For 40 years my wife and I have owned rental property. For 35 years I have been a San Diego apartment broker. I learned a lot, too much the hard way. Some of what I learned is summarized below.
Too many aspiring buyers think the seller is their toughest opponent. Most don’t realize other unseen competitors are the bigger obstacle to successfully acquiring an income property in San Diego’s low-risk market.
If you aspire to own rental property in San Diego, you must understand the level of competition you will face. Here are three observations to consider.
Expect Lots of Competition
In San Diego, 1,500 millionaires are chasing 350 escrows for buildings with four or more apartments. About 80% of those millionaires won’t close on even one San Diego County apartment escrow in the next year. More than half the millionaires probably own more than you do or have a higher net worth or have more liquid funds. You are no longer the judge in the beauty contest. You are a contestant.
That should give you an idea of the number of potential competitors you’ll face. But that’s only the beginning of the story.
Expect Multiple Offers
You won’t be competing with those other buyers one at a time. Expect multiple offers on 80% of the assets below $5 million. Expect all buildings above $7.5 million to have multiple offers. A great broker is a major competitive advantage. He or she will know the competition and help you craft an offer that’s likely to be accepted.
Fortune Favors the Experienced
The sellers and listing brokers will favor investors who have closed five or more large transactions. This is another place where you gain by having a great broker, one with an impressive history in the marketplace. Sellers will consider your broker’s history and reputation when they decide which offer to accept.
What’s your experience? What’s the competition like in this market?
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Terry Moore, CCIM, is the author of Building Legacy Wealth: How to Build Wealth and Live a Life Worth Imitating. Read his “Welcome to My Blog.”