Downtown San Diego

The proposition of Renting vs. Owning real property in Downtown San Diego is a conversation that comes up on a consistent basis.

Does it make more sense to Rent or Own a Downtown San Diego Condo in 2011?

With the demand for rental properties in Downtown at an all-time high, and the discounted prices of Downtown Condos for sale, the consideration of purchasing a Downtown San Diego Condo can make real sense.

Of course, there are a few variables that factor into this equation, but if you are contemplating the idea of moving Downtown, and you have a monthly budget between $1500-$3,000 per month, you may fall into the category of consideration.

Properties for Rent- Downtown San Diego

As of 11/28/2011, there are exactly 40 properties listed for rent within the CCDC Downtown Boundaries.

The following is a breakdown of  Non-Furnished Rental Properties in Downtown San Diego:

•  Studios | Qty: 4 | Size Range: 628-593 Sq Ft | Monthly Rent: $1,195- $1,675
•  1 Bedrooms | Qty: 10 | Size Range: 483-593 Sq Ft | Monthly Rent: $1,525- $2,395
• 2 Bedrooms | Qty: 22 | Size Range: 1126-1545 Sq Ft | Monthly Rent: $1,900- $15,000
• 3 Bedrooms | Qty: 1 | Size Range: 2,700 Sq Ft | Monthly Rent: $2,700
• Lofts | Qty: 3 | Size Range: 1,390-2,033 Sq Ft | Monthly Rent: $2,800-$5,200

Downtown Economic Rent Summary                            

• The least expensive rental available in all of Downtown is $1,195 per month.
• The average 1 bedroom rental is approximately 777 sq ft, yielding about $1,888 per month.
• The average 2 bedroom rental is approximately 1,294 sq ft, yeilding approximately $3,080 per month.
• 7 of the 2 bedroom rental properties are less than $2,500 per month.

Owning vs. Renting-  Downtown San Diego

In searching for comparable properties for sale to the rental properties above, I created a search for1 Bedroom Condos for Sale in Downtown San Diego  between 700-800 sq ft.  The search generated 9 properties, 2 of which I omitted because the monthly HOA dues greatly offset the comparison.

1 Bedrooms Condos for Sale- Downtown San Diego

I selected 3 of the 7 properties to show a broad range in breaking down the numbers:

Condo with financing:     Union Sq 1402   |  Palermo 404   |  Breeza #105
Purchase Price:                    $185,000    |      $235,000    |    $325,000
Down Payment 25%:            $46,250     |      $58,750       |    $81,250
Mortgage Amount:             $138,750       |     $176,250      |   $243,750
Mtg Payment 4.25%:            $683      |      $1,734      |     $1,198
Property Taxes:                         $174     |        $221     |     $306
Monthly HOA dues:                   $370     |      $265     |     $561
HO-6 insurance:                            $19     |     $24     |    $34
Total Monthly Obligation:     $1,246    |   $1,378  |  $2,100  
Estimated Rent:                           $1,600   |   $1,800     |    $2,000
Own vs. Rent Variance:     +$354  |   +$422   |  -$100

Note:  The numbers shown in the breakdown are fairly conservative, and of course, down payment amount and mortgage interest rate can greatly affect the outcome of the variance reflected above.  Buyer must also note that there are significant tax benefits to home ownership that are not reflected in the calculations above.

  These three selected properties tell the tale of 1 bedroom properties for sale in buildings that are quality construction, with low to moderate HOA Dues, in desirable locations.  

The benefits of Buying a Downtown Condo can STRONGLY Out-Weigh the benefits of Renting!

As you can see, 2 of the 3 selected properties are actually cheaper to buy than to rent!  Often times, the rent vs. own variance can be within a few hundred dollars per month; in such a cases, it really makes sense to purchase a 1 bedroom based on these  scenarios.    

2 Bedroom Condos for Sale- Downtown San Diego

Here I created a search for 2 Bedroom Condos Under $400,000 that generated 17 total listings.

Of the listings that were available, I then selected a range of 3  quality properties with low to moderate monthly HOA dues, and compared them with the 2 bedroom rentals above.   Here are the results:

Condo with financing:    Pacific Terrace  |   Union Sq   |     M2i
Purchase Price:                      $315,000    |   $354,900   |    $382,400
Down Payment 25%:             $78,750       |   $88,725      |    $95,600
Mortgage Amount:               $236,250      |  $266,175     |    $286,800
Mtg Payment 4.25%:            $1,163    |  $1,309       |    $1,412
Property Taxes:                         $297          |    $334           |      $360
Monthly HOA dues:                 $400          |    $405           |       $438
HO-6 insurance:                       $33            |      $37            |       $40
Total Monthly Obligation   $1,892      |  $2,086       |     $2,250
Estimated Rent                        $2,200       |   $2,200        |      $2,400

Own vs. Rent Variance:  +308   |  +$114    |   +$150

In Summary:  2 Bedroom floorplans under $400,000 make a strong Rent vs.Buy debate, particualrly when HOA dues are less than $400 per month!

  Again, without calculating any tax benefits of homeownership, the selected properties fall well below what downtown 2 bedroom rentals are commanding.  Throw in the consideration of subleasing one of the bedrooms @ $1,000 per month and the idea gets very interesting…

Apparently, this is no secret as 75% of the sales this year have been in the aforementioned segment of the market (Below $450,000).  There is is such high demand for quality properties under $450,000 ,that the inventory has now shrunk to approximately 1.4 months supply.  There are still “good deals” out there; however, they are becoming more difficult to find.

Life in “America’s Finest City” is great.  Owning a piece of it can be surprisingly affordable. 

My suggestion:  Don’t wait!!!

Interested in finding out more details?  Give us a call:  (858) 531-8785

Image Courtesey of Aaron Goulding Photography www.jagmediaproductions.com