The San Diego real estate market is one of the strongest, as it is the second largest city in the State of California by population, with more than 70 miles of coastline. San Diego enjoys multiple features that make it the perfect place to be for tourists and residents alike. Almost 35 million people visit San Diego every year. Its perfect weather throughout the year, with an average of 64 degrees, along with its tourist attractions play a huge role in it having the hottest real estate market at the moment. So, if you’re a real estate investor, now is the perfect time to become a landlord in San Diego. This article is dedicated to explaining why the last statement is a fact.
Related: Top 4 Benefits of Investing in San Diego Real Estate
San Diego Real Estate Market
The San Diego real estate market has been witnessing increasing numbers of rents and rental income for landlords in the past few years, and according to real estate experts, its real estate market investments continue to grow. In 2015, San Diego’s real estate market ranked 5th in the list of most expensive markets in the US, and it stayed in the top in 2016. This is due to the growing population of San Diego, which affects the demand and supply in the rental market. In 2017, the demand for rental properties is still increasing, while the limited property inventory remains. Guess who is winning in this situation? You guessed it – the landlords.
Related: Most Affordable San Diego Neighborhoods to Invest in
The affordability of income properties in the San Diego real estate market in 2017 is an issue for investors, with a median property sale price of $721,305. However, the rental income is very high too with $2,570 for traditional rentals and $1,618 for Airbnb rentals. In addition, the expected cash on cash return (CoC return) is 2.40% for traditional rentals and 1.67% for Airbnb ones. These figures are proof that the San Diego investment property’s profitability is higher than in many other top city real estate markets in the US, regarding the traditional and Airbnb rental strategies.
For further details on rental returns (CoC returns, cap rate, etc.) in US cities, use Mashvisor’s comparative analysis tools to make the right investment choices.
It is worth mentioning that there has been a rise in property construction since last year with an emphasis on single-family homes rather than multi-family homes. That means higher cash flows for investors who are eyeing San Diego for real estate investing.
Appreciation in San Diego Real Estate Market
Along with high profitability of the San Diego investment properties, the bright side of investing in this city includes high appreciation rates. Investors rejoice! The San Diego real estate properties appreciation rate has been three times higher than the national average since 2016. According to an article published in 2016, houses purchased in the San Diego real estate market in 2015, 2013, 2011, 2009, and 2007 had appreciated by an average of $52,565, $164,316, $208,199, $259,927 and $34,649 respectively. Take these figures and compare them to the national average appreciation rate, and you will realize how profitable it is to invest in San Diego real estate.
For example, four years ago, the average appreciation difference between San Diego and other cities was $36, 784 in favor of San Diego. Numbers don’t lie!
San Diego Real Estate Market vs. Other US Real Estate Markets
In spring 2017, San Diego came in the 8th place in terms of increase in house prices of the US cities list. In a year, San Diego’s house prices rose by 6.6%, while the prices rose 5.8% everywhere else in the US. This year, cities like New York, Miami, and Chicago all came below San Diego with 3.8%, 5.4%, and 4.00%, respectively, while cities like Seattle, Portland, Dallas, and Denver witnessed the highest rise in prices with 12.9%, 9.3%, 8.4%, and 8.2% respectively.
During April 2017, nearly 4,000 homes were sold in the San Diego real estate market, the lowest sale number since the past five years. The high demand and the limited supply as well as the low mortgage rates are responsible for the recent price skyrocketing. In 2016, there were nearly 6,000 home listings in the San Diego real estate market, while this year the number decreased to 4,763 listings.
Related: The 12 Best Places to Buy for Rental Income in the US this Year
Real estate experts can’t predict how much prices can further rise by the end of 2017, but it is important for investors to keep their real estate market data updated.
Airbnb Property Investments in San Diego Real Estate
Before Airbnb was founded in 2008, San Diego had been famous for short-term rentals. However, the existence of Airbnb maximized the number of short-term rentals revenues. In 2009, San Diego listings in Airbnb did not exceed 5, while nowadays there are over 8,000 listings of houses, rooms, apartments, and condos. Within 8 years, the number of listings has been growing by 60% annually. By February 2016, San Diego Airbnb hosts received an estimated $8 million in rental income.
Related: Why Investors Should be Looking into Airbnb San Diego
One of the major reasons why the San Diego short-term rental market has been thriving in recent years is Comic-Con. This famous annual event receives an average of 130,000 visitors each year, with 167,000 people attending the affair in 2015. Comic Con has been enriching San Diego, both literally and figuratively since 1970, and it has become one of San Diego’s most famous attractions. With this crazy number of people and their amusing costumes guaranteed to flock to San Diego between June and August, Airbnb hosts can take advantage of the high demand and raise their rental rates.
Other attractions in San Diego that greatly help the rental real estate market include: Balboa Park, San Diego Zoo Safari Park, Seaworld San Diego, and Old Town San Diego State Historic Park, to name a few. Mashvisor’s city investment guide offers a closer look at the attractions and activities in San Diego.
Traditional vs. Airbnb Rentals: Airbnb Regulations for San Diego Real Estate
Despite all the positive cash flow short-term rentals represented by Airbnb rentals, real estate investors might still want to take into consideration the San Diego regulations regarding this type of rentals. As Airbnb is growing in a hotspot like San Diego, it has been met with angered hotel associations and community groups. Earlier this year, a San Diego attorney announced that short-term rentals are illegal rentals. It was argued that because short-term rentals are not clarified in the city code, they cannot be legal. However, city officials declared that they will bring regulation proposals to the City Council this summer or fall. With nothing clear about the future of Airbnb rentals in San Diego at the moment, the cash on cash return for traditional rentals has surpassed this of Airbnb. The San Diego Investment Performance on Mashvisor shows that the traditional CoC return is 2.40%, while the Airbnb CoC return is 1.67%.
The Bottom Line
There is no doubt that San Diego should be a top choice when it comes to real estate investing in the US; the numbers illustrating its performance in the rental market are impressive. However, to help you make the right investment decisions after thorough real estate market analysis regarding your San Diego real estate investments, use Mashvisor’s tools and data to draw the investment map that will lead you to the treasure.
