How to Buy Your First Home in San Diego (What Realtors Won't Tell You)

Final Edit

Bailey: [00:00:00] Welcome back to the 10 70 Architecture YouTube show. Today We're going to be talking about the current state of the San Diego housing market.

Bailey: we're then going to be exploring creative ways for older millennials, gen Z, but pretty much anyone to enter into the market. of course I'm joined.

Bailey: By the principal architect of 10 70 Architecture, Sean Canning, who has a lot of experience entering into the housing market in creative ways. So Sean, why don't you just tell us a little bit about how you are thinking about this conversation, and then we'll just jump right into it.

Sean Canning, Architect: Morning Bailey. Thanks for hosting this. one of the things as an architect, that I'm always wondering is how does the younger generation, or really anybody who's not already. the housing market, how do they get into the housing market in San Diego? Because as of 2025, the average home price in San Diego is $928,000, an enormous chunk of change. How would somebody like you [00:01:00] buy a home in San Diego? is it even a possibility anymore? this has huge implications for San Diego because if people can't buy homes here, they're gonna end up living further and further away from the core of San Diego, the downtown core, and then they're gonna commute in, which has a ripple effect of implications.

Bailey: two important statistics to set the stage for where the housing market currently is, is the fact that I was listening to this podcast recently where they were talking about this. And they were saying that nationwide in America right now, the average age of a home buyer is 56 years old.

Bailey: So of course that's just the averages. So there's younger people, there's older people, but I think that's important because we mostly, for example, I'm 27, people think of probably starting right around my age to maybe 35 as being like the prime first time home buying years. It's now become something where you need to be a lot more established in your career and have had many years to accumulate more money, more, net worth to be able to afford a home. And then also in the [00:02:00] year 1950, in California in particular, I have it in front of me here, it was the cost to buy a home in California was $9,564 adjusted for inflation.

Bailey: That's about $117,000. Based on the number you just gave of just under a million, that means the inflation within the housing market, since 1950 it's nearly 10 x above inflation essentially.

Bailey: So even 10 years ago, this conversation would be much different. Sean, why don't you talk a little bit about how you kind of view the current state of the housing market and then of course transition into how you've approached entering into the housing market. Because at this point you've bought multiple properties in San Diego.

Sean Canning, Architect: Yeah,

Bailey: I.

Sean Canning, Architect: we own three properties at the moment in San Diego we own a single family home where we live in Logan Heights. And then we have a three unit rental property in Logan Heights, which was actually our first, the first property we bought, which I'll show you in a second. And then we own a second property in Burial Logan, which has three rental units. We've not purchased any of these [00:03:00] for more than half a million dollars, that's like 50% of the average cost right now. And each of them, we've used creative solutions to end up owning the properties. I think San Diego's like one of the top three, if not top five most challenging housing markets in the country right now. I think you have to come with a little bit of a different angle If you're gonna end up in a home here, and most of what we'll talk about today is not the type of thing a real estate agent would tell you, but more of like the ideas of an architect. So I guess I should like also qualify what I'm about to say.

Sean Canning, Architect: I'm not a real estate professional, I'm an architect, so the ideas are coming from that direction. lemme tell you a little bit about the first home we purchased

Sean Canning, Architect: this was the first house we bought here. It's in Logan Heights, which at the time, we purchased this home in 2016, so I was 30 years old when we purchased this. when I was about your age is when I started to really think about how I could get a home. So. can see in the greater context of San Diego where this is, it's considered Southeast San Diego. So here's downtown San Diego and we're [00:04:00] about I dunno, two or three miles from downtown San Diego. at the time we purchased this home, this was considered like a risky neighborhood to buy in. And in the last nine years it's improved significantly. There's still some challenges with this area. but for the most part, It's improved significantly. Okay, so this is what the house looked like. This is what the house looks like right now. Or before we built an A DU in the front of it and we got lucky.

Sean Canning, Architect: We actually found a duplex that was listed for $335,000, which is like, sounds like an insane price nine years later. But guess it just goes to show, you know, where things were in 2016 when we bought this house. the house we just painted the front changed the door. the windows, added some signage, built a fence, and then this mural came later, but it's the unit in the back, which is where we ended up living. So we ended up buying this house with an FHA loan. We put 3.5% down on a home that ultimately sold for 327 and [00:05:00] $5,000 because we were able to negotiate with the seller a little bit. And at the time when we bought this house, the housing market was so competitive, that we basically purchased this house without. my wife Margaret, had never even seen the house before. the most important thing was that the house was in a livable condition because otherwise. You can't get a loan for the house. So we needed to find something that was a single unit or ideally two units.

Sean Canning, Architect: But to be honest, that felt like a little bit of a pipe dream at the time. we wanted to make sure that the house was in good enough condition that the bank would give you a loan. If the house is not in good enough condition, then you're gonna end up. Having to pay cash and we didn't have $327,000 of cash, this is the floor plan.

Sean Canning, Architect: We ultimately worked out here. the house. This is a little bit of an explanation of how it worked. So we rented, we lived in this unit and we rented this unit. And when we purchased the house, this is actually how it looked right here. it was actually 327 and a half, and this was the renovation work we did the back unit. probably spent about [00:06:00] $80,000 renovating that back unit. a lot of the work, Margaret and I did ourselves to keep the cost down. And this is what it ultimately appraised for when we finished. So again, we were living in the back. We were renting the front. Our mortgage payment been about $3,000 at the time, the unit in the front I think was renting for like $1,500.

Sean Canning, Architect: So this was a great deal, and at that time we actually had a Three and a half percent interest rate, which didn't even realize how important it was at the time. This is us doing a lot of the work ourselves. We did our own installation. we built all the cabinetry in the kitchen, installed all the appliances ourself.

Sean Canning, Architect: And basically this is how it looked when it was finished. this is now a rental unit for us. This was a 1925 bungalow, which was renovated to be minimalist on the interior, but you can see we kept some of the original framing. Those were the original ceiling joists from 1925. They're all redwood. We built all this stuff in the bathroom ourself, all the cabinets, ourself. For a long time we lived in the house when it was unfinished. So [00:07:00] that's another interesting angle. if the home is livable and you're doing a renovation on part of it or all of it in this case, there's actually nothing stopping you from living there during the renovation, a renovation. But that was like a sacrifice we had to make on our first home. So this was the unit that was fully renovated, and this is the addition that was done in 1985 where the second unit was. And there's another photo of how it looked. And thenlater on the mural came We rescued the mural that you see here. And then ultimately, we ended up building an a DU in the front here. we purchased this for 327 and $5,000. We put three and a half percent down, which would've been. Under $12,000 to get the home, we had about probably $20,000 in savings to start the renovation, and my parents gave us a house warming gift. At the time, Margaret and I had been together for like 12 years and it didn't look like we were gonna get married.

Sean Canning, Architect: So my parents, instead of a wedding [00:08:00] gift, they gave us a housewarming gift of $40,000. So we had about $60,000 to complete the renovations, and it took us a whole year to renovate the house and we saved up about another $20,000.

Sean Canning, Architect: And then we used that 20,000 to pay off the remaining of the house, renovation. And also we had put a lot of the construction projects on our credit cards. So then we were paying those off at the end. The tenants that we had in front were the same tenants that were there when we purchased the house. So all in all, it was a pretty good deal at the time. But in 2016 when we bought the house, we were very concerned that we were not gonna be able to afford the mortgage payment, which, you know, if you look back at things, That sounds crazy, but it was a big investment for us and we basically did everything we could to make ends meet on that house.

Bailey: it sounds like a fairly risky investment. I would say. Like you were all in on this.

Sean Canning, Architect: We were all in, but I think oftentimes when you're buying your first home, you kind of have to be all in because what's the other option?

Bailey: my logic was like I wanted to get. Into [00:09:00] that bottom rung of the real estate ladder because from that point, you can then use the equity you gain in the home. Whether that's by, paying off your mortgage over a decade or so, or whether the property increases in value or whether you're adding another unit.

Sean Canning, Architect: You're starting to generate equity which you can then trade up into the real estate market. So I think, a lot of what we're gonna talk about today is getting onto the bottom rung of the real estate market. And I suppose, there may be an alternate theory, like just rent all the time and never jump into the real estate market.

Sean Canning, Architect: But as architects it was important for us to own our own property.

Bailey: Plus in your situation, not just the fact that you're an architect and you had development plans for the lot, so it wasn't like you were just buying a home to live in. You had investment ideas for it, and then also the fact that you and Margaret as well could save a lot of the money, being able to do a lot of the general contractor type labor.

Sean Canning, Architect: Yeah, and not everybody would be able to do that, but I think, like, let's say you are the type of person who's not very handy. There's a lot of things you can still do if you're ambitious [00:10:00] enough to do this, like you can go on YouTube, figure out how to install LVP flooring, or click linoleum tile flooring.

Sean Canning, Architect: It's very easy to do, and this is a way you can, like improve the house because most of the homes we'll look at today are probably in the condition where you're gonna buy it, but you're gonna have to make improvements as you live there.

Bailey: Let's jump into Zillow and see what's on the market right now, and then we'll use these as real examples to see if these are things that you could afford or even if you'd be willing to do These types of projects.

Bailey: Okay,

Sean Canning, Architect: you'll pull up the screen share of the Zillow properties. What neighborhoods are we gonna be looking in? are we gonna be looking at North Park? north Park is out of your price range.

Sean Canning, Architect: Damn that that's, I think that's one of the top neighborhoods in San Diego Yeah, north Park is a great area and for somebody your age to live in North Park would be like unbelievable. But you're a renter in North Park, not a property owner in North Park.

Bailey: it.

Sean Canning, Architect: let me explain how I kind of set up my Zillow here. So I've basically used San Diego as the nucleus city of San Diego. limited the cost of a home up to [00:11:00] $600,000 and I've sorted the home type by houses and multifamily. So not going to put all of the lots and lands. Generally, I'm also not a fan of condos because of the high HOA fee.

Sean Canning, Architect: Some of the HOA fees on condos are like six or $700 a month. And I don't know if it's just because I'm an architect, but I don't like somebody telling me what I could or couldn't do with the. I live. So I'm kind of anti, HOA, that's why I'm not using any condo. So everything here is gonna be a house that you can purchase and own, The next thing

Bailey: is you need to figure out, like generally where you're going to live. this entire coast here, these are beautiful areas, but these are not areas where a first time home buyer is going to be able to purchase a home. So I like to think of this as trying to get as close to downtown as possible. So this is downtown and the neighborhood that.

Bailey: what I was gonna say as well.

Sean Canning, Architect: Yeah. I can walk downtown from my home. I live right here, right now. The first home we bought was over here. Our other [00:12:00] property is over here, so everything is walkable to downtown. And, Logan Heights is here. Burial Logan is here. I would also recommend you stay east of Route five everything that's west of Route Five is part of the coastal zone.

Sean Canning, Architect: And if you have to get a permit for anything that we're gonna talk about today, that's like a $30,000 12 month permit. And you don't wanna have to do that if you don't have to. So I would generally recommend you stay east of Route five.

Bailey: What types of home renovation remodeling work would trigger the need for a coastal development permit?

Sean Canning, Architect: personally, someone who's not handy, which I think is probably the majority of people, that wouldn't necessarily be a deal breaker, especially if I'm just trying to prioritize getting into the housing market in a solid location for basically as cheap as possible.

Bailey: Well, if you're in the coastal zone and you're gonna do like an addition, a large addition, that would trigger a coastal development permit. If you're closer to the water, then an A DU could trigger a coastal development permit. But generally, if you're doing an interior remodel, you would be your opportunities. the coastal [00:13:00] zone, in my opinion, is for at least a middle level. Developer or middle level home purchaser. it's just not the easy developments that we're looking for in your scenario and you representing your whole generation.

Bailey: All right,

Sean Canning, Architect: So look at these two properties here.

Sean Canning, Architect: We have a $600,000 property in Logan Heights. We have a $550,000 property in Grant Hill. Grant Hill is a nicer neighborhood, we'll take a look at those in a second. You could also come down here to Mountain View. Or South Crest, although this is not as nice of a neighborhood. if you go out to Emerald Hills, it's kind of hit or miss and kind of hit or miss.

Sean Canning, Architect: And the further out here you get, the further you're gonna be commuting. So you're gonna be kind of like compromising your quality of life or maybe putting more money into your car. Ideally we'd be a little closer over here. But I do wanna point out, besides San Diego, you also have La Mesa, lemon Grove, and Chula Vista as options. let's take a look at some of these ones and see what you would be able to do here.

Bailey: zoom in a bit more towards the downtown options. 'cause I think I speak for most people, my [00:14:00] generation, like I live in Denver for example, now in a very walkable, mixed use environment where I can walk everywhere. I rarely use my car. During the week and there's like coffee shops, bars, restaurants, all within walking distance.

Bailey: So that is what I would wanna replicate here. I do think it's important also to state here that San Diego does not have a very good public transportation system. The way a city like New York or Paris or Chicago, places where you can just like get on a train and like easily get in with San Diego.

Bailey: It's especially most places in California, it's car culture.

Sean Canning, Architect: Yeah. both of these, there's really no major mass transit. I mean, there is a trolley line that you can see here that goes down commercial, it's really limited on the stops But both of these areas, you can walk to different shops or breweries. The further you get over here, the less walking you'd wanna do because the neighborhood is not as nice. Grant Hill would be ideal, aside from the fact that it's on the top of a hill, so there's gonna be some up and down walking.

Bailey: let's check out this Grant Hill please.

Sean Canning, Architect: Yeah, when I'm looking at this 1 [00:15:00] 5 50 for Grand Hill, I'm like, oh man, like this. This thing is sounding pretty good right now, but let's see why it's only five 50 here. I would say, by the way, grant Hill, I think is the most undervalued neighborhood in San Diego. It's a very small pocket neighborhood. San Diego is the city of neighborhood, so every like area has like all these like micro neighborhoods.

Bailey: Mm.

Sean Canning, Architect: it's a one bedroom, one bath at 736 square feet and it's on Island Ave, which is generally a really nice area to live. You could look in these photos and you can see that somebody did a pretty nice renovation. the interior space looks pretty modern. Flooring looks pretty good. Kitchen. looks really nice, so there wouldn't be a lot of work for you to do if you were to buy something like this

Sean Canning, Architect: I was expecting a disaster for the price point. This is very nice.

Sean Canning, Architect: it is surprisingly nice on the inside, which sometimes leads me to believe that this home was flipped. And you know, I have opinions about flippers and how they generally detract value from properties, but. it does look really nice and you can see like there's a lot of modern details.

Sean Canning, Architect: So, you know, this could have actually been done by somebody with a little bit of a [00:16:00] design sensibility. It looks like this is a staircase here and here's the staircase. So I think what they did here with this one bedroom is, I think they put the bedroom upstairs and then all of the public spaces downstairs, living room, kitchen, dining room, there's an attic here. very small backyard. Little exterior space, which is nice. And then see, here's the view you get from Hill and you can actually see all the way down to the Coronado Bridge.

Bailey: Okay.

Sean Canning, Architect: let's dive in a little bit more and try to figure out what's going on here.

Bailey: Yeah. 'cause I feel like something's up, something's wrong as to why this one is so cheap. I mean, it's the only one in the general vicinity that is.

Sean Canning, Architect: Well, first thing, if it's got interior photos, that means you can probably get a loan on it. If there's no interior photos on the listing, that means the interior's not looking good and you're probably have to pay cash. So something without interior photos, you might wanna follow up with the agent.

Bailey: Yeah.

Sean Canning, Architect: I'm seeing, okay, this house has gotta get painted. Would you be willing to paint the exterior of this home if you owned it?

Sean Canning, Architect: I will say I'm not a fan of this exterior at [00:17:00] all. It's not just the color. But yeah, I mean, I could live with it all things considered, and I do think I could paint it for sure. So right there you could add a ton of value to this home. Now here I'm seeing that there's a garage, which means that there's a play here for a future A DU here within this garage, and that would generally be your lowest cost option for an A DU. The biggest expenses you'd have to add some plumbing for your bathroom and kitchen. but other than that, that could become a future rental unit. And then the other thing I should point out here iswe can zoom in and we should be able to see the lot lines. Yeah. So this is the reason why this property is so inexpensive is look how small the lot is. So that's, that's unfortunate because you don't have the backyard space in the future to then. Build an A DU like five years later, which would help, offset your rent. And I think it's a great idea to do, but you don't have the opportunity here. You do have the opportunity to convert that garage, but, but that's about it.

Sean Canning, Architect: And if you did convert the garage, you're gonna be doing street parking. But I think that's a [00:18:00] compromise I would make on something like this. So now let's jump into the. much you'd actually have to pay for this thing. So on Zillow, if you come down over here and you click on this, you can actually like run the numbers yourself. if you were to put 20% down on this home, that would be $110,000, your interest rate is actually probably gonna be 7%. this is what you'd be paying every month. as a first time home buyer, there's a couple things wrong with this.

Sean Canning, Architect: First off. You probably don't have $110,000 sitting in the bank. So that's the first thing. what I'm gonna recommend is you put 3.5% down. There's three different. Strategies for down payments, down is gonna get you an FHA loan. That's your lowest amount you can put down unless you're like a veteran, in which case you can put zero down, but generally it's gonna be 3.5% is your lowest After that, you can put 5% down. That's considered a conventional loan. if you could put 20% down, there's advantages to that. let me Get into this a little bit more here. At 3.5% down, [00:19:00] you are going to be paying this mortgage insurance per month. basically ensuring the bank that you're gonna. make payments because you have so little down in the property. Now if you put 5% down, you're still gonna have that mortgage insurance. It's just gonna drop a little bit more. But if you were to put 20% down, and this is why a lot of people talk about putting 20% down, watch what happens to the mortgage insurance here. can see it disappears because at this point the bank is like, you have enough equity. we're gonna trust that you're gonna make the rest of the payments at this point. If you put 3.5% down as you're making these payments, and eventually you get up to 20% equity, the PMI insurance is never going to leave the property.

Sean Canning, Architect: But if you put 5% down and get the conventional loan you're building equity, once you hit 20% equity, this will automatically disappear. So usually it's better to put the 5% down than the 3% down, if you can. But the other angle here is If the interest rates dip below 7%, like let's say they hit six or or even 5%, again, you're gonna refinance. And at [00:20:00] that point you would refinance with 5% down at a lower interest rate. And by that time, the home is probably up in value. So at 7% interest rate, I wouldn't, wouldn't have an issue only 3.5% down.

Sean Canning, Architect: We set this back to five 50, and then we'll talk about if this is reasonable for you to afford. Okay, so this is what it's gonna look like right now if you were to buy that property. Did I do that right? The home is five 50. We're gonna put 3.5% down 7% interest. So you can see you're still gonna have a really steep payment here. So we need to find a way to reduce this payment for you because. $4,700 is probably double what you're paying for rent right now. Right?

Bailey: It is like triple what I'm paying.

Sean Canning, Architect: Triple what

Bailey: $4,700 is more than my monthly expenses. Everything combined unless something comes up.

Sean Canning, Architect: And at the end of the day, this is just a one bedroom, one bathroom home. this is probably pretty unrealistic. I was actually running some [00:21:00] numbers before this. Podcast here, and I wanted to make a couple suggestions. So the first thing is, the general recommendation is that you put only 28% of your income into your housing. So if this is 28% of your income, you're making a ton of money. The best recommendation that I can give you and the way I was able to make this work is I had a significant other who was able to split this payment with me. our income is, we have two incomes, which contributes to the money we bring in, and then 28% of both of our incomes is basically double what?

Sean Canning, Architect: you have double income if you have a second person. So that could be a significant other, it could be a parent who's willing to help you out with this. it could be, a partner, basically. Almost like a roommate who's like a partner in the property. I don't think this is a good property because. Ultimately it's a one bedroom, one bath, and there is some opportunity for the future A DU, but the price is just too high here. [00:22:00] So let's abandon this one and take a look at the other one. What are your thoughts so far, Bailey? These numbers look pretty high to you.

Bailey: They look pretty high to me, but I knew going in all these numbers would be high. Quite honestly, I don't think it's the worst idea. I feel like all things considered the location, the interior, the costs wasn't unreasonable. you can still get one A DU, which I think is.

Bailey: Probably gonna be sufficient for most people if they wanna go down that route. Although of course if you had the opportunity to build two or even three, that would be better. I do like how it's across the street from a very large park, it seems. I think that compensates for the lack of backyard space.

Bailey: Allstate considered it was fairly solid.

Sean Canning, Architect: This is a great area. think this is the best views in the whole city from the top of this park. and generally there's not a lot of homeless in this area, so that's great too. let's take a look at this one. So the location is not as good and the price is $50,000 higher, so let's see why. Okay, so this one, we got three bedrooms, two baths. So immediately there's a roommate opportunity here, which is gonna help [00:23:00] offset your rent. It's a thousand square feet. We could look at the house. It's fairly straightforward. So if any repairs are needed, they should be pretty easy to do. You can see right away the kitchen is not as nice as the other kitchen.

Bailey: Yeah, you're gonna need to remodel the kitchen,

Sean Canning, Architect: Well,

Sean Canning, Architect: you remodel it as you go. You know, you wanna buy something now that's workable. And then at some point, a year or two years down the line, you commit to renovating the kitchen. And then once you do that, you've added some value into the home. But the thing I like about this is the bedroom count and the bathroom count. I don't think there will be a floor plan on this one. And look at this. So this is probably a 25 foot wide lot. It probably has alley access, which means you can fit two to three parking spaces in the back. room for one or two Aus in the future.

Sean Canning, Architect: You have a backyard space so you can entertain your guests outside. And with the three bedroom, two bath, it would be pretty easy to house hack this and convert it into two units, and that's gonna help [00:24:00] significantly in offsetting your vent. let's dive into the numbers on this one though.

Bailey: this one certainly has more development opportunity. Unquestionably. The other one we looked at, I feel like is much more of a buy it, move in, and you're pretty much good.

Sean Canning, Architect: Mm-hmm. So this one's gonna come with years of projects that you're gonna do or you're gonna pay for, but I still think there could be an opportunity here. So let's just see how much of an opportunity there would be. 20% down, you would pay $120,000. If you put 3.5% down, you're paying 550, $100. if you made $90,000 a year and you have a significant other, who also makes $90,000 a year, 28% be $4,200 a month. this is still above. the recommended amount that you would pay if you guys both made $90,000. Now I would bet you in San Diego people are paying more than the 28% of their income to [00:25:00] housing. But this is certainly going to be a stretch. But let's just keep working these numbers and see if we could figure out a solution here. You're gonna need to put $21,000 down. your first goal where you are right now, is to save as much as you can over the next three years or so. And I think you should probably try to save, you know, $25,000 or $30,000. The more money you have, the easier all this is gonna work. And then to afford something like this, you're gonna have to get the loan from the bank you won't get this loan. By yourself, you're gonna need a second person to get this loan. in all these strategies, you really need a dual income scenario going on. And that's either gonna be a partner, a family member, a significant other. I just don't know if there's another way where you would qualify for a loan of this much otherwise.

Bailey: Well, as you say that, I would argue that. if you're a traditional W2 employee, that's most likely gonna have to be the case. But both of us are self-employed entrepreneurs. there's more risk that comes with [00:26:00] that, but there's also more upside naturally. to be able to afford it yourself, you'd have to be in an entrepreneurial position, or at least have a W2 full-time job.

Sean Canning, Architect: And then you have a side hustle. bringing in a lot of money as well, so entrepreneurship plays a big role That's true. But also keep in mind like the bank is just gonna wanna see your tax returns over the last two years and they're gonna be like, okay, this is how much he's making. And then they just basically put it into their spreadsheet and they're like, this is the maximum we're gonna loan him. There's probably a couple other quirks to that I know, like if, in some cases, if you have like a documented rental income from the property, they can kind of use that. And I think that leads us into the house hacking conversation on this one. So what's your, don't mind me asking, what's your rent right now, your monthly rent?

Bailey: My monthly rent before utilities, which are baked in, is 1450 in Denver, Colorado. You could get a place in Denver for around a thousand dollars a month to rent, but it wouldn't be in this neighborhood and it would be like, kind of like a beater place for sure.

Bailey: So adjusted [00:27:00] for how nice I would say my place is with like, you know, it's got a new kitchen remodel, it's a new appliances, This is probably the best value deal in the entire city and when I tell people this, they actually agree with me, so $1,500 we'll say.

Sean Canning, Architect: So I guess the first thing I should mention is like from Denver to San Diego, the rent is just gonna be more here, Rent for a one bedroom here, minimum is probably $2,500 a month. If you're looking to buy a home, you can compare a $2,500 a month rental, To what you're gonna pay for owning the home. You know, maybe it's worth paying $3,500 if you own the home versus $2,500 to rent. So I'm kind of using that for a little perspective here. But this number is not an insurmountable down payment. I mean, this is gonna take years to save up, I would imagine, over two to three years, I think this is like a reasonable amount to save up. would you agree with that?

Bailey: I think it's a reasonable amount to save up. it depends on everyone's individual financial circumstance. For me, I would be looking to continually invest in the stock market Maybe even cryptocurrency, although of course we're not trying to [00:28:00] give investment advice on this discussion.

Bailey: and then cash out at a good time when I wanted to make this purchase, so I wouldn't be saving it in the bank necessarily, although I would try to have a good amount of money in the bank, it would be tied up in equities, and then I would eventually sell it to pay off the down payment.

Sean Canning, Architect: Yeah, that makes sense. You just need access to about this much money, wherever the money is. But here's, still the issue like I was saying, 2,500 is gonna be like a rental cost for a one bedroom unit. And here we're gonna be paying double to own this property. So I think what you would be doing on something like this, if you really wanted to get into the housing market and you had dual income, you rent out the other bedroom and bathroom. And now somebody is gonna be paying for a one bedroom with a bathroom, and you could also like plum in a kitchenette for them too. And that is gonna rent for $1,500. now all of a sudden, instead of $5,000, you're down at $3,500 and you own the property. in this particular case, this is actually a [00:29:00] two bedroom. So there's a case. where you rent both bedrooms, maybe a thousand dollars each, and now all of a sudden your payment's at $3,100. But now let's talk about what this means if you're going to have a partner in this project. So if you're lucky enough and you have a parent who's going to co-sign with you, that's awesome. In that situation, you're probably still paying the full mortgage and your parents just on the loan, but in most scenarios, I don't think your mom or dad's gonna sign the loan and then also give you 50% of the mortgage. So while they could help you get your foot in the door, you'd still be on the hook for all of this. And in that scenario, you get one or two roommates and then that kind of drops the number here. So that works. But you gotta be lucky enough to have this situation where your parents are gonna co-sign on the mortgage. The other scenario is you have a significant other who either you're married to or maybe thinking you're going to, you know, feeling strongly about the relationship. And that's a great situation because now you can take [00:30:00] both of your incomes qualify for the loan and you have more income coming in than if it's just your income.

Sean Canning, Architect: And the best thing about this is you're presumably going to be. Living in the same bedroom. And then that still leaves the two vacant bedrooms for two roommates, one or two roommates. And then the third scenario is you have a partner who's like a, basically would be a roommate, but they're, you know, you, you have a good relationship with this person.

Sean Canning, Architect: They want to invest in the home. And I think they would consider that like a, what's called a tenants in common scenario. you're both investing, but the downside of that is now. that roommate is going to have their own bedroom, so it leaves you with only bedroom available.

Sean Canning, Architect: I guess the upside is they probably split this in half, now you're paying $2,500. Basically they're paying $2,500, maybe you rent the other bedroom for a thousand dollars and you pay 2000. They pay 2000. And then, you're sharing the equity with them.

Sean Canning, Architect: I think all three of those scenarios could make this work. [00:31:00] And the icing on the cake here from, at least from my perspective, first off, it doesn't look like there's too many renovations. It's not the nicest kitchen. It's probably not the nicest the icing on the cake here is what you do in the future. So after you've lived here for a little while, you've done a couple renovation projects to fix things up, Then you gear up in the future and build an A DU or two ADUs back here, and then all of a sudden you can get this thing to almost a cash flow scenario.

Bailey: what do you think about this property Billy?

Bailey: I don't think it needs a ton of work. I think you'd probably need to remodel the kitchen, maybe the bathroom, That's probably for the most part what I would wanna do in the interior. It does have significant development potential on the lot. Also looks like it's nice. It's next to a park, which I think is cool for just going for walks and stuff.

Bailey: It seems like a good location. you could probably be able to at least two ADUs and then. Have two or three more tenants there, get it to cash flow. how far away do you think it is from downtown, let's say walking distance.

Bailey: 'cause it seems kind of far out.

Sean Canning, Architect: this is probably a 30 or 45 minute walk to Peco Park.

Bailey: [00:32:00] Okay. But you're near the pier over there.

Sean Canning, Architect: I mean, let me be totally honest with you. This is not the best park. They've made a lot of improvements here, but this park has quite a lot of homeless people in it. This is a brand new through 12 school. but it's not the best school system, You're next to Chicano Park over here, which is a kind of a cool area with a good vibe.

Sean Canning, Architect: And Barry Logan over here there's a lot of cool stuff going on here. do have the trolley here, so you're probably a 15 minute walk to the trolley stop, which could take you all different places, but the trolley doesn't go everywhere You'd want it to. And the further you go east in this neighborhood, the more sketchy it gets.

Sean Canning, Architect: You're kind of right at the fringe, which has I think, reflected in the price of the home. So those are the challenges. You are making some compromises. This is not gonna be the San Diego lifestyle that you're gonna see on tv. This is gonna be the bottom rung of the real estate ladder in San Diego.

Bailey: I think that was a very informative exercise for not just myself, but anyone watching, my big takeaway is that, and maybe you disagree, I think you'll disagree, but that's fine. But for me personally, I [00:33:00] think the value proposition of buying a home compared to what we just looked at of like in 1950.

Bailey: Has gone down significantly? this case study we looked at is like the most extreme example because San Diego is so expensive.

Bailey: it's so much more expensive inflation adjusted and it's nearly like 10 x from when we think about like the golden age of the American dream and then especially in many of the examples you give of like getting creative and like house hacking and bringing in roommates.

Bailey: for example, 20, 30 years ago people wanted to move outta the apartments where they had roommates buy a property so they could finally not have any roommates. Now, for example, I live alone, it would seem like if I wanted to do that, I would be going. Back in a way of, you know, I'd have to get roommates potentially, which I wouldn't mind, but it would have to be one of my good friends.

Bailey: I wouldn't wanna live with like a random person. And I think there's just also the opportunity cost of, you could just put money in the stock market and, you know, the s and p returns eight to 12% annually. and then you don't need to do anything, technically. So I'm just, I mean, there is value in home ownership.

Bailey: The [00:34:00] starter home, it's gonna be downgraded to the condo for my generation, which I'm kind of fine with 'cause I don't wanna be doing the development necessarily, and I don't wanna be doing the landscaping for sure. So if someone else can take care of all that, I'm cool with it.

Bailey: But that's just the way I see things going. And I think if anything, if people wanna get into housing market, I think it's gonna have to be delayed until you're probably like 40 plus, quite honestly.

Sean Canning, Architect: you definitely bring up some interesting points, like we at a point where housing has reached a price where it just makes more sense to be a permanent renter? I have a client who's in his late seventies and he owns a bunch of rental properties in La Jolla and they rent for like $4,000 for like a small one bedroom. And like, well, what happens if San Diego becomes a place where nobody can ever buy a home and everybody's just renting? I'm like, we're gonna be in this scenario where everybody's renters. Isn't that bad? And he was like, well, that's New York City. So cities just reach A point where people are permanent renters.

Bailey: there are [00:35:00] significant downsides to renting. I will say, I don't wanna be a permanent renter, Because then you can kind of get into a situation where you're almost like a surf in a way, like back in the day in Europe. So that's not what you want.

Bailey: The idea is to own property. 'cause that's more secure. I would argue

Sean Canning, Architect: yeah.

Bailey: benefits to renting though. Like for example, if this building burns down, it's not the end of the world for me. You know, I'll just go somewhere else,

Sean Canning, Architect: But you know, if you're comparing how much you can make with your money in the stock market versus how much money you could make in real estate, I think that's pretty speculative. Especially the real estate. Like everybody assumes real estate's gonna go up and everybody assumes it. In San Diego, real estate has gone up, but you know, there are. Cases where it can crash down. And I think the stock market may be a little bit more stable than real estate. have we reached an infliction point where your generation doesn't purchase real estate in high cost areas? I'm not sure. from my perspective as an architect owning the land and having the future development possibility is the. Most, appealing scenario. And that's [00:36:00] why the condo was not something I was interested in, not only with the condo, you don't have any land for future development, but the HOA fees are really a killer. and also just the fact that an HOA can tell me what color I can paint, things like that, doesn't sit well with me.

Sean Canning, Architect: Yeah, well, I get that.

Sean Canning, Architect: opposed to condos. And by the way, I should let you know, like in the eighties, my parents' first property was a condo, and then they. Basically the condo became a rental, and then eventually they sold the condo and moved into another,

Bailey: Yeah,

Sean Canning, Architect: house.

Bailey: that's one of the benefits of the condo. If you get that first, then you can rent it out in the future when you have more money to buy a property. I think it's worth mentioning though, that number one, we're looking at a place right in the middle of the city. I think a lot of people who are looking to buy their homes are gonna probably be looking for something more suburban, especially if they're having a family.

Bailey: And also with the rise of remote work, there's a big trend and I don't wanna live this type of lifestyle, but with the rise of remote work, there are people who are looking to move outta cities, especially as they get into their late twenties, thirties, and have more property live in a place that's more [00:37:00] suburban and not need to commute.

Bailey: I think the further away you get outta the city, the more affordable, for the most part, these homes should likely become.

Sean Canning, Architect: It's difficult to say, like the area that I showed you, it's close to downtown, so it would be more urban, but it's still a single family home, which is kind of suburban I guess. As the city grows, as San Diego grows, areas that were suburbs become more urban and more dense. I think that's been a big issue.

Sean Canning, Architect: it's a whole different topic, but like people are adding more housing or more units to these properties, there's a big backlash like the whole NIMBY movement. Butdon't want a stagnant city. And if you look back historically every city basically grows or it kind of dies, but that's a whole nother conversation for another podcast. Billy, if I was gonna give you advice on what I would do right now, if I were you considering, if your mindset is to own a home, first off, I would say save as much money as you can, as fast as you can, [00:38:00] because. housing prices continue to increase, and they're probably increasing faster than you're saving for that down payment. And that's also the reason why I think it's better to put a lower down payment on your first home. Even though put 20% down, you'd save a lot of money on your monthly payment and you'd save that PMI insurance, but by the time it takes you to save 20%, home prices are gonna be so much higher. So the first thing anybody should do. save their money. the second major advantage as we ran these numbers is having that partner. So kind of critical to making this work the way I showed you today. Then I guess the third thing is home ownership just comes with more, maintenance, so gonna be doing the landscaping. Although on that property it was mostly concrete, so there may not be too much landscaping to do. You know, doing some weekend projects just kind of comes with the territory. I kind of really enjoy that work and I know not a lot of people do. but over time you'll, just end up doing the work or you hire somebody to do the work if you can afford it. [00:39:00] And then the little projects around the house, you know, like my cabinet broke the other day, so I just fixed the cabinet. It took 30 minutes. it's not too big of a deal.

Sean Canning, Architect: And if you want to figure out how to do these things, you just go to YouTube and somebody's explaining how to do it.

Bailey: Well, I think this is very, informative. I will say personally, it was informative for me, but we're pretty much at time, so we'll wrap it up here. But I think there's several other offshoots of this main topic we could eventually touch on. So is there anything else you wanna say before we wrap up?

Sean Canning, Architect: if you're interested in home ownership, out a way to do it and go for it. you have to come up with creative solutions to get into a really challenging market.

Bailey: Alright, thank you for watching everyone. We'll be back in about two weeks or so. Until then, subscribe to the channel, check out the website, and certainly feel free to reach out if you're interested in a architecture development type project in San Diego.

Sean Canning, Architect: Thanks, Bailey

Sean Canning, Architect: Bailey