Real Estate Investing Guide
Everything you need to analyze rental properties like a pro — from first-time investor basics to the metrics Wall Street uses.
Getting Started
Why Rental Property?
- Cash flow — monthly income after all expenses
- Appreciation — property values trend upward over time
- Tax benefits — depreciation, mortgage interest deductions
- Leverage — control a $1M asset with $200K
- Inflation hedge — rents and values rise with inflation
The Investment Analysis Process
- 1. Screen — filter by price, location, property type
- 2. Estimate rent — use comps, Zillow, and HUD data
- 3. Run the numbers — cashflow, cap rate, CoC, DSCR
- 4. Compare — side-by-side across neighborhoods
- 5. Decide — grade properties A+ through D, focus on the best
Key Assumptions That Matter Most
- Down payment % — 20% is standard; lower means PMI
- Interest rate — even 0.5% swings change cashflow by $100+/mo
- Vacancy rate — 8% is conservative for San Diego
- Property management — 10% of rent if not self-managing
- Maintenance & CapEx — 1% of value + 5% of rent for reserves
Key Metrics
Click any metric to read the full explainer with formulas, examples, and how Prop2Profit calculates it.
Cap Rate
Capitalization rate measures unlevered return. Learn when it matters and when it misleads.
Cash-on-Cash Return
How much cash your actual invested dollars earn each year, after debt service.
DSCR
Debt Service Coverage Ratio — the metric lenders care about most.
Net Operating Income
The foundation of every valuation model. Revenue minus operating expenses.
Price-to-Rent Ratio
Quick screen for buy-vs-rent economics. Lower is better for investors.
IRR
Internal Rate of Return — the time-weighted total return including appreciation and equity.
Gross Rent Multiplier
A fast "napkin math" metric to compare properties before deep analysis.
San Diego Market
High-level market snapshot. Explore individual zips on the Neighborhoods page or read our zip spotlights.
Median Home Price
~$950K
Varies widely by zip
Avg Rent (3BR)
~$3,200/mo
Coastal areas higher
Vacancy Rate
~5%
Below national avg
Population Growth
+0.8%/yr
Steady demand driver
Why San Diego for Investors?
- Strong military & biotech employment base
- Constrained supply — limited buildable land
- Year-round tourism supports STR demand
- UC San Diego drives rental demand in North County
- Historical appreciation: ~5-7% annually
- Below-average vacancy rates
- Diverse economy reduces downturn risk
- Prop 13 caps property tax increases at 2%/yr
Investment Strategies
Buy & Hold (Long-Term Rental)
Pros
- + Steady monthly cashflow
- + Equity builds via mortgage paydown
- + Appreciation over 5-10+ year horizon
- + Tax advantages (depreciation)
Cons
- - Capital intensive (20% down)
- - Tenant & maintenance hassles
- - Illiquid — selling takes months
Best for: Investors seeking passive income and long-term wealth
House Hacking
Pros
- + Live in one unit, rent the others
- + FHA/VA loans allow 3.5-0% down
- + Dramatically reduces living expenses
- + Build landlord experience with training wheels
Cons
- - Must live on-site
- - Limited to 1-4 unit properties
- - Owner-occupied rules for 1 year
Best for: First-time investors who want to start with minimal capital
BRRRR (Buy, Rehab, Rent, Refinance, Repeat)
Pros
- + Recycle capital for multiple properties
- + Forced appreciation through renovation
- + Higher returns than turnkey
Cons
- - Rehab risk & cost overruns
- - Requires contractor network
- - Refinance depends on appraisal
Best for: Experienced investors comfortable with renovation projects
Value-Add Multifamily
Pros
- + Economies of scale (more doors)
- + Value based on NOI, not comps
- + Potential for rent bumps post-renovation
Cons
- - Higher barrier to entry
- - Commercial lending is different
- - Management complexity
Best for: Investors ready to scale beyond single-family
Ready to Run the Numbers?
Browse live San Diego MLS listings with instant investment analysis.