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abc

Senior Member
Registered: 01/24/09
Posts: 414
Reply with quote  #1 
Does anyone own units in lower end areas of SD?  The numbers are pretty good.  With leverage and these rates, there is a good return on cash investment (on paper at least).  I'm just trying to get over my hesitation since I don't know these areas well and wouldn't live there myself.  So far in my investing career I have only bought rentals in areas where I would personally live.  The lower end areas may be totally fine, it is just an big unknown for me.  I just don't want to get myself into a pain in the neck.  Areas I'm talking units:

-National City
-Old Chula
-Encanto
-Logan Heights
-Grant Hill
-City Heights
-Lemon Grove
-Spring Valley
-El Cajon
-Oak Park

Is there anyone who owns units here that can tell me about it?  It's just hard to know until you close on a place and have the units up for rent what you are getting yourself into.  With 25% down, fix up costs, and all the time & energy invested, it's a big commitment of time and money.  So there's a hesitation to go forward when you don't know what to expect for tenants and management in these areas.  









Shnaka

Senior Member
Registered: 01/03/08
Posts: 340
Reply with quote  #2 
I work in Chula, Nat City, El Cajon. There are some huge differences in the markets you list there, some are much better than others and they have wide ranging demographics. Chula Vista is an excellent market in my opinion for stable tenants and good cashflow. Call or E-mail me if you'd like to discuss in more detail bascom@scc1031.com 619 916 9179
KARENY

Senior Member
Registered: 08/23/09
Posts: 201
Reply with quote  #3 
I just rented one in the hood in Oceanside.No problem 1585 for tiny 3 bed condo.Sec 8.Even though this one is kinda in the ghetto I always fix it up really nice and I had multiple offers to rent in 3 days. It was a very low end condo for 127,000. Sold for 350,000 in 2005.  I only do Section 8 because the average tenant stays close to 10 yrs.
abc

Senior Member
Registered: 01/24/09
Posts: 414
Reply with quote  #4 
Thanks Karen, that is good info on average stay for section 8.  Turnover is the biggest cash flow killer for rentals.  Do you have to fix a lot of stuff for the sec 8 inspections?  $1,585 is a good rent for a $127k condo.  Do you have other properties in bad neighborhoods?
KARENY

Senior Member
Registered: 08/23/09
Posts: 201
Reply with quote  #5 
No this is the only ghetto property I am renting.It belongs to my young son who bought it when he was 21 and he wanted me to manage it for him. I was worried about being able to get a good tenant but it wasnt a problem and the rent is guaranteed; a good portion of it.This one lady said she would only have to pay $165 and the govt would pay the rest.They always pay because those vouchers are like gold and they dont want to lose them. Most of my investor friends are all doing sec 8 because they have low turnover and high cash flow.
KARENY

Senior Member
Registered: 08/23/09
Posts: 201
Reply with quote  #6 
No this is the only ghetto property I am renting.It belongs to my young son who bought it when he was 21 and he wanted me to manage it for him. I was worried about being able to get a good tenant but it wasnt a problem and the rent is guaranteed; a good portion of it.This one lady said she would only have to pay $165 and the govt would pay the rest.They always pay because those vouchers are like gold and they dont want to lose them. Most of my investor friends are all doing sec 8 because they have low turnover and high cash flow.
SeanHillier

Senior Member
Registered: 10/19/09
Posts: 450
Reply with quote  #7 

I have an investor client who is very happy with their Section 8 renter. And yes, those Section 8 vouchers are like gold. The S.D. County website says the waiting list for Section 8 openings is 5 to 8 YEARS.


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Sean Hillier
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kaihacker

Avatar / Picture

Senior Member
Registered: 05/31/07
Posts: 4,777
Reply with quote  #8 
In Kern County the Section 8 system is closed but current recipients can continue in the system as long as there is funding.  

I have never actually had a section 8 applicant in my area of rural kern county.  I have has tenants with govt assistance, sometimes better than the section 8 program....but never section 8.  One program I have worked with a few times helps the tenant with first, last and deposit along with a portion of the monthly rent.  

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abc

Senior Member
Registered: 01/24/09
Posts: 414
Reply with quote  #9 
What are the downsides to section 8?  They have to inspect the property annually and you have to fix what they ask you to fix right?  Sec 8 seems like a great way to go. If you can get a tenant to stay for 10 years in a high cash flow area with these prices and these interest rates...you are set up to win big with buy & hold!

KARENY

Senior Member
Registered: 08/23/09
Posts: 201
Reply with quote  #10 
the downside?They usually have kids that can be a little rough with the property but I dont mind if they stay for a long time.  Actually I have heard the average wait is 7 yrs, but I have had applicants that have gotten bumped up the list to maybe a 1 month wait if their case is considered more dire like single moms with kids :homeless.or a mom who comes out of rehab successfully and wants to be reunited with the family. I have found most of the sec 8 tenants to be very grateful for the voucher and are pretty good tenants. Sometimes sec 8 will pay 80% of the deposit too.
KARENY

Senior Member
Registered: 08/23/09
Posts: 201
Reply with quote  #11 
Yes, there is a yearly inspection you have to pass; but so what its all stuff that should be done anyway like screens on windows,no loose flooring..basic stuff that should be done anyway.
hbkmat

Senior Member
Registered: 06/08/05
Posts: 197
Reply with quote  #12 
I like Chula Vista. I live in Eastlake and I go to the older part of Chula often. I like spring valley also.  Shoot even San Ysidro would not scare me. I think it would be a lot easier if you knew Spanish.  My aunt rents her house in San Ysidro and they always pay on time and never bother her with small stuff.  
CGabhart

Senior Member
Registered: 03/20/05
Posts: 2,086
Reply with quote  #13 
I own 7 units in city heights, owned in lakeside, escondido, vista, encanto, north park, hillcrest.

They all have there challenges but it is more management intense in the lower end areas and your expenses (not taxes) are definitely more.

I would probably pay a little more for an under rented deal in north park or chula vista that you can upgrade and crank up the rents.

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KARENY

Senior Member
Registered: 08/23/09
Posts: 201
Reply with quote  #14 
I have not found it to be management intensive;and the cash flow is good.I absolutely HATE turnover!Thats why I do section 8.I have over 400 a mo positive on the condo; and that was with a small down payment. Just rented today; tenant plans to stay till kids are out of school... aproximately 10 yrs. 
mlreits

Avatar / Picture

Senior Member
Registered: 04/01/10
Posts: 913
Reply with quote  #15 
Quote:
Originally Posted by larrywww


There's an old saying amongst investors that cash flow is a lie.  My own personal belief is that if you want cash flow you probably need to add loans to the mix of investments because a loan comes alot closer to pure profit in most instances.

I've sometimes wondered about investing in an upscale market like San Diego County.  (I know it sounds a little odd to call Oceanside "upscale", but I guess everything is relative.) 


Hi Larry,

Can you explain the first paragraph? This is the first time I've heard of it and not quite understand it.

With respect to your 2nd paragraph, it is my understanding that people invest in an upscale neighborhood as part of inflation hedge, asset protection and for appreciation or schools. It's almost never cashflow in an upscale neighborhood. The numbers speak for themselves. 8-10 x annual rent vs. 25-30 x annual rent.


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Minh

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