Real estate investors in San Diego have enjoyed remarkable returns since the economic recovery began nearly nine years ago. Unfortunately, however, one fundamental indicator continues to limit market potential: supply.
Tight supply and high demand have contributed to skyrocketing home prices, so it is wise to carefully assess the market before making investment decisions.
1. Use Your Home Equity to Buy a Rental Property
Real estate investment has proven its worth time after time, yet can still be risky. Aside from the loss in value to their properties, landlords also face other challenges that could potentially compromise them including tenants damaging them, late rent payments, evictions and costly legal battles with tenants who damage properties and evict them due to nonpayment. It is crucial that prospective real estate investors learn all they can before starting any investments and to set aside enough savings reserves in case there are losses to cover any potential setbacks or surprises that might arise during any potential transaction.
One way real estate investors can increase their earnings is to purchase and rent properties in high-demand neighborhoods, especially vacation rental homes that appeal to tourists. Vacation rental homes require special licenses and insurance, making purchasing one an expensive proposition; alternatively, using home equity loans or HELOCs could offer lower interest rates compared to personal or bridge loans.
If you’re considering using your home equity to buy a vacation rental in San Diego, Intercap Lending’s team of lending experts can assist in finding you a loan tailored specifically to meet your needs and goals. Get in touch today so we can get you on track.
2. Use Your Home Equity to Buy a Single Family Home
San Diego offers idyllic beaches and waves for living now, but investing in real estate here also makes financial sense for future returns. Renofi estimates that San Diego will become one of the six highest home values by 2030 – this means homeowners could see significant returns when selling their properties here.
Finding an appropriate single family home can be costly; buyers need a substantial budget in order to afford Carlsbad, Solana Beach and Encinitas with average home prices close to $1 million.
Home equity loans and lines of credit offer an ideal way to access any equity you’ve built up in your property – the difference between its current market value and what remains due on your mortgage loan being your home equity.
Home equity increases when you make payments that reduce the principal balance, such as paying down your mortgage balance faster or making additional payments that reduce it further. Your equity stake can also expand when local real estate prices appreciate and you complete home improvements such as remodeling a kitchen or bathroom addition; both options available through SDCCU can increase the value of your home and increase its equity stake significantly. With both fixed rate and variable rate loans to meet any of your financial goals.
3. Use Your Home Equity to Buy a Condo or Apartment
Buying condos in San Diego offers numerous choices. La Jolla boasts stunning Mid-Century and Spanish Revival properties by the ocean while North Park features charming Craftsman bungalows – giving any buyer plenty of choices for finding their ideal property.
Condo ownership offers numerous advantages that make it an appealing option for those who desire a less-maintenance-intensive lifestyle. Instead of needing to mow their lawn or worry about general upkeep themselves, owners can enjoy living in a shared community which handles these tasks for them. Furthermore, many condos include amenities that all residents can take advantage of like pools and fitness centers.
Utilizing your home equity to purchase an apartment or condo can be an excellent way to invest in the real estate market and create passive income streams, but it’s crucial that you carefully consider all its implications before making your decision.
Consider that rising interest rates have significantly dampened the housing market, making it harder to sell your home and make a profit with reduced home prices. Before making decisions regarding how best to utilize your equity, speak to an experienced mortgage professional such as Flyhomes loan officer for advice.
4. Use Your Home Equity to Buy a Commercial Property
Real estate investment has long been a reliable means of creating steady returns with their money. Although real estate can appear daunting at first, with proper strategies and access to capital any investor can realize their dream of purchasing and managing an investment property.
Though many investors rely on financial partners for financing real estate purchases, this approach carries certain risks that can reduce profits realized upon sale of property. An efficient and rewarding alternative could be using your home equity as investment property purchases.
San Diego’s housing market has been plagued by low inventory since the pandemic first broke, and this trend is projected to persist into the foreseeable future. Rental demand will likely remain high; landlords can expect year-over-year rent increases.
This trend will likely prompt a small exodus from downtown neighborhoods, with more and more people opting to leave cramped urban living for spacious suburban houses. This could have an enormous ripple effect throughout greater San Diego as many homeowners may decide to sell and relocate in order to take advantage of lower home prices and more cost-effective mortgage rates in the suburbs.