Multifamily Unit Properties

Your Guide Through the Cycles

With over 25 years of experience in San Diego real estate, I have guided investors through every cycle. From appreciation to correction, I have seen it all. Now, I focus on the most resilient and profitable sectors. I am your dedicated guide to multifamily properties.

The Current Landscape: A Tale of Two Markets

The San Diego multifamily market is currently split. It is divided between smaller residential multifamily assets and larger commercial complexes. Understanding this distinction is the first step in crafting your investment strategy. I know exactly what we are looking at and where to make your next move.

The Residential Side

On the residential side, we see intense demand for duplexes and triplexes. Prices range from about $750,000 in emerging neighborhoods like City Heights to over $2.5 million in coastal areas like Pacific Beach. Demand is driven by investors seeking immediate rental income amidst current interest rates.

The Commercial Side

Larger deals require a different approach. For five unit assets and above, we must analyze Cap Rates, Return on Investment, and zoning support.

The Prime Opportunity Angle: Leveraging SB9 and Zoning

Recent legislative shifts, notably SB9, have eased zoning restrictions. This new law enables increased density on single family lots. This creates new development opportunities where adding units can significantly boost property value.

I assist clients in verifying what is permitted using the ZAPP portal. We turn land into long term wealth.

Neighborhood Intelligence: Where to Deploy Capital

Location remains vital, but in San Diego, specific location is key.

• North Park and University Heights: These areas are hotbeds for 10 and 11 unit complexes. They benefit from great amenities and transit access.
• Coastal Areas: Neighborhoods like La Jolla command premium prices.
• Golden Hill: This area blends character with centrality.

Navigating the Ecosystem: Platforms and Management

Access to the right platforms is essential.

• Data Sources: Residential data from Zillow provides insights for 2 to 4 unit assets. For larger deals, I monitor Crexi and LoopNet for detailed inventories and financials.
• Property Management: Top level firms like Good Life Property Management and Mission Center Properties ensure your investment runs smoothly.

The Critical Question: Primary Residence or Portfolio Play?

Deciding between living where you invest or building a larger portfolio depends on your goals.

• Owner Occupied Strategy: Neighborhoods like North Park and Normal Heights offer math driven opportunities for buying a duplex and renting out the other unit.
• Portfolio Play: Larger assets in the commercial arena require deep analysis of numbers and zoning.

2025 Market Update: Stabilization and Growth

The San Diego multifamily market has successfully transitioned from the correction phase of 2023 and 2024 into a period of stabilization. While economic uncertainty regarding interest rates and inflation persists, the region continues to perform better than national averages. This is driven by a shortage of housing supply and a high quality of life that attracts residents.

Supply and Demand

After years of heavy construction, new supply introduced over the last two years has now been delivered and is absorbing. This has led to strong occupancy rates.

While the national vacancy rate sat at 6.4% in the first quarter of 2025, San Diego remains significantly tighter. Forecasts show local vacancies holding steady at approximately 4.5%. The "tale of two markets" narrative continues here as well. Class A luxury units face higher competition, while Class B and C workforce housing maintains very low vacancies around 2.5%. This is driven by durable demand for affordable options.

Rent Growth and Performance

Rental trends are positive. Effective rents increased by 0.6% nationally between January and May 2025. San Diego projects a 2.5% increase compared to last year. This growth is stronger than what the market experienced in 2024. It signals that the worst of the rent stagnation has passed. However, affordability remains a challenge. Future rent growth is closely linked to the ability of the workforce to absorb costs.

Investment Sentiment: A Split Landscape

The investment community is currently divided into two distinct camps regarding strategy.

• 1. The Active Buyers: A significant segment of investors has accepted that elevated interest rates are a "new normal." There is increased conviction and buying activity as these players seek to deploy capital while cap rates have expanded.
• 2. The Cautious Wait: Another segment remains on the sidelines. They are hesitant due to uncertainty surrounding tariffs, operational costs, and potential labor shortages. This group is waiting for clarity on how government policies and trade dynamics will impact the bottom line.

Emerging Challenges: Tariffs, Inflation, and Costs

Investors are now looking beyond interest rates to operational inflation. New concerns have emerged regarding:

• Tariffs and Materials: Multifamily properties rely heavily on imported products for renovations, roofing, and plumbing. New tariffs threaten to increase these costs significantly.
• Labor and Insurance: Potential labor shortages and rising insurance premiums are squeezing operating margins. Insurance costs are fueled by severe weather events and recent wildfire activity in Southern California.
• Legislative Risks: Local legislation regarding zoning and rent control continues to be a factor that investors must monitor closely.

Opportunities and Technology

Despite these challenges, the multifamily sector remains a strong hedge against inflation. It is a sector where supply is historically hard to increase rapidly.

To combat rising operational costs, smart investors are turning to PropTech. From smart utility management to internal accounting streamlining, technology adoption is becoming a critical tool for maintaining profitability in a high cost environment.

Navigating a Complex Market

The narrative of the San Diego multifamily market has shifted from a "wait and see" freeze to a strategic and active market. However, it is fraught with new complexities regarding tariffs and legislation. Real estate is inherently a local game. The difference between national trends and San Diego’s specific resilience underscores the need for expertise.

In this environment, partnering with a realtor who possesses deep, localized knowledge of the San Diego market is essential. An experienced professional can help investors navigate the split landscape. I can help you distinguish between segments that are overpriced due to national hype and those that offer true value based on local supply constraints.

Ready to Take the Next Step?

San Diego’s multifamily market demands expertise. With my 25 years of experience, I provide strategic guidance beyond simple listings. I help identify high potential properties, leverage legislative changes, and manage risk.

Let us review current listings on Crexi and set your course for success in this vibrant market.

Contact Me Today