San Diego is the eighth-most populous city in the United States and continues to grow every year. Whether people seek warm weather, (relatively) less expensive living, or the amenities San Diego has to offer, there are many things to love about the city. One of those things to love is the real estate market.
The real estate market of San Diego is intriguing because home prices are well above the national average, yet much less expensive than some of the other Californian cities – such as San Francisco. The city has experienced a double-digit increase (16%) in home values year-over-year. According to redfin.com, the median home sale price in San Diego is $800,000 as of December 5, 2021. This price translates to a price-per-square-foot of approximately $494, which is well above the national average of $123!
Now that you’re excited about the San Diego real estate market, let’s discuss the Dos and Don’ts of jumping into house flipping in the city.
Don’t Lean Too Heavily on Market Forecasts
The simple reason you shouldn’t lean too heavily on market forecasts is that they are not guaranteed. Projections inherently have some measure of uncertainty that comes with them. Unless you have a crystal ball, unpredictable things will happen. Right now, the market forecasts seem to show a slight cooling due to rising interest rates. However, since San Diego is constrained on one side by the ocean and the other by a mountain range, its population growth is severely outpacing its rate of new home construction.
When calculating the after-repair value, take home value projections with a proverbial grain of salt. They’ll likely increase, but the rate of increase is anyone’s guess. Be sure to fold some margin into your real estate investment.
Don’t Over-Improve for the Neighborhood
With San Diego being a desirable city, one would think over-improving would not even be a concern, but it certainly is. In recent years, homeowners of even the most luxurious homes in California have struggled to offload their asset because the market simply wasn’t moving as much as it had been before the pandemic. Mega-mansions aside, conducting pricey renovations that are uncommon for the neighborhood will result in a property that won’t ultimately command a price that you need to make a profit.
Don’t Handle All the Renovations by Yourself
While it may seem obvious before a project starts, it can be tempting to move fast and try to accomplish as much as possible on your own when the clock starts ticking. However, a half-done job or one that needs to be redone is a massive waste of time, attention, and finances. As the phrase goes, “let the baker bake,” and you can focus on the aspects that you’re best at.
Seek the Growing Neighborhoods
San Diego County has 100 neighborhoods. Find the ones that are ripe with fix-and-flip opportunities and laser-focus on those. While it may be a deluge of data to wade through, identify the neighborhoods that are in your ideal price range and assess their year-over-year home sale prices. When you find a handful of neighborhoods that meet your criteria, let your real estate agent know you’re on the prowl.
Find a Great Team of Contractors and Stick to Their Sweet Spot
One aspect that makes real estate investment valuable is that homes are complex, meaning they have many components. While most of these components don’t evoke cognitive or physical difficulty (painting walls, replacing flooring, installing new cabinetry), many, many pieces go into making a home livable. One strategy for success is maintaining a network of trusted contractors who are extremely good at a few particular tasks.
When you find a property that needs renovations that you know for a fact your team is aces at, you can move fast and confidently on purchasing it.
Get Funded Fast
As the saying goes, “time is the killer of all deals.” It couldn’t be more accurate in the real estate investment industry. San Diego is experiencing a seller’s market, and if you don’t have the cash for purchase quickly, someone else is probably willing to snatch up your deal the moment you turn around. Line up your financing partner before you go property searching so that you don’t waste any time when you’re ready.
At Park Place Finance, we close deals in as little as five business days. Park Place Finance is your trusted hard money lender for when you don’t want to lose out on a deal to the faster competition. If you’re looking for a partner to finance your next real estate investment deal, fill out the form below to get started with Park Place Finance.