The Real Estate market has changed, no one can argue that. Prices have plummeted in San Diego– in some sub-markets more than others. Many have lost substantial value in their homes, but have been fortunate enough to be able to hold onto them. Other have lost their homes altogether.
One of the hardest hit markets was condos, especially (non-oceanfront) higher end condos . HOA’s have been struggling with foreclosures and many an “upside down” owner has walked away. With real estate so shaky and the stock market unsteady, what does one do to invest in their financial security?
My prediction is that lower-end condos are going to be great investments for the future:
1. With so many people downsizing from their foreclosed homes, lower priced rentals are at a premium in San Diego. There is huge competition for a well-priced, well located unit renting from $800-$1200/month. I see this all the time in my Property Management division.
2. “Bread and Butter” properties have traditionally been the least affected by an economic downturn mainly because 2 people can afford an average rent, and have to live somewhere. When times get tight, they won’t opt for living in a tent, they will opt for a 1 BR unit as opposed to a 2 BR unit….or a 2 BR unit with a family member or roommate.
3. Condo prices are so low that if you do the math, you will most likely recognize a positive cash flow after all your expenses are paid, or at least break even.
4. You can never go wrong with a well located 1 BR condo. because you can always live in it yourself if you need to. Call it Plan B.
Gone are the days (at least temporarily) where people are spending 50% of their income on housing because companies have downsized, jobs have been cut and many families are living on one income. With credit issues from recent distressed sales, bankruptcies and divorce, a huge part of the population is looking for small, affordable units and will be into the foreseeable future.
I would say that if you want an investment strategy for your future, purchase 1-2 BR condos in well located areas in San Diego. Make sure you thoroughly review the financials, and try not to purchase a condo in a struggling HOA.
Purchasing just 2 or 3 condos could add to your portfolio for a very nice, secure retirement!