Real Estate Investment in San Diego, CA

Why Invest in San Diego Real Estate?

With warm weather, over 70 miles of coastline, picturesque beaches, and popular attractions like Balboa Park and SeaWorld, San Diego is home to 1.407 million people, being the second largest city in California by population. The population growth rate is 0.91%, which is higher than the 0.7% national average. San Diego's economy is solid and constantly growing, supporting industries such as technology, hospitality, military, biotechnology, and microbrewery. Both population and economy growth lead to a high rental demand in the area.

Even though the median property price in San Diego is rather expensive ($828,000), making it tough for real estate investors to enter this market, investing in properties in San Diego can offer high rental incomes both for single-family homes and vacation rental properties (such as Airbnb). Real estate investors can expect a cash on cash return of 2.3% and a cap rate of 4.8% for traditional rental properties as well as a cash on cash return of 2.5% and a cap rate of 5.1% for vacation rental properties. This makes San Diego a profitable market for real estate investors.

Investment Considerations for San Diego Real Estate

There are a number of factors to consider, including:

  • Job growth – With companies like Qualcomm, Ferrellgas, Bad Boy, Acadia Pharmaceuticals, Illumina, Psyonix and Zesty.io headquartered in San Diego, the city has also been attracting a lot of start-ups and renowned knowledge-based organizations to open key offices in the area. San Diego is one of the country's best cities for job growth and the employment has grown at a 2.6% annual rate in 2016. Thus, the job numbers are growing, especially in the high-paying professional fields, while the unemployment rate has dropped in 2018 to 2.9%. With these great numbers, real estate investors in San Diego can know for sure that the rental demand is growing, and they'll be able to choose from plenty of employed tenants who can pay their rent on time.
  • Growing tech hub - As the 4th place in the United States for startups, the city is often called a tech mecca. Plus, San Diego has actually made it to Forbes' 'Best Cities to Start a Business' top spot. With a lot of promising tech projects being hatched here, many entrepreneurs call America’s Finest City their home sweet home. Therefore, more and more talented people are choosing San Diego as the place where they can expand their careers. Thanks to the city's growing tech scene and newly arrived tenants, real estate investors in single-family rental homes in San Diego can enjoy positive cash flow likelihood.
  • Famous tourist destination - San Diego welcomes approximately 35 million tourists each year. There's an increasing demand for Airbnb-type properties, with high occupancy rates and low vacancy rates. This makes the demand in the city's real estate market increase, which translates into a favorable market for real estate investors. With such a high demand, real estate investors can charge higher rents for vacation rental properties, leading to a growing return on investment and a positive cash flow.

What are the Best Neighborhoods to Invest in San Diego

Neighborhoods like East Village (rental income: $2,630, CoC return & cap rate: 3.2%), Pacific Beach (rental income: $2,650, CoC return & cap rate: 2.3%), Point Loma Heights (rental income: $2,740, CoC return & cap rate: 3.1%), and North Park (rental income: $2,140, CoC return & cap rate: 2.1%) are some of the best areas to invest in San Diego. These show the highest potential for rentals and their occupancy rates surpass other neighborhoods'.

The city is a smart call for real estate investors looking for positive cash flow, profitable cap rate, and CoC return. Overall, San Diego is a nice, profitable venture for investors in single-family homes and vacation rental properties.

 

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