Is buying a condo in San Diego a bad investment?

So you're considering buying a condo in San Diego, but you're concerned or hesitant because you don't know if it's going to be the wisest investment whether you're looking to live in it or not. That is exactly what we're going to break down on this video today. My name is Dan Parker with the Best Life Home Team, your San Diego real estate resource and whether you're considering buying a condo, a townhome or a single family home, reach out my team and I we'd love to be able to help you out. This is a very common question that we get from our clients whether they're looking to buy a condo or townhome or attached property to live in or as an investment vehicle. Either way, it's still an investment, right? If you're purchasing a property for a lot of people, that's the most expensive thing they're going to buy in their life. And so you absolutely want to make sure you get a good rate of return that's going to be easy to sell whenever that day comes. So this is a bit of a loaded question or it's a lot to consider. I'm going to break it down into three main criteria that we're going to go over here in a minute. But here's the main value hierarchy. So in any market, if you're looking at the types of homes that are going to have the best opportunity for appreciation and for resale value, this is the hierarchy. Number one is going to be single-family detached homes. Three-bedroom, two-bath minimum is going to be most ideal. That's going to be on the top of the hierarchy. Then you have townhomes in detached condos, which I will explain here in a second. And then the third tier, you're going to have condos and I'd probably lump in there 55 plus communities and maybe even two-bedroom homes. So those are the bottom of the criteria. But again, a lot that you have to consider, which we're going to go over here in just one second. All right, let's hold on a second before we go any further. I think it's important that you know what a condo is. Now, condo is obviously short for condominium. It's condominium association. Technically, these can be attached properties. So they can be, they can have other properties on the sides. You can have other properties on the top and the bottom, but they can also be detached. So really it's, it's not just properties that have people above and below and on the sides. It's the way that the entire community is classified and what your ownership level is. And the simplest way to break this down is if you own a single family home, you own the physical property, and then you also own the land that it sits on. Whereas if it's a condominium association, you generally just own the unit and the land is owned by the condominium association. And you also partially own some of the community space as well. The land is shared between the owners of the condominium association. And that's how you can have detached condos. So you can see this a lot of times if you're looking around, if you're looking on Reifen, looking on Zillow, realtor.com, wherever you like to look for homes. If you see what looks like a single family detached property, that seems to be significantly cheaper than anything else that's around. This is one thing that commonly pops up that technically, it's a condo, it's classified as a condo as opposed to a single family detached property. It's a little bit nuanced. But the thing, the main thing for you to know is when it comes to this being an investment vehicle for you and for your family, it's cheaper to buy, it's also going to sell for less money than surrounding detached property properties. So there's, in my opinion, there's it's not like there's a ton of things that you have to be concerned about or worry about in this scenario. But strictly as an investment vehicle, it's going to appreciate less than the surrounding detached homes. And as I brought up in the video, there are three main criteria that you want to consider as to whether or not this is going to be a good investment for you. First is going to be location, there's a lot to consider with a location as in terms of like, what where's it located in San Diego County? What specific neighborhood is it in? But also like specifics of that location of does it have walkability? Is there a cafe and a restaurant and a little park that you can walk to from that condo? That's going to be huge, that's gonna be really big when it comes to resale value. Is it located on a main road or really busy intersection? Can you hear or see the freeway? These are all going to be super big negatives when it comes to reselling that property. And just knowing the general supply and demand in that specific area. If you look at downtown San Diego, it's going to have roughly 50% of all the condos in San Diego County are located in downtown San Diego. Now that makes it really easy when you want to purchase down there. But when it comes to selling, you're gonna have a lot more competition. Some other specifics when it comes to San Diego for location of anything that's super coastal, extremely coastal or surrounding Balboa Park is generally going to be a great place to purchase a great place to invest. And as I was just mentioning, downtown is going to be a little bit of an outlier and specifically East Village would be an area that personally if I were looking to buy an attached property, that wouldn't be the first place I would look. The second consideration I would have would be the cost and the value. So the cost is going to be the physical price of that property. I think also compared to other condos, other detached homes in the area, is it an outlier? Is it significantly higher? Is it significantly lower? Those could be potential challenges, potential pitfalls, you know, most of us have heard the saying from from our parents, or from someone else that you never want to be the most expensive home in the neighborhood. And I think that kind of goes for these types of complexes as well. If you're living in a or purchasing a condominium or a condo in a complex that is significantly nicer than anything in the area that could actually be a negative because if you think about it, you can't really you're basically capped at the value of that property. Now, of course, there are certain areas I would say that don't necessarily fit this mold. Again, these are all general considerations. If you want specific advice, reach out and I can help you through the process. And when it comes to cost, it's not just the physical price of the property. It's also going to be how much are you paying in HOAs? And of course, what do you what do you get with those HOAs, which we'll get into on the the next topic that you want to consider? And also, is there Melrose? If you aren't from San Diego or California, Melrose is an additional tax for new communities. You'll find this a lot in Chula Vista, you'll find it in San Marcos, you'll find it in Mission Valley, a lot of the brand new complexes and anything that's built in the last 20 or so years, generally, there's going to be an additional tax. Now that tax is usually going to have an expiration date. So usually last 20 to 25 years, although I will say a lot of the newer communities that we're seeing throughout San Diego County, there's not an expiration date or the expiration date is significantly farther out than we've seen in the past. And although this can be a challenge, and this can make it more difficult for it to be a great investment. Also consider this goes into beautifying and to supporting the local community goes to building schools, it goes to building brand new nice shopping centers, and beautifying the streets and landscaping and all that kind of stuff. So although this is an additional cost, you kind of want to see what is it going towards. If you're living in an area like Otay Ranch, Otay Mesa, these are newer communities. And you can just see what all that Melrose has done. It's really helped to beautify the community. And that actually adds value to your property and the surrounding properties at the same time, which can be a great thing. And the third consideration is going to be community insights. So you have an HOA, what do you actually get for that? And this is again going if you look at downtown, if you look at the high rises in San Diego, this can be a challenge because sometimes you'll see an HOA of $1,000 a month without a gym without really feeling like you're getting a lot for that investment. Because the upkeep and the maintenance of these high rises is going through the roof, the insurance for these high rises is going through the roof, it's getting more and more expensive. So that's going to be a downside of the high rises. But just in general, what are the amenities? What are you getting for the cost of that HOA? You also want to know the size of the complex? Is it is it extremely dense? Is that something that people are going to like in the area that you're in? And really, really important when it comes to community insights is the actual financials of the HOA? What does it look like? Do they have enough enough funds to cover everything that they want to do? How funded is that HOA? Is there a ton of deferred maintenance throughout the community that's generally going to be a bad sign when it comes to how well it's funded. And lastly, when it comes to community insights, you want to know what percentage of that community is owner occupied, which means you purchase a place to live in yourself versus how many of those units are being rented out. If there is a huge percentage of people that own those properties, just to rent them out, then think about yourself as wanting to owner occupy and purchase it to live in it, there's gonna be less of an incentive, there's gonna be less of a desire to want to live there. And when you purchase one of those units, because you're surrounded by people that are renters, and may not care as much about the community about the complex about that unit. Of course, that's not always true. There are some great tenants out there. But these are just some general rules that you should consider along with does this HOA allow short term rentals, that's going to be potentially a big pitfall, but a big challenge, a big negative as well, because the shorter period of time that people are living or staying in those properties, the higher likelihood that they're there to party to have fun and care less again about the community about the unit about the neighbors. Now, if you're looking to purchase this as a short term rental, then great, that's that's not going to be a challenge for you. But if you're looking to purchase to live in that unit, then that, for me, that would be a huge consideration. So whether or not this is a good investment really depends a little bit on what are your goals for this property? Are you going to rent it out from the beginning? Are you going to live in it for five to 10 years and then have the plans to move somewhere else and rent it out and turn it into an investment property? For a lot of people that can make that happen, that can be a great opportunity. I love the idea of using a condo or townhome as an investment property because there's a lot less maintenance, a lot less upkeep insurance is going to be a lot lower because you have the master insurance policy. There are a lot of there are fewer overhead costs, along as as long as you account for the cost of the HOA. But usually what people are talking about when they're talking about a personal residence, being a good investment property is how difficult is going to be to sell this property? Am I going to is it going to appreciate or is it not going to appreciate as much as single family homes or townhomes surrounding? And it is true that attached properties in general might take a little bit longer to sell might not appreciate quite as much as detached properties that are nearby. But that's not always a case. Let me give you the example of the current statistics in North County, San Diego versus Metro San Diego, which includes downtown. The two metrics we're going to use to really compare and contrast these two are going to be days on market how long between a property being listed in selling and also the original list price versus the final sale price. These are the two metrics that are going to show us what makes the most sense. And if you look right now in North County, San Diego days on market is exactly the same between detached properties and attached properties at 24 days on market and percentage of original list price versus what they received or what the sale price was, was in the 98% range. Both of these are great. And if you think about it makes sense because there are a lot fewer, there's a lot less supply in North County when it comes to condos. So demand is going to be relatively high as a percentage versus when you look at Metro San Diego, days on market for single family homes is 20 versus attached properties is 31, which means over 50% longer to sell those attached properties. Still nothing crazy. I'll take a 31 day average days on market. That means with great marketing, you can sell that thing fast, that shouldn't be a problem. And then percent of original list price versus sale price received is going to be 99.2% in Metro San Diego for single family homes in 96.9% for attached properties. Now that small percentage of difference could mean could mean 10s of 1000s of dollars when it comes to selling your property. Now that's significant, that's worth considering. But again, every single property is going to be different, especially when you consider the three criteria that I just mentioned. Question for you is, would you consider buying a condo in San Diego County? I think if you're this far in the video, the answer is probably yes. So I put together a full buying checklist when it comes to a condo that you can check out right here or reach out to myself and my team and we can help you through the process or contact info down below. Thanks for watching. See on the next one.