Dear Landlords and Investors,
The principles of leverage, supply, demand, and ROI still push appreciation. San Diego has proven to be a wise location for your investment dollars. But, don’t become complacent. Don’t lose track of why you are investing, regardless of how successful you are. Dealing with unexpected issues can make or break your business. So of course, you’re right to want to understand how the current market affects your property values. You deserve expert guidance. Here are details on what you need to know now:
A TURN IN THE 2-4 UNIT MARKET?
Over the last few months we’ve noticed a trend of the average sales price dropping. December of 2022 was at $1,285,327. January of 2023 was at $1,275,616. And February was at $1,129,693. Which is down $155,634 in just 3 short months. Not earth shattering by any means. Especially with rates continuing to rise. And the uncertainty in the equity markets.
It may be a sign of the typical slow down we see in winter. But, couple it with some of the other factors we track and we have to ask: Could this be more than the winter slow down? There were a total of 43 2-4 units that sold last month in February. Of them 11 had price increases. 2 of them sold at list price. And 30 had price decreases.
A big majority or 29 of the sold were 2-unit type properties. Next, there were 9 that were 3-unit type properties. And there were only 5 of the 4-unit buildings that sold last month. Hmm… these numbers started making us think.
We closed on a duplex off of Hilltop in Chula Vista two weeks ago. It closed at its listed price, $1,095,000. We had a handful of offers. Several that were over the list price! Proving that what we’ve repeatedly said still rings true. Well priced property sells quickly at or above list price. This particular duplex had a lot going for it. It had two identical townhome style units. With 3 beds 2½ baths and attached 2 car garages on each side. Decent sized private fenced backyards, and plenty of off street parking.
So to both our buyer and seller clients. Stay vigilant! Buyers when you see something that looks good. Reach out to us right away. Believe us, you’re not the only ones out there scouring the market for good deals right now.
And sellers, the market is still in your favor. At least for now due to the scarcity and desirability of 2-4 units here in San Diego. Keep in mind SB9 passed. So the single family home with an accessory dwelling unit is becoming very popular. And perhaps it’s a better solution for some buyers.
ADU’s COMPETING WITH 2-4 UNITS
Here’s a little insider baseball. The multiple listing service does not have a separate category for single families with an ADU. So agents list them in the residential income property category. Skewing the values for true multi-units. A trend we’ve been noticing since State Senate Bill 9 was put into law back in September 2021.
We had a chance to speak with the appraiser who did the valuation for that duplex in Chula Vista. We asked him, “What are your thoughts on valuations with these ADUs going on in the 2-4 unit listing arena? Seems they throw off values and we need to weed them out. At least from true multi unit-type properties.”
He replied with:
As for the ADU’s, hitting the market as a multi-unit is a funny thing. Zoning has a big deal to play with the current market place. Most of these original 2-4 properties were built years ago. And went through different zoning periods and market places. It was expensive and difficult to get a 2-4 unit in any neighborhood. Now you can put up multiple ADU/JrADU in any SFR neighborhood. And for a fraction of the price and command huge upside on rental income. Lenders have taken notice and require appraisers to treat these as 2-4 units. Often times the properties can be larger and be in more demand. Due to owner occupied and rental income generating. Other areas, like Chula Vista, have older duplexes. They are smaller and rents are lower due to size and room count. They don’t compete well with larger sfr/ADU properties. I would say this is a current trend for now. The short term future is ADU properties. Home owners and investors are building like crazy. Every market area is different. So we look at the current trends and use the best data we can to determine fair market value.
We have a bunch of thoughts on ADUs. Especially with their immediate and long term impacts. Most residential neighborhoods that were never zoned to have them. And even more importantly how they’ll affect the 2-4 unit market moving forward. We’re sure you’ve come to a conclusion too. Reach out to us. We’re interested in hearing your thoughts as well.
AND WHEN YOU’RE AT THE END OF THE GAME… READY TO RETIRE FROM LAND LORDING?
Let’s face it. Being a landlord has its ups and downs. If we had to point you in one direction it would be the Delaware Statutory Trust folks. And here’s why. With the DST, you get all the benefits of ownership. Without the hands-on day-to-day dealings of tenants and property management/maintenance. First and foremost, you get cash flow. And in a lot of instances, it’s even more than the relinquished property provided. Second of all, you’ve got professional management and bookkeeping. It’s automatically done for you. We’ve touched on DST options in the past. Don’t be shy, contact us.
Bookmark-Worthy Links
San Diego Real Estate YouTube -Weekly Videos Keep You Connected
Rentometer -House and Apartment Rental Rate Comps
HomeBot -Personalized Home Finance Tool
ALTOS Reports -Powerful Data-Driven Real-Time Zip Code Market Updates
MLS Access for Investment Property -Custom Searches For Investment Property
San Diego Apartment Investors Market Report Archives -Access Past Market Reports
IT’S TIME FOR YOU TO GET THE ROI YOU DESERVE.
You’ve worked hard for what you’ve earned, and you’re right to want the best experience. Be confident you have professionals on your side. We use ROI-based marketing. Rest easy knowing we use an organized system to market your property. Employing our highly targeted and proven approach like no one else is what you deserve!
Thinking of selling your property in the next 12 months? Call us today for your strategic marketing consultation at 858-218-4511.
