San Diego Real Estate Investing Strategies: Fix and Flip or Buy and Rent?

There are two main strategies for those looking to add San Diego real estate investing to their investing portfolio. You can find houses to fix and flip or you can buy houses to hold and rent for the long-term.

Each San Diego real estate investing strategy has its advantages and disadvantages. Here’s an in-depth look at both so you can decide which is right for you.

San Diego Real Estate Investing Strategy: Fix and Flip

Fixing up a San Diego property and then flipping it quickly can make for some impressive profit gains, if done correctly. Additionally, flipping a San Diego property is relatively cheap to get started as you can find properties for less than market value. These are generally distressed properties such as short sales, bank-owned real estate, or foreclosures. This means you need less of an upfront investment as well as less financing from your lender.

Another advantage of flipping is that it is quick. You buy the San Diego property, fix it up, and then sell it. On average, this takes about six months. In this way, your capital isn’t tied up for the long-term and you don’t have to worry as much about market fluctuations.

Flipping does have a few disadvantages, however. For one, renovation costs can be expensive. While it is possible to do some of the work yourself in order to cut costs, working with pros can ensure the work is done correctly.

But be sure to get a reasonable estimate from a contractor beforehand so you can factor costs into your budget. Keep in mind that interest accumulates while you are renovating, so remember to account for that as well.

With fixing and flipping there is always the possibility that you can run into complications you never expected. Perform your due diligence with your home inspection, but allow for the possibility of problems in your budget. Always do your renovations with proper permits in place, otherwise selling the house later may be an issue.

San Diego Real Estate Investing Strategy: Buy and Hold

If fixing and flipping houses sounds like too much hands on work, there is always the buy and hold to rent strategy. In many markets across the country rental rates are going up faster than home prices. That means more money in your pocket should you decide to buy a San Diego property and rent it out.

Buying and holding properties provides a steady income stream in the form of rent. You should be able to cover not just your mortgage payment, but also maintenance, insurance, property taxes, and so forth and still have a positive cash flow. Buying and holding property also provides the possibility for long-term wealth, as you pay down your mortgage and the property appreciates over time.

There are some disadvantages to the buy and hold strategy as well. Maintenance issues can always be a problem. Your tenants may come to you with all sorts of issues to fix and it may seem never-ending. You can hire a property management company to handle these issues, but that comes at a cost as well, anywhere from 6 to 12% of the monthly rent amount.

In addition, you may miss out on other investing opportunities because your capital is tied up in the San Diego property. Even though you’ll be getting monthly positive cash flow, you’ll have to wait until you sell to receive the larger payout.

Both fixing and flipping and buying and renting are viable San Diego real estate investing strategies that can potentially make you a significant return on your investment. Fixing and flipping can be more exciting and deliver more immediate returns while buying and renting can provide lasting wealth.

Buying and renting involves dealing with tenants while fixing and flipping involves dealing with property contractors during renovations. Either way you choose to invest, be sure that you are knowledgeable in the local San Diego market when evaluating properties.