What You Need to Know About Real Estate Investing in San Diego

What You Need to Know About Real Estate Investing in San Diego

San Diego offers year-round mild climates to enjoy its many beaches and sunny days. Here’s what you need to know about real estate investing in San Diego.

 

KEY TAKEAWAYS

• San Diego is ranked #2 most desirable city to rent in the country for 2022.
• San Diego averages 266 sunny days per year. Two months more than the U.S. average.
• San Diego rents will increase
• New California laws make San Diego investments better.
• San Diego is cheaper than other major California cities.
• New initiates will increase housing units in San Diego County.
• San Diego County’s current rents can increase until July 31, 2022, to a maximum of 9.1%.

 

San Diego Ranked #2 Most Desirable City to Rent in 2022

 

The Rent Café site declared San Diego as the 2nd most desirable city for a renter in the country for 2022.

To learn why, read our recent blog post titled: “San Diego Ranked #2 Most Desirable to Rent City in the U.S.”.  Rent Café ranked San Diego #2 because of these facts:

1. Competition for rentals got so intense in 2021 that it only took an average of 26 days to fill a vacancy with 29 people applying. This was twice the national average; and
2. San Diego tenants averaged a credit score of 671 making it the “highest credit score average amongst the Top 10 rental markets”.

 

The KEY TAKEAWAYS from our bog post show that San Diego is:

• #1 most fun place to live in the U.S.;
• Among the best places to retire in 2021;
• Ranked among the world’s 25 ‘Most Beautiful’ cities to Visit;
• Renters love year-round warm weather, beautiful beaches, highly rated public schools, great restaurants, and parks;
• San Diego needs more housing units;
• Niche rates 18 San Diego County neighborhoods with Overall Grades of A+; and
• Investors will find San Diego apartments with low vacancies, a high number of potential competing tenants, and renters with high credit scores.

 

Sunny San Diego Beaches

 

San Diego is famous for its beaches. Here’s why:

• San Diego averages 266 sunny days per year. That’s more than two months of sunny days than the U.S. average of 205 days per year;
• It’s never too hot as July averages the highest temperatures at 79 degrees;
• The annual BestPlaces Comfort Index rates San Diego 9.2 (out of 10) making it one of the “the most pleasant places in California”;  and
• San Diego has 31 beaches on its 70 miles of coastline.

These facts make San Diego a popular place to live, vacation, retire, and rent.

What You Need to Know About Real Estate Investing in San Diego

 

San Diego Rents Will Increase

 

Now that the pandemic is winding down, San Diego landlords will see rents rise.

The SoCal Lifestyle Realty blog describes the current San Diego housing investment market as: “San Diego Home Prices and Rents Soar 2022”.

Their blog post explains that San Diego rents are soaring in 2022;

Note: You should read our past blog posts about these housing investment opportunities:

•  “San Diego Rental Market Trends”;
• “East Village, San Diego Ranked #20 Top Apartment Neighborhoods” in the country;
• “Investing Near Military Bases Makes Sense in San Diego”
• “Should You Invest In San Diego Single-Family Or Multifamily Rentals?” and
• “What and Where Are Opportunity Zones in San Diego?” Where San Diego has 46 of them which includes multi-family development with federal tax incentives.

What New Laws Make San Diego Investments Better?

 

In 2021, California passed new laws to jump-start housing development to combat a severe shortage. These laws came into effect in 2022 including:

SB 9 – Senate Bill 9 allows single-family homeowners with a lot at least 2,400 square feet to split the lot into two and develop up to four housing units.

SB 10 – Senate Bill 10 allows cities to upzone urbanized areas near public transit hubs and job centers to allow up to 10 housing units without going through a lengthy state environmental quality process.

Learn about SB 9 and SB 10 new laws in our recent post titled: “How to Develop 28,500 Lots in San Diego County in 2022”.

AB 1482 –  Assembly Bill 1482, understand the new Just Cause Eviction rules explained in our recent blog post: “What is Just Cause for an Eviction in California 2021?”. 

 

San Diego County’s current rent increase until July 31, 2022, is:

5% base + 4.1% CPI = 9.1%

This means the maximum rent increase is 9.1%.

Read about this in our recent post: ”San Diego New Rental Laws You Should Know 2022”.

Are Multifamily Units a Better Investment than Single-Family Homes in San Diego?

 

One of our blog posts compares the pros and cons of investing in single-family homes or multi-family units in San Diego titled: “Should you invest in San Diego single-family or multifamily rentals?”

We concluded that it depends on your investment goals. If you prefer cash flow invest in multifamily units. Or, if you prefer appreciation invest in single-family homes.

Expect the new California laws mentioned above (SB 9 and SB 10) will increase the number of Accessory Dwelling Units (ADUs) and apartments to meet low-income housing demands.

However, SB 9 is only suitable for a single-family residential lot owner large enough (at least 2,400 square feet) to split to add up to 4 ADU units.

On the other hand, SB 10 is available for investors to find vacant lots near major public transportation hubs to develop 10-unit apartment buildings.

 

New Housing Construction Will Increase in San Diego

 

San Diego experienced less new housing construction during the COVID-19 pandemic and in 2021.

Yet, some reforms are proposed in San Diego for 2022 as explained in our recent post: “San Diego Housing Laws: Top Changes 2022”.

For example, the City of San Diego now declares: “Developers are now exempt from paying fees for nearby infrastructure projects on the first two ADUs they build” Yet, this only exempts the first two ADUs. Developers will pay the fees for additional ADUs of 750 square feet or more. This will add more ADUs in the future.

 

California Courts Support Local Governments Exempting Housing Developers from Zoning Limits

 

A California Court of Appeals ruling in February 2022 now allows local governments to exempt housing developers from strict zoning density and height limits.

This was a case arising in San Diego when the city allowed a housing developer the exemptions in return for including a few affordable units in the project. You can read about this precedent-setting case in our recent post titled:

“California Court Exempts Housing Developers From Local Limits”.

 

What are the Cons of Investing in San Diego Housing?

 

Limited Supply

 

A limited supply of available homes and units in San Diego to purchase makes it harder to find investments.

Short supplies lead to bidding wars against other investors.

 

Price Increases

 

Low supplies lead to higher prices. Too many buyers looking for a home to live in and investors seeking opportunities when supplies are low lead to increasing prices.

Yet, if you can find an investment property don’t delay knowing prices will get higher in the future.

 

Short-Term Rentals in San Diego are Limited

 

New laws in the City of San Diego severely limited the number of housing units available on short-term rents. Now, except for a few exceptions, vacation rentals require 30 days or more.

What You Need to Know About Real Estate Investing in San Diego – Conclusion

 

Summing up what you need to know about real estate investing in San Diego:

• San Diego is the 2nd most desirable city in the country for renters;
• Plenty of sunny days at 31 beaches make San Diego desirable to live here;
• Rents will increase;
• San Diego will experience more housing units soon; and
• Rents can increase by 9.1% until July 31, 2022, and possibly beyond.

 

Want to Invest in San Diego Housing?

 

SoCal Lifestyle Realty in San Diego can help you find profitable housing investments in San Diego County.

Contact their experienced Realtors to find what opportunities exist based on your preferences like appreciation or cash flow.

 

Need Property Management Services in San Diego County?

 

WeLease Property Management Company offers you all the professional property management services in San Diego County. It doesn’t matter if you buy single-family home rentals, duplexes, or apartment buildings, we can help you to manage them to save you time while earning greater profits.

Contact us to learn how we can help.

 

 

Steven Rich, MBA – Guest Blogger

 

 

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