Last month a client brought me a listing on Camino de la Reina. Nice two-bed condo in one of those mid-rise buildings near the trolley station. Rent estimate around $2,800 a month. Purchase price $525,000. He said the numbers "worked." I asked him what his net operating income looked like after the HOA.
Silence.
This is the bit that kills me. Investors will spend hours comparing cap rates across zip codes but forget that Mission Valley HOAs can run anywhere from $350 to north of $600 a month depending on the building and its amenities. That's real money. On a $525,000 condo with $2,800 in rent, a $500 monthly HOA shaves your annual return by more than a full percentage point. And that's before you account for the special assessment the building voted on last year for elevator repairs.
I spent twenty years as a financial planner before getting into property, and one thing that stuck with me is this: the expense side of a pro forma matters more than the income side. Rents can soften. Expenses almost never go down. HOAs in particular have a nasty habit of creeping upward, 3 to 5 percent a year in a lot of Mission Valley complexes if you look at the past decade.
So here's what I tell every investor who's shopping condos here. Pull the HOA's reserve study. Actually read it. If the reserves are underfunded (and a surprising number are), you're buying into a future special assessment. That $525,000 purchase is really $525,000 plus whatever the building needs to catch up on deferred maintenance.
Townhomes along Friars Road tend to carry lower HOAs because there's less shared infrastructure. No lifts, no pool in some cases, smaller common areas. The trade-off is you're responsible for more of the exterior yourself. I still think it's a better deal for most buy-and-hold investors, because you control the expense line.
The condo on Camino de la Reina? My client ended up passing once we ran the real numbers. Found a townhome a mile away, lower HOA, slightly less rent, but the cash-on-cash return was meaningfully better.
Pull the reserve study before you pull the trigger. Boring document. Worth every minute.