If you’re considering investing in San Diego, chances are you understand the lifestyle benefits that this beautiful city offers. Year-round, the weather is nearly perfect. Some of the best and most innovative craft breweries can be found here. Great schools are plentiful. And from sprawling green vineyards to golden beaches, there’s picturesque nature at every turn.
But there’s much more to San Diego than this. For investors looking for the next best place to generate revenue, look no further than San Diego. Although San Diego often takes a backseat to more mainstream California cities like Los Angeles and San Francisco, this is even more of a reason to strike before competition gets fierce. Here’s why San Diego is a great place to invest right now:
More People Are Migrating to San Diego
The San Diego economy is growing, and more people are headed towards these sunny shores. As a whole, the population in San Diego grew by 7.5% since 2010. One study found that millennials in particular are flocking to the city in droves. Currently, an entire third of San Diego’s population consists of millenials, making it the second most millennial-populated city in the country. The majority of these people are at the crux of starting spearheading their careers and are attracted to what the city has to offer.
According to another study conducted by Bank of America, the majority of millenials that migrate do so because of the wealth of job opportunities. Between 2010 and 2017, 160,000 new jobs were added. Engineering, defense, and biotech and are among the top industries attracting new employees. Housing costs are also less than comparable cities. And furthermore, population numbers will only continue to rise moving forward. By 2050, trends suggest that there will be an additional 500,000 more people in the area.
Appreciation is Falling, Rental Rates Are Strong
According to NeighborhoodScout, San Diego falls in the top 10% nationally in terms of real estate appreciation. Over the past decade, San Diego real estate has appreciated by 55.37%. This puts the annual home appreciation average at around 4.5%. Even when the housing market was in the midst of experiencing a national crisis, San Diego remained incredibly strong, and that’s reflected in the speed with which home values have increased.
Yet, the buyer’s market is also still strong. Throughout the remainder of 2019, you can expect real estate prices in San Diego to rise slightly. However, this will happen at a slower than the previous year, according to data. Beginning in 2017, rising interest rates and slowing sales have resulted in lower home prices. Over the past couple of years, the annual pace of increase has been around 10%—currently, it’s around 4% in the low tier and 2% in the high. Home prices are expected to fall until 2021. Rental rates are also pretty strong. The median rental rate is $2,700, and you could certainly charge higher rent for a single family home. Without rent control, it’s also a fairly landlord-friendly city.
The Startup Scene is Growing
When you think of startups, Silicon Valley is likely the first city to pop into your mind. But the fact is, the Silicon Valley startup scene is highly saturated, and more entrepreneurs are turning to other cities for an ideal startup ecosystem. That’s what San Diego startup culture provides. For starters, there’s less competition for investment opportunities. This gives startup founders a viable chance for much-needed early cash. With its prime coastal location, it’s also an attractive option for people looking for a strong work-life balance.
“After years of stagnation, San Diego is seeing a barrage of startup activity in the tech scene,” Brittany Meiling said in the San Diego Tribune. “In recent months, two tech startups earned billion-dollar valuations, making them the first software ‘unicorns’ spotted locally in decades. The news caps months of unusually high venture capital deals in local tech, with at least $320 million funneling into tech startups in less than three months. For context, tech companies only brought in $164 million combined for the first nine months of 2018.”
There’s also a growing number of incubators sprouting throughout the city—these programs are designed to help startups grow quickly, and they achieve this through mentorships, classes, and networking opportunities. Astra, Wireless Health Hub, and BlueTech are all diverse programs in San Diego that cater to a variety of niche startups.
To answer the rise in tech companies choosing San Diego as their home base, there’s also a growing number of coworking spaces. This is also a great opportunity for investors interested in commercial spaces. With more people flocking to the city, you can expect a series of businesses designed to cater to them to also grow. And lastly, the startup community here has expanded, with events like Startup Week San Diego and San Diego Startup Weekend attracting attracting organizations, businesses, and startups on a local and national scale.
Ideal Climate for Short Term Rentals
With a plethora of tourist attractions and beaches, San Diego is an ideal place for short term vacation rentals. From SeaWorld to the San Diego Zoo, tourists around the world flock here for a taste of what the city has to offer. San Diego properties in close proximity to the beach or major attractions command premium prices on sites like VRBO and Airbnb. And during major events like Comic Con, demand for these rental spaces soar, and prices skyrocket.
Currently, short term rentals in San Diego are nearly evenly split between single-family homes and multi-family properties. According to a Market Overview published by Host Compliance, the sizes of rental units vary and 7% are listed as studios, 28% as 1BR, 32% as 2BR and 19% as 3BR. Only 13% of properties are listed as having 4+ BR. From 2016 to 2017 allow, the short term rental market grew by 15.9%.
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