“I’d like to buy a 2-4 unit property in Pacific Beach, but the prices are so high relative to the rents. I know this is typically the case, but why? Why are gross rent multipliers higher in better neighborhoods?”
Answer:
Great question. Here are the reasons, as I see them:
1. Many buyers of 2-4 units by the beach are owner-occupant buyers and are willing to pay more than a straight investor.
2. Some people like to manage their rentals themselves and prefer an easier to manage and relatively safe area like the beach (yes, I know it’s not 100% safe).
3. Pride: People will pay extra to own a better area.
4. Many investors prefer to own closer to their home, in an area more familiar and convenient. Because more people who can afford to invest (i.e. richer folks) live closer to the beach, the prices are bid up a bit.
