Category: Property

San Diego – Pros and Cons of Living Here. Bonus: Considerations if Moving Here

Any place has pros and cons. Cost of living, weather, job opportunities, access to airports, access to outdoor recreation, and so on. I recently asked on X what the biggest 3 Pros and biggest 3 Cons are for living in San Diego. I had approx. 45 responses and I think they’re a good summary of factors for living in San Diego. You can check out the thread here:

I’d like to add my thoughts on living in San Diego and elements to consider if you are moving here.

  • The Weather is Awesome – I made fun of how often this gets mentioned the first 3 years I lived here. Now I reference it very often. It is really pleasant, although definitely colder than you probably expect if you haven’t visited here before. It gets chilly in the dark and never really hot.
  • Water Views and Urban Canyons – these are my two highest rated housing location considerations to look for, and I’d probably put the canyons above water views – mostly because coastal areas are quieter and less interesting. Ocean breezes are also very good, even if without a water view.
  • Mexico – If you live in San Diego you need a passport and a Global Entry card (with your vehicle SENTRI registered). Go to Tijuana, farther south into Baja or all the way to Cabo, Valle de Guadalupe, and so many other places. You can also fly anywhere in Mexico very affordably via the Tijuana Airport which has a US access point at the Cross Border Express (CBX) airport crossing. It costs approx. $25 each way to utilize, on top of parking.
  • It’s Early to Bed / Quiet – Trying to match up with East Coast timezones, a lot of military personnel, and surfers / hikers / yoga-ers / Orange Theory and F45 lead to a lot of early mornings. SD shuts down earlier than any other big city I’m familiar with. I don’t mind it at this point in my life, but it was a surprise on arrival.
  • Less Pretension – Not sure why, but what people do for work or where they went to University are not as prominent as in other places I’ve lived. There is a lot of money and expertise here, it’s just not first topic of conversation.

As with the X responses, it is expensive to live in San Diego. Per one recent study the 8th most expensive place in the US. #1 place to live for the 8th highest price? Sounds like a good deal. #SDlove

typical day in San Diego (Windansea Beach in La Jolla, which is a neighborhood of San Diego)

Rent Vs Buy – North Park 2022

Whether to rent a property vs buy a property is a consistently popular topic in personal finance. I largely think it depends on how tied to a specific area you are, and current market conditions (home prices, rental prices, interest rates, property tax regime, etc.).

I found the following property comparison in North Park, San Diego interesting. One house for rent and one for sale, within a block of each other and with similar square footage, age, and layout.

With the large increase in mortgage rates over the past year it seems there’s a large difference between monthly cost of rent and monthly mortgage cost – I would guess this difference has to decrease and most likely will do so via reductions in purchase prices or potentially decreases in mortgage rates. (Rent rates may continue to increase but have been doing so at a high rate which doesn’t seem sustainable.)

Rental home is a 3 bed, 1 bath house with 1,725 square feet at $4,650.

Home for sale is a 4 bed, 3 bath house with 1,583 square feet at $1,595,000. With 20%, $319,000, down payment Redfin estimates the monthly mortgage cost including insurance and property taxes at $10,161.

For similar properties in almost the exact same location this difference in monthly cost seems too big to hold for long. The down payment alone would rent a house for 5.7 years and even after the down payment the monthly mortgage cost, excluding repairs and upkeep, is more than double the monthly cost.

Feels like it is going to be an interesting year or two ahead in the real estate market in San Diego, and probably many areas across the U.S. I suppose the good news for renters is if owners have locked in lower mortgage rates they can realize some of that lower borrowing cost by renting at lower monthly cost than current conditions provide for in purchasing a home.

Ask JPA – When do you choose to sell a rental property?

Ask JPA is an irregularly scheduled question-and-answer series of posts. Have a question for JPA? Send it to john.patrick.anderson@gmail.com. Cheers!

Hi John,
I know this is not a one-size fits all question / answer. When do you choose to sell a rental property? Let’s assume that I own property that is a good area that is appreciating in value, it’s also easy to rent (positive cash flow), and say that I’ve paid it off. When do I choose to sell it? I know that depends on a lot of factors: what would I reinvest etc? Just wondering what some of the models that you use for exit strategy? Maybe never sell – just C/O refi and reinvest in another unit? 

Dear Thinking of Selling,

Deciding when to sell a property will depend on many factors – current market values, current interest rates, needs or plans for the equity in a property, among others. If you generally think you want to sell or tap the equity in a property there are a few major options that I would associate with various motivations:

  1. Sell the property, pay capital gains taxes, and have the funds free and clear for anything. Probably the best bet if you’re tired of owning property and being a landlord or want the money to be liquid and available for travel, spending, or non-real estate investments. Paying taxes isn’t fun, but capital gains rates are lower than ordinary income tax rates which is a benefit.
  2. Do a cash out refinance and use the proceeds to invest in additional real estate, or for other uses. In the current mortgage environment interest rates are very low and you can both lock in very low rates for decades to come and access the equity in the property (up to 70% or 80% loan-to-value) and take the funds to do anything – pay off credit card debt, go shopping, or buy another property. The cash out refinance will increase the monthly mortgage payment so you may want to look at the current property performance and if the property will still cash flow well for you.
  3. Sell the property and do a 1031 exchange. A 1031 has some specific rules to it but basically you sell the property as normal but the funds go to a 3rd party administrator and have to be reinvested into another property within a relatively short time period. A 1031 exchange defers any capital gains taxes, so you don’t have a tax bill until the new replacement property is sold. 1031 exchanges are popular with real estate investors for the tax deferment, and as a tool to scale up in size. If your property has had good appreciation you can take that appreciation and lever it up with a new investment property mortgage. (For example a typical investment property will require 25% down payment so if you have had $100K of appreciation that will allow you to buy $400K of property.)

If you want to continue being a real estate investor I’d highly recommend Option 2 or 3 above. If you don’t, then Option 1 is probably your best bet. Option 3 will be best if you want to grow your real estate investments and Option 2 is better if you’re not sure if you want to invest in real estate or other areas.

I personally plan to keep investing in real estate consistently for many years to come so I would likely do the cash out refinance if there is a good amount of equity in the property, and given the current low mortgage rate environment. I’m not sure where your property is located, but that may also play into the picture as some places like California can have substantial tax benefits to holding a property long term rather than selling and reinvesting in another property.

Hope this helps and thanks for asking!

. – JPA

Some current multi-unit properties for sale in San Antonio, TX (from Redfin website). Scaling up from a single-family home to a four-unit building would be an option for a 1031 exchange.

15 Empty Cars or A Beautiful Public Plaza? Little Italy Opts for the Latter with Piazza della Famiglia

Little Italy continues to grow and become a better place to visit and live.  The most recent addition to the neighborhood is Piazza della Famiglia – a 10,000 square foot public plaza with apartments above and 16,000 feet of retail and restaurant space surrounding.  This plaza was formerly a short block of Date Street but per an agreement between the developer, H.G. Fenton, and the City of San Diego the street was vacated and a beautiful public space was created, paid for by private dollars.

The plaza isn’t fully open yet but a few of the businesses are and when I stopped by today on a sunny, gorgeous day around noon there were people chatting and having coffee, a family walking their baby in a stroller, and a number of passersby traversing the plaza on foot and bicycle.  There’s currently a small tent set up with leasing information for the two apartment buildings that H.G. Fenton built next to the plaza – Vici and Amo – which add 125 units to the area.

Here are a number of photos I took of the plaza.  The Little Italy Farmer’s Market (every Saturday and the best in the region if you ask me) will soon return to Date Street and the scene is going to be better than ever.

It’s awesome to see the neighborhood and the City choosing a public space over a handful of mostly free parking spaces (metered during part of the day) that previously occupied the plaza space.  For a comparison I checked out the two closest similr streets, which are similar size – Cedar and Fir.  When I stopped by Cedar had 10 total vehicles parked and Fir had 20, including one person moving from one meter to another and a parking enforcement vehicle looking for ticketing opportunities.  Needless to say, these streets that are devoted to cars and parking had zero persons enjoying the square footage occupied by the empty traffic lanes and parking spots.

Fir Street – 20 empty cars

Cedar Street – 10 empty cars

Which would you prefer for your neighborhood? 15 empty cars on a block, or a beautiful public plaza with shops, fountains, tables, and a place to sit and enjoy life? This sort of opportunity is available in spaces across San Diego, if we choose to embrace it.  More likely we’ll see massive amounts of additional free street parking across the city, as soon to come to North Park, due to the City making it easier than ever to quickly give over more public land to parking.  I’d prefer more plazas, trees, and life – hopefully you’ll join me in working for the same.  And don’t forget to check out the Little Italy Farmer’s Market – a great start to the weekend for locals and visitors alike.  I’d recommend taking a bike-share bike, hopefully by the time you visit the local business association will have stopped sabotaging those programs in Little Italy.

Want To Be An Airbnb Host in San Diego? Good Luck – You’re On Your Own

The City of San Diego continues to discuss options for regulations and rules around short-term rentals on sites like Airbnb.  Short-term rentals are rentals for less than a full calendar month and have been the topic of discussion at a number of City Council and committee hearings over the last few years.

I recently received an inquiry from a San Diego resident that would like to rent out one or two bedrooms in the home they live in – sharing a room or home with guests is often referred to as “home-sharing”.  Home-sharing is frequently brought up in the short-term rental debate with both sides typically saying there is no issue with this type of activity.  (However, home-sharing is the only type of short-term rental I’m aware of that the City of San Diego took to court, and ultimately the judge decided that this type of activity is not allowed under current rules and issued a fine to that host.)

The prospective host in this case was looking to do the right thing and get clarity from the City before hosting on Airbnb.  They contacted several City departments regarding how to fill out the right information for the Transient Occupancy Registration Certificate( “TORC”), if a Business Tax Certificate is required, what taxes they need to pay, and if there are other regulations they need to follow for lawfully renting out rooms via platforms such as Airbnb. 

 

On the response to the prospective host, the city was clear and straight-forward in providing the process to register for the TORC, what kind of taxes the host would need to pay, etc.  The Transient Occupancy Tax (i.e. hotel tax) is not part of the debate and proposed short-term rental rules – it is already in place and collected (and in the case of Airbnb remitted for all hosts on the platform each month by the platform itself).

However, in regard to other requirements for operating an Airbnb, the prospective host was directed to consult the Development Services Department (in charge of Land Use and Development). Surprisingly, when the host reached out to Development Services they were told  that since there are no official regulations or rules around short-term rentals, this kind of activity is currently not allowed in San Diego.  That’s when the host reached out to me, as part of my efforts with the Short-Term Rental Alliance of San Diego (STRASD) – seeking clarity the city couldn’t provide and how they should proceed.

The contradiction between the responses from different City departments is confusing but accurate.  Yes – you can register and pay the taxes for this sort of activity.  No – you can not engage in this type of activity in the first place.  This is the current status of short-term rentals in San Diego, at least for home-sharing situations.  It still seems that whole-home short-term rentals may be on firmer ground, although the current City Attorney has declared all short-term rentals illegal. [Note: the previous two City Attorneys held a different position, that short-term rentals were not illegal.]

This sort of lack of clarity is harmful to potential hosts like the one highlighted in this post – a San Diego resident seeking to improve their economic position and do so in a straight-forward and compliant manner in the type of short-term rental that is roundly approved of and supported.  We need clarity to support residents like this and should encourage this type of widespread entrepreneurial opportunity to give citizens more options and ability to chart their own desired course.  Hopefully in the months ahead we will see clarity that gives certainty to current and potential hosts and guests and that supports the opportunity that platforms like Airbnb and others gives to many thousands of San Diegans.

A screen shot of some home-sharing options currently available on Airbnb (taken 4-19-2018)

29th Street – North Park’s Newest (Free) Luxury Parking Lot

Thanks to a request from the Mid-City Parking District a number of streets in North Park will likely soon be converted from parallel on-street free parking to head-in on-street free parking.  The following list of requested changes will result in an increase of 254 parking spaces, using more of our public land to store empty automobiles.  The proposed changes were discussed at the March meeting of the North Park Planning Public Facilities and Transportation Subcommittee – minutes including discussion can be found here.  The proposed changes are on the agenda for the North Park Planning Committee consent agenda for Tuesday, April 17.

The proposed changes are spread across a large section of North Park, but the stretch of 29th Street is particularly interesting to me.  29th Street is the site of the North Park Parking Garage – a 100% taxpayer funded parking garage with low rates that rarely breaks even (and in the most recent year likely lost money due to popularity of biking, walking, and Uber / Lyft – financials aren’t yet out to verify performance).  Here’s a map of the blocks of 29th Street and cross streets proposed to be converted to head-in parking (identified in red).

There are a number of reasons to oppose these conversions:

  • Climate change and health – Increasing automobile parking runs counter to the city’s Climate Action Plan goals to move mode share away from automobiles.  Bringing (and parking) more cars in North Park brings more air and noise pollution to the neighborhood, in addition to the potential fatalities and injuries that are common from automobile use. Giving away even more of our public realm to parking is a bad idea.  Increasing and encouraging more automobiles in North Park also runs counter to the promotion of the area as a walkable neighborhood. At a time when bike-share, scooter-share, and ride-share options are plentiful and increasing we shouldn’t be increasing the amount of parking for private vehicles.
  • Aesthetics and safety – This stretch of 29th Street is full of beautiful Craftsman homes.  The average age of the homes on the block is around 90 years old.  Parallel parking creates a standard car edge so visibility down the street for pedestrians, drivers, and residents is clear.  Head-in parking creates large variances (think of an extended cab pick-up, which are for some reason incredibly popular in San Diego despite the urban environment lacking steers and I-beams to carry around, parked next to a small sedan).  Pulling in and out becomes more dangerous for those traversing the street.  Additionally, the headlights from the vehicles at night are aimed directly into homes which are mostly at street level. I can’t imagine most residents would enjoy the additional lighting from the street.
  • Unneeded and counter-productive – Most of the houses on these streets already have off-street parking, many have full length driveways and garages.  The housing density (number of residents per unit) is almost certainly less than it was 50 years ago, as the average American household size has fallen almost by half.  If the housing is nearly a century old and the households are smaller than they have been in the past it seems unlikely that residents are clamoring for more parking on the street to bring in more traffic and noise.

Here’s a photo gallery of each block of 29th Street to get a sense of the housing and parking.  The street is very wide but as you can see, there is hardly a lack of parking although this may vary according to time of day.

Perhaps the worst bit of all is residents have basically no say in this process.  The parking changes were requested by a parking agency and I don’t believe any residents of any of these streets were part of the application – apparently the mission of parking agencies are to maximize the amount of parking for vehicles.  Residents will have a chance to respond negatively to the proposals, a written notice will be sent out.  Who does the notice go to – property owners or residents? (Not sure.) Are the mailings certified delivery to ensure receipt by intended recipients? (Guessing no.)  Even if the letters are addressed properly, and received what are the odds they are read or understood? (Not likely.)  The standard to oppose is that a majority, more than 50%, of the notices sent out must be returned in opposition.  If you’ve ever done a survey or mail response campaign you probably understand there is essentially zero chance of ever seeing a 50% response rate to any issue.

If there is demand from the residents on the impacted streets then an Opt-In approach would pass with flying colors.  I suspect that there is not support from the residents given the above many reasons this is a bad idea.  In either case, I believe the North Park Planning Committee has discretion on this matter to evaluate as they deem most appropriate. I hope they’ll opt to consider the impacts of yet more automobile-focused use of our land in this urban environment and reject this proposal to bring yet more traffic and parking and associated ills to the area.  For reference, here’s the evaluation policy for this sort of proposal.

Loader Loading...
EAD Logo Taking too long?

Reload Reload document
| Open Open in new tab

Download [349.41 KB]

In addition to this conversion being a bad idea there are better options for the excess roadway that does exist.  Some of those better options are:

  • Reduce the road width and increase the size of the housing parcels (increase the public right-of-way usable by property owner) – this would increase home values and the tax base, bringing in funds via property taxes, and allow for planting of trees or other use.
  • Install a bike lane to enable more residents to bike to work or school.
  • Do nothing. The status quo, although mostly a vista of asphalt, has real potential and we shouldn’t discard it for more unneeded free parking. Not to mention that once granted it is very difficult to repurpose parking area to other uses, as recent debates in Hillcrest and elsewhere have underscored.
  • My favorite – Dreaming big I’d love to see Balboa Park connected to the new North Park Mini-Park, located at 29th Street and North Park Way via a beautiful greenscape.  My proposal would greatly reduce the street size of both 29th Street and Granada Avenue to something like below – going from 54 feet of street space to 16 feet (paired one-way streets, one North-bound and one South-bound with one side of parking) and adding 19 feet of green space to either side of the two streets.  That’s a lot of additional greenery, quieter roads, and an increase in parking on each lot of one space per driveway. (Although I would guess many residents would do as they currently do and opt for more productive uses of their land than parking vehicles and utilize for gardens, play areas, chicken coops, hop scotch, and other options.)

If you have an opinion on this proposal you can attend the North Park Planning Committee Hearing on 4/17 or contact the group via email at info@northparkplanning.org.  Additionally, on my street – Granada Avenue – I’ll be working with the other residents to proactively state our opposition to this sort of conversion.  You can consider doing the same as it seems likely the many over-sized roadways in San Diego will likely follow 29th Street in becoming a parker’s paradise.

Video Game Building – My New Favorite Building in Downtown SD

Formally known as the Shift “Next Level Apartments” this recently erected building in the East Village portion of Downtown San Diego looks like it was designed for a video game.  The colors and the odd angles and shapes throughout feel so strongly like they stepped out of an early Halo game or something similar.

The building is bounded by 15th Street and 16th Street as well as J Street and K Street, a full city block.  Will be interesting to see it fully tenanted and up and running – the street scene in East Village continues to ramp up in a major way.  The units are priced from $1700 – $4500 although the available units ranged from $2795 for a 1 bedroom, 1 bathroom to $3920 for a 2 bedroom, 2 bathroom.

Out and About – Recent Podcast Interviews on Short-Term Rentals

I was recently included on two podcast I regularly listen to, both on the topic of short-term rentals.  I have been using platforms like Airbnb for about 8 years to welcome people to San Diego and have had a great experience.  As with many other cities around the globe, San Diego has been debating the proper place for short-term rentals (rentals of less than 30 days or a calendar month) in recent years.  I’ve become involved in that political debate locally and follow the issue broadly as well.

The Voice of San Diego podcast is a great resource if you’re interested in local issues and longer interviews with people that make an impact here.  I was part of a four person panel discussing potential new rules for short-term rentals in San Diego.  The podcast was held shortly before a full City Council hearing on the topic which was expected to result in new rules for the city.  Instead, the all day hearing resulted in nothing new and the issue remains up in the air.

Check out the Voice of San Diego podcast on short-term rentals here:

https://www.voiceofsandiego.org/topics/news/vosd-podcast-great-vacation-rental-debate/

I was also recently on Get Paid for Your Pad – a podcast focused on short-term rentals with news and interviews of hosts from around the world.  This show is a great resource if you are a current host, considering hosting, or just interested in the topic.  Host Jasper Ribbens, from The Netherlands, does a great job of including perspectives from hosts from different cities and nations and covering a wide variety of news items from technology to new rules that impact the short-term rental industry.

You can find my interview with Jasper here:

https://getpaidforyourpad.com/podcast/under-promising-over-delivering

Hope you enjoy the podcasts and if you’d like to connect about short-term rentals in San Diego or elsewhere please reach out anytime.  Cheers!

A photo from a recent bike ride along Sunset Cliffs. #SDlove

Prop 13 On My Block

Property taxes are typically described as a wealth tax – they are taxes levied on assets held rather than transactional taxes like income taxes (applied to wages as earned) or sales taxes (applied to goods when purchased).  Property taxes are applied to the same property each year.

Back in 1978 Proposition 13 was passed in California to place a limit on property tax increases.  Per Wikipedia, Section 1. (a) of Proposition 13:  “The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.”

Proposition 13 also placed some rules on how the value of a property is assessed or re-assessed.  Again, per Wikipedia: “Proposition 13 declared property taxes were to be assessed their 1975 value and restricted annual increases of the tax to an inflation factor, not to exceed 2% per year. A reassessment of the property tax can only be made a) when the property ownership changes or b) there is construction done.”

I was curious about the impact of Prop 13 on property taxes in San Diego after seeing some listings on Redfin and Zillow that had astoundingly low property taxes.  For example, the Banker’s Hill property shown below, currently for sale for $1,697,955, carries an annual property tax levy of $136.97.  That effective tax rate of .008% is far below the 1% established under Proposition 13.

I decided to take a look at the property values and property taxes on my block in North Park.  The houses are all pretty similar (outside of one empty lot that was purchased by a local church and razed for a small and scarcely used parking lot).  Below are the property values (per Zillow Zestimate) and property taxes paid (per San Diego County Treasurer website).  I’ve listed all the properties on both sides of the street but removed the addresses for privacy reasons.

Summary of property value estimates and property taxes on a block in North Park

Despite the homes on the block having pretty similar property values the amount of taxes paid and effective tax rate vary quite a bit.  I found it interesting to see the differences in a very small area of town summarized together.