Are you looking to grow your real estate investment portfolio? Consider investing in the San Diego real estate market! Why? Well, thanks to its healthy economy and tourism, San Diego real estate is now considered one of the hottest markets in the United States. Let’s go further into details explaining why real estate investors should consider buying investment properties in the San Diego real estate market.
San Diego Real Estate Market Figures
Based on data from Mashvisor’s investment property calculator, investment properties in the San Diego real estate market are rather expensive (the median property price is $828,000), but at the same time, they offer high rental income for both traditional and Airbnb rental properties (around $3,000). The expected cash on cash return (CoC return) and capitalization rate (cap rate) for traditional properties is 2.3% and 4.8% respectively, and 2.5% and 5.1% for Airbnb rental properties. Based on these figures, we can say that compared to other real estate markets in the US, San Diego real estate offers much better profitability for a real estate investor.
Use Mashvisor’s comparative analysis tools for details on return on investments (CoC return, cap rate, etc.) in any city in the US!
San Diego Real Estate Market – The Growing Economy
The San Diego real estate market continues to improve and enjoy a healthy economy. Currently, the unemployment rate in San Diego is 4.7%, which is lower than the national average of 5.0%. In addition, the one-year job growth rate in San Diego is 2.8% (0.8% higher than the national average). This is one of the many reasons people decide to move into and live in San Diego, making it the second largest city in the State of California by population. This is a good sign for real estate investors as the growing job market not only helped the city’s economy but also added more demand to the San Diego housing market.
Moreover, San Diego has not only been attracting residents but also tourists. In fact, almost 35 million people visit the city each year! As more people visit the city, the demand in the San Diego real estate market increases, making is a favorable one for a real estate investor. When demand is high, real estate investors can charge more rent or sell investment properties for higher prices, which leads to a higher positive cash flow and rate of return on investment.
Related: Real Estate Investing for Beginners: How Much Cash Flow Is Good for Rental Property?
San Diego Real Estate Market – Opportunities for Traditional and Airbnb Rental Properties
Based on the previous point, we can conclude that San Diego real estate is optimal not only for a real estate investor who is investing in long-term residential real estate properties but also for a real estate investor who is interested in short-term Airbnb rental properties. In fact, looking at the expected rates of return computed by Mashvisor’s investment property calculator, we can see that the traditional and Airbnb rental properties cap rate and cash on cash return are somewhat similar.
Click here to start analyzing investment properties based on a number of metrics provided by Mashvisor, such as cash flow, cap rate, and cash on cash return!
San Diego’s tourism industry is one of the most successful in the nation thanks to its beautiful weather and over 70 miles of coastline. Furthermore, the city has a number of popular attractions including the famous San Diego Zoo, San Diego Zoo Safari Park, SeaWorld San Diego, and Balboa Park. Indeed, San Diego is the 11th most visited city in the US by overseas travelers and is one of the top 5 locations for domestic tourism.
With this prosperous tourist industry, Airbnb San Diego is a great market – Within 8 years, the number of listings has been growing each year by 60%, and currently, there are over 8,000 Airbnb listings of houses, rooms, apartments, and condos. As demand for Airbnb rental properties continues to increase, a San Diego real estate investor can guarantee high Airbnb occupancy rate and low vacancy rates (which ultimately equals high cash flow and rental returns!)
However, there is one thing Airbnb San Diego real estate investors should take into consideration, and it is the city’s regulations regarding this type of rentals. So far, San Diego real estate market laws remain silent on the issue of Airbnb legislation.
Related: Airbnb vs Traditional Renting: Which Rental Strategy Yields Higher Rental Income?
San Diego Real Estate Market – Appreciation Rate
Many people enter the real estate investing business with two goals in mind: the short-term goal is positive cash flow, while the long-term goal is appreciation. Another factor that motivates real estate investors to invest in San Diego real estate at the moment is appreciation rates. San Diego real estate continues to appreciate; in fact, the appreciation rate in the San Diego real estate market has been three times higher than the national average since 2016!
Total equity gains for San Diego real estate are some of the most appealing in the US housing market and will remain like this for the near future. This means that if you purchased a San Diego real estate investment property in mid-2015, this property will have appreciated in value by an average of $53,000, significantly higher that the national average appreciation rate of $16,000.
San Diego Real Estate Market – Increasing Investment Opportunities
San Diego real estate has a rather limited inventory when it comes to housing. However, since last year, there has been a rise in new property construction. For a real estate investor eyeing San Diego for real estate, this is not only a proof that the San Diego real estate is growing, but it also means an opportunity to achieve a higher cash flow. It should be mentioned that there’s an emphasis on the construction of single-family homes rather than multi-family homes. Thus, this increase is beneficial for both a San Diego real estate investor and homeowner.
San Diego Real Estate Market – Affordability
One problem that hinders the San Diego real estate market is the affordability of investment properties. As the figures above show, the median San Diego property price is over $800,000. However, this is what makes San Diego real estate an attractive market! When the general population can’t afford to buy homes, they opt for renting a property. This is a good thing for a real estate investor looking to buy investment properties in San Diego. With the right financing strategy and tax deductions, a savvy real estate investor can make it work in the San Diego real estate market.
Related: The Best California Real Estate Markets: Affordable and Not So Affordable Areas
San Diego Real Estate Market – Conclusion
In the past few years, the San Diego real estate market has been witnessing an increasing demand for rental properties, and according to real estate experts, this demand will continue to grow. So, if you are thinking about buying an investment property, consider buying a San Diego investment property!
Click here to start searching for investment properties in San Diego. Make sure to check Mashvisor’s data and use our comparative market analysis tools to make the right investment decisions and find the most profitable investment property in any state, city, and neighborhood in the US!