Should You Go for a San Diego Investment Property or a Los Angeles Investment Property in 2018?

The Southern California real estate market has been one of the best places to buy a rental property throughout the year. This real estate market is one of the best for making money and is expected to only improve with time (to find out more, read this: “California is Emerging as the Best Place to Invest in Real Estate in the Years to Come”!). While buying an investment property in any of the cities in the Southern California real estate market will likely result in an excellent investment, two cities stand out from the rest: Los Angeles and San Diego. Both the City of Angels and America’s Finest City have top-notch real estate markets, but which is better? If you had one choice as a real estate investor, should you invest in a Los Angeles investment property or a San Diego investment property? Let’s compare the two to find out!

Los Angeles Real Estate Market

When it comes to city averages, a Los Angeles investment property and San Diego investment property are very similar. The differences in each market, such as optimal rental strategy and average return on investment, arise when analyzing their neighborhoods. We will, therefore, compare the neighborhoods in each market. The top four neighborhoods in the Los Angeles real estate market and San Diego real estate market will be listed, with their pros and cons. The two cities will be compared together at the end of the blog. All data in this blog was provided by Mashvisor’s rental property calculator. To learn more about Mashvisor’s rental property calculator, read this: “Mashvisor: The Best Rental Property Calculator You Could Ask For”! To start your 14-day free trial with Mashvisor, click here!

1.) Mid City West

Median Property Price: $1,926,809

Traditional

Rental Income: $4,445

Cash on Cash Return / Cap Rate: 0.34%

Airbnb

Rental Income: $3,971

Cash on Cash Return / Cap Rate: 0.18%

Occupancy Rate: 58%

Pros: The average Los Angeles investment property in Mid City West is a profitable one. The neighborhood provides the highest traditional and Airbnb rental income in Los Angeles real estate. Airbnb occupancy rates and the average return on investment are also relatively high.

Cons: Mid City West is the most expensive neighborhood in the Los Angeles real estate market, with the average Los Angeles investment property on the borderline of $2 million.

2.) Westlake

Median Property Price: $973,952

Traditional

Rental Income: $3,006

Cash on Cash Return / Cap Rate: 0.96%

Airbnb

Rental Income: $1,368

Cash on Cash Return / Cap Rate: 1%

Occupancy Rate: 63%

Pros: The median rental property price in Westlake is the most inexpensive among the top four neighborhoods in LA. Traditional rental income, Airbnb occupancy rates, cap rates, and cash on cash returns are also relatively high in the neighborhood.

Cons: The main con of a Los Angeles investment property in Westlake is its low Airbnb rental income.

3.) Sawtelle

Median Property Price: $1,363,828

Traditional

Rental Income: $4,254

Cash on Cash Return / Cap Rate: 0.44%

Airbnb

Rental Income: $2,778

Cash on Cash Return / Cap Rate: 0.09%

Occupancy Rate: 48%

Pros: Property prices in Sawtelle are right in the happy middle, compared to the other three top neighborhoods in Los Angeles real estate. A traditional Los Angeles investment property in Sawtelle will also enjoy high rental income and average return on investment.

Cons: Airbnb occupancy rates, rental income, and return on investment are relatively below average in Sawtelle.

4.) Koreatown

Median Property Price: $1,060,272

Traditional

Rental Income: $3,130

Cash on Cash Return / Cap Rate: 0.51%

Airbnb

Rental Income: $2,066

Cash on Cash Return / Cap Rate: 0.33%

Occupancy Rate: 58%

Pros: Real estate investors in Koreatown will enjoy its high traditional rental income and cheaper property price. Its return on investment for both strategies and Airbnb occupancy rate are about average.

Cons: The primary con of a Los Angeles investment property in Koreatown is the below average Airbnb rental income.

San Diego Real Estate Market

San Diego may not have the world-class status of LA, but it is still among the best rental markets. This is especially true for a real estate investor wanting to buy a vacation home or traditional income property. Below are the best neighborhoods to buy a San Diego investment property.

1.) Gaslamp Quarter

Median Property Price: $706,022

Traditional

Rental Income: $3,265

Cash on Cash Return / Cap Rate: 2.64%

Airbnb

Rental Income: $3,354

Cash on Cash Return / Cap Rate: 1.88%

Occupancy Rate: 62%

Pros: Rental income is high across the board for the average San Diego investment property in Gaslamp Quarter. The neighborhood also boasts the highest return on investment in the San Diego real estate market.

Cons: While considered cheap in LA, median income property prices in Gaslamp Quarter are average for a San Diego investment property.

 2.) Cortez Hill

Median Property Price: $619,733

Traditional

Rental Income: $2,550

Cash on Cash Return / Cap Rate: 1.65%

Airbnb

Rental Income: $2,970

Cash on Cash Return / Cap Rate: 1.65%

Occupancy Rate: 63%

Pros: Cortez Hill is among the best places to buy an inexpensive San Diego investment property. Its ROI, Airbnb rental income, and Airbnb occupancy rate are other high points for the neighborhood.

Cons: Cortez Hill’s only notable con is its relatively below average traditional rental income.

 3.) East Village

Median Property Price: $562,223

Traditional

Rental Income: $2,508

Cash on Cash Return / Cap Rate: 1.77%

Airbnb

Rental Income: $3,047

Cash on Cash Return / Cap Rate: 1.94%

Occupancy Rate: 59%

Pros: East Village’s biggest plus is that the average San Diego investment property price is the lowest in the market. Airbnb rental income, ROI, and occupancy rate are also noteworthy.

Cons: Like Cortez Hill, the average San Diego investment property traditional income in East Village is about average.

4.) Horton Plaza

Median Property Price: $1,081,209

Traditional

Rental Income: $3,724

Cash on Cash Return / Cap Rate: 1.22%

Airbnb

Rental Income: $3,714

Cash on Cash Return / Cap Rate: 0.84%

Occupancy Rate: 63%

Pros: The average San Diego investment property in Horton Plaza has the highest rental income compared to the rest of the market. Its occupancy rate is as well.

Cons: While it offers the most rental income for the average San Diego investment property, Horton Plaza’s property prices are the highest in the San Diego real estate market. The neighborhood also has the lowest ROI among the top four neighborhoods in San Diego.

Los Angeles Investment Property vs. San Diego Investment Property: Which Is Better?

You can’t go wrong with a Los Angeles investment property or a  San Diego investment property. Still, each market has its advantages over the other. The final verdict is:

Los Angeles is better for…rental income (especially traditional) and better sales.

San Diego is better for…purchase prices, occupancy rates, and ROI.

Both San Diego and LA are among the best places for positive cash flow properties. For more on how to find profitable properties, read this: “How to Find Positive Cash Flow Properties”! To learn more about where to invest in real estate in 2018 and how to find the best investments, click here!

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