Last year I watched a client close on a fourplex off Camino de la Reina for $1.85 million. Sounds mad, right? That's what most people said. But here's what actually happened when we sat down and ran the numbers like proper grown-ups.
Each unit was pulling roughly $2,400 a month. That's $9,600 gross across the building. After expenses, insurance, property management, and a reasonable vacancy assumption (I used 5%, which tracks with what MLS data showed for that corridor last spring), the net operating income landed around $86,000 annually. On a 25% down conventional loan at the rates we were seeing, the property cash-flowed from month one. Barely. But it cash-flowed.
The real play was the rent gap. Two of the four units had long-term tenants paying well below market. One was at $1,900. Comparable one-beds nearby, especially closer to the trolley station, were leasing at $2,500 to $2,600. So the buyer had a built-in upside just waiting for natural turnover. No renovations needed. No evictions. Just patience.
I spent my first career as a financial planner before switching to real estate twenty years ago, and the thing that still surprises me is how few investors actually model a property forward. They look at today's rent roll and today's mortgage payment and call it analysis. That's a snapshot, not a strategy. You need to project where rents are heading, what your loan paydown looks like in year three, and what the realistic exit cap rate might be. Mission Valley's got rezoning pressure, new development along Friars Road, and steady demand from hospital and university workers. Those factors compress cap rates over time, which means your equity grows faster than the spreadsheet suggests.
Some agents will tell you fourplexes in San Diego don't pencil anymore. I disagree. They pencil differently than they did in 2019, sure. You're buying for a blend of cash flow, appreciation, and loan paydown now. Not just cash flow alone. If you need an 8% cash-on-cash return from day one, you're shopping in the wrong city. But if you can live with 4% to 5% while your tenant pays down your mortgage and rents creep up, Mission Valley still makes a lot of sense.
What's your target return, and have you actually stress-tested it against a rate adjustment?