Children, a legal/financial charity for families of ill children. He has been quoted in The Wall Street Journal, The New York Times, and the Journal of Financial Planning. Jon lives in San Diego with his family.

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