If you want to build wealth, there are numerous investment options and countless strategies for where and how to park your money.
But one of the most reliable options is investing in multiunit properties. Here in San Diego, where properties are growing in value, demand for living space is high, and available inventory is relatively low, investing in 2- to 4-unit properties creates a real opportunity for sustained profits and investment growth.
Nothing is guaranteed, but multiunit properties in San Diego are a popular investment.
So how can you build wealth by investing in multiunit properties in San Diego? By taking a strategic yet patient approach, you’ll enhance your chances of success.
Why San Diego?
This article is based on two premises. The first is the city and region of San Diego. Our city is a wonderful place to live and an excellent tourist destination, but it’s also a great place for owning investment properties. Property values in San Diego are expected to rise roughly 10% during 2021, which means investors (likely) will see a strong return whenever they choose to sell. (Assuming prices don’t go down, which is unlikely based on history.)
San Diego is also expected to see significant population growth, which means the demand for housing will only increase. This will ensure that property owners have a continual supply of willing renters to keep their properties occupied. It’s an attractive city, and it draws people not based on a specific business, company, or industry, which can come and go, but on the excellent weather, beaches, and attractions. These factors are not likely to disappear!
Why Multiunit Properties?
The second premise of this article is the advantage of multiunit properties. Multiunit properties provide greater access to income because you have more than one unit to rent out. This means multiple rent checks from a single property, as well as the reduced chance of a property sitting completely empty. Even if one unit is unoccupied, you may have three other units bringing an income.
This makes multiunit properties more attractive, in many ways, than owning single-family rentals.
How to Build Wealth by Investing in Multiunit Properties in San Diego
Consider Living at Your First Property
While this can be a major commitment, especially if you already live on your own property, you may be able to get better terms for your purchase by living on the property for the first year or two. This is because living on the property gives you access to government-sponsored financing.
Certain forms of financing, such as VA and FHA loans, are not intended for investment purposes. However, you can use these loans to purchase properties with as many as four units. The only catch is that you have to live on the property for an initial period, usually between 12 and 24 months.
If you agree to live on the property, you may be able to secure financing with a smaller downpayment, as well as terms that are more affordable for long-term investors. Essentially, you’ll live in one of the units while renting out the rest. Once your initial period is over, you can move out and turn the entire property into an income stream.
Remodel for Value
It’s easy for overhead to ruin an investment property’s return, making what should be a revenue stream into a money pit. But by investing wisely and staying focused on value, you can improve a property while making smart choices for your future. Of course, you’ll need to make the property livable, but projects that bring the highest returns are usually the best.
What projects are worth the investment? According to Remodeling Magazine’s annual survey, few remodeling projects bring full returns for their money. However, in the Pacific region, a garage door replacement will bring a 95% return, while a manufactured stone veneer will bring a 93% return. These both make the property more attractive from the exterior, helping to bring renters to your space.
Don’t overdo it on remodels, especially luxury and high-end changes. Renters likely won’t care if the house has refined marble flooring or a gilded chandelier and you probably won’t get your return on this investment.
Calculate Cash Flow, Expenses Before Buying
If you are going to build wealth by investing in multiunit homes in San Diego, you have to know how much money will be brought in by the property, as well as how much it will cost you to actually own and rent out the property.
Income is fairly easy to calculate. You can get a general idea of how much a property can bring in by looking at similar properties in your area. If you know how much a similar rental property fetches per month for every unit, you should be able to estimate your monthly income. You can also perform a market assessment by a trained professional who should be able to give a reliable estimate for monthly incomes.
The other factor is costs. The largest expense for most rentals in San Diego is the mortgage bill, but even if you own the property outright you’ll still have maintenance, upkeep, and any remodeling that needs to be performed.
Purchase Properties in Moderate Areas
When investing in multiunit properties in San Diego, you can find a wide range of prices, from low-cost housing to high-end facilities. To start your portfolio of wealth-building properties, it’s best to start with moderate-priced homes in middle-income areas. These usually attract a strong pool of available renters, and the homes will generally keep their value.
There are certainly advantages to purchasing on both the high and low ends of the market, but a foundation of moderate, middle-value homes is a solid start for your portfolio.
Use an Affordable Loan
As we discussed earlier, the mortgage can make a big difference in your overall success. If you want to build wealth, you need an affordable loan with the lowest possible interest rates. Don’t be afraid to shop around various lenders and find an option that delivers low rates with terms that fit your specific needs.
Interest rates are currently low but may tick higher, and prices are expected to trend upward, which makes this a great time to purchase property in San Diego.
Get World-Class Services for Your Investment-Loan Application
If you want to purchase a multiunit property with a high-quality loan, contact the team at San Diego Purchase Loans today.
We understand the importance of affordable financings, especially in a hot market like San Diego. With experience serving property investors, we can help you find the right loan for your specific needs!
