DSCR Loans in San Diego, CA: Investor's Guide to America's Finest City

San Diego is expensive. Let's get that out of the way. With a median home price around $830,000 – $900,000 and a metro population of 3.3 million, this isn't a market where you'll find $200,000 cash-flow machines. But San Diego offers something most affordable markets don't: relentless demand. The military (the largest concentration of military personnel in the world), biotech, tourism, UC San Diego, and sheer lifestyle appeal create a tenant pool that doesn't dry up.

For investors willing to be strategic about neighborhoods and property types, DSCR loans unlock San Diego deals that conventional financing makes nearly impossible — especially if your personal income doesn't reflect your investment capacity.

How DSCR Loans Work in a High-Price Market

The DSCR formula doesn't change based on price:

DSCR = Monthly Rental Income ÷ Monthly PITIA

But in San Diego, hitting a 1.0+ DSCR requires more intentionality. A $900,000 home with a $675,000 loan at 7.5% has monthly PITIA around $5,800 – $6,200. You'd need $5,800+ in rent to hit 1.0. That's achievable in some scenarios (multi-unit, furnished, military housing) but not with every property.

The key is knowing where the rent-to-price ratio works.

San Diego DSCR Loan Terms (2026)

Note: Some San Diego DSCR lenders go up to $5M+ for luxury or multi-unit properties, which opens doors for 3-4 unit buildings in premium locations.

Why San Diego Rewards Patient Investors

Military Demand Is a Moat

San Diego hosts Naval Base San Diego, Marine Corps Air Station Miramar, Camp Pendleton (just north in Oceanside), Naval Base Coronado, and more. Roughly 130,000 active-duty military and 240,000 veterans live in the region. Military tenants receive housing allowances (BAH) that are predictable, inflation-adjusted, and direct-deposited. In San Diego, E-5 BAH with dependents runs about $3,200/month; O-3 with dependents gets roughly $3,800/month. These are essentially government-guaranteed rent payments.

Biotech and Tech Employment

San Diego's biotech corridor (anchored by Illumina, Neurocrine, Dexcom, and hundreds of startups) employs tens of thousands of high-income professionals. Qualcomm and other tech firms add to the base. These workers earn $100K-$300K and often rent before buying in San Diego's expensive market, creating demand for quality rental homes.

Chronic Housing Shortage

San Diego consistently underbuilds relative to population growth. Geographic constraints (ocean to the west, mountains to the east, Camp Pendleton to the north, Mexico to the south) limit sprawl. The result: vacancy rates consistently below 4%, often below 3%.

Appreciation Track Record

San Diego home values have appreciated roughly 6-8% annually over the past 20 years. Even with cyclical dips, long-term holders have built massive equity. In DSCR investing, appreciation is the bonus on top of cash flow — and San Diego delivers both over time.

Best San Diego Neighborhoods for DSCR Investors

1. City Heights

City Heights is San Diego's best-kept investment secret — though the secret is getting out. This centrally located neighborhood offers homes in the $550,000 – $680,000 range. Three-bedroom rentals command $2,400 – $2,900/month. Duplexes and triplexes here are the real prize: a duplex at $650,000 – $780,000 generating $4,200 – $5,000/month combined rent puts you solidly above 1.0 DSCR.

Sample DSCR calculation (duplex):

• Purchase price: $720,000
• Down payment (25%): $180,000
• Loan amount: $540,000
• Monthly PITIA: ~$4,350
• Combined monthly rent: $4,600
• DSCR: 1.06

2. National City

Just south of downtown San Diego, National City offers the most aggressive rent-to-price ratios in the metro. Single-family homes sell for $550,000 – $650,000 with rents of $2,400 – $2,800/month. The real opportunity is small multifamily — the area has a good stock of 2-4 unit buildings. A triplex at $850,000 generating $5,800 – $6,500/month is strong DSCR territory.

3. Chula Vista (East)

Eastern Chula Vista (Eastlake, Otay Ranch) features newer construction that appeals to military families from nearby bases. Homes run $650,000 – $780,000 with rents of $3,000 – $3,500/month. BAH-paying military tenants make this a reliable cash flow zone. The newer construction also means lower maintenance.

4. Imperial Beach

IB is the most affordable beach community in San Diego County. Homes sell for $680,000 – $820,000 with long-term rents of $2,800 – $3,400/month. The beach location also supports mid-term rental strategies (traveling nurses at nearby Sharp Coronado Hospital, military personnel at Naval Base Coronado) at $3,500 – $4,500/month furnished.

5. Oceanside

Oceanside sits at the northern edge of San Diego County, adjacent to Camp Pendleton. The military tenant base is enormous. Homes run $650,000 – $800,000 with rents of $2,800 – $3,400/month. The downtown revitalization around the Oceanside transit center has lifted property values, and the Coaster commuter train connects to downtown San Diego.

6. El Cajon

El Cajon is the East County value play. Prices range from $580,000 – $700,000 with rents of $2,500 – $3,000/month. It's not glamorous, but the numbers work. Strong demand from families priced out of coastal communities. The Grossmont-Cuyamaca college district and Grossmont Hospital provide employment anchors.

7. North Park / University Heights (Higher Entry, Premium Rents)

These trendy urban neighborhoods command higher prices ($750,000 – $950,000 for single-family) but also premium rents ($3,200 – $3,800/month). The real DSCR play here is small multifamily — vintage apartment buildings and duplexes that generate enough combined rent to clear the debt service threshold.

Property Types That Maximize San Diego DSCR

Small Multifamily (2-4 Units)

This is the DSCR investor's best friend in San Diego. Multi-unit properties spread income across units, making it far easier to hit 1.0+ DSCR than a single-family home. San Diego has good inventory of 2-4 unit buildings in City Heights, North Park, Normal Heights, and National City. A fourplex generating $8,000 – $12,000/month can support significant debt.

Condos and Townhomes

Entry-level condos ($400,000 – $550,000) offer the lowest barrier to entry. A 2-bed condo in Mission Valley or Mira Mesa renting for $2,400 – $2,800/month can work for DSCR — but watch HOA fees. A $400/month HOA increases your PITIA significantly. Target low-HOA complexes or newer communities with reasonable fees.

Single-Family Homes with ADU Potential

California's ADU laws apply in San Diego, and the city has approved thousands of ADU permits. A single-family home with a detached ADU can generate $4,500 – $6,000/month combined, dramatically improving DSCR. Look for properties with large lots, detached garages suitable for conversion, or existing unpermitted units that can be legalized.

Military Housing (BAH-Optimized)

Properties near military bases that are sized and priced to align with BAH rates are essentially pre-qualified for a specific rent amount. An E-6 with dependents receives about $3,400/month BAH in San Diego. A home priced so that $3,400 covers the PITIA is almost auto-funded by the military housing allowance.

San Diego-Specific Considerations

Mello-Roos and Special Assessments

Many newer San Diego communities (particularly in Chula Vista, San Marcos, and Carlsbad) carry Mello-Roos special tax assessments on top of regular property taxes. This can add $200 – $600/month to your costs. Mello-Roos is included in your PITIA for DSCR calculation, so it directly impacts your ratio. Always check for special assessments before making offers.

Coastal Commission Regulations

Properties in the coastal zone face additional restrictions on renovations, ADU construction, and short-term rentals. If your strategy involves modifications or STR, verify the property isn't in the coastal zone — or budget for the additional permitting complexity.

Insurance Market Challenges

California's homeowners insurance market is in flux. Some carriers have pulled out of the state entirely. Budget $2,000 – $4,000/year for landlord policies in San Diego, and start shopping for insurance early in the purchase process. In some cases, you may need to use the California FAIR Plan as a backstop.

Short-Term Rental Regulations

San Diego allows short-term rentals but with significant restrictions. Whole-home STR permits are limited and require the property to be your primary residence (not ideal for investors). Mid-term rentals (30+ day stays) are unregulated and represent a better strategy for DSCR investors wanting above-market income.

Investment Strategies for San Diego DSCR Investors

Strategy 1: The Military BAH Play

Target 3-4 bedroom homes near Camp Pendleton (Oceanside, Vista) or Naval Base San Diego (National City, Chula Vista) priced at $650,000 – $750,000. Market to military families at BAH rates ($3,000 – $3,500/month). Military tenants are reliable, transfers are predictable (typically 2-3 year leases), and BAH adjustments keep pace with housing costs.

Strategy 2: The Multi-Unit Urban Play

Buy 2-4 unit properties in City Heights, Normal Heights, or North Park. Target buildings where combined rents exceed $5,000/month. Use DSCR loans that allow up to 4 units. Renovate units at turnover to push rents to market rate. San Diego's tight vacancy means renovated units lease quickly.

Strategy 3: The Mid-Term Furnished Play

Furnish a 2-3 bedroom property near a hospital (Scripps, Sharp, UCSD Medical Center) or military base. Market to traveling nurses, military TDY personnel, or relocating professionals on 30-90 day leases. Rents of $3,500 – $5,500/month (vs. $2,500 – $3,200 unfurnished) dramatically improve DSCR. Some lenders accept mid-term rental income for qualification with 12 months of documented history.

Strategy 4: The Condo Entry Point

Start with a condo in the $400,000 – $500,000 range in Mission Valley, Clairemont, or Mira Mesa. Low-HOA units renting for $2,400 – $2,800/month can hit 0.95 – 1.10 DSCR. It's not a home run, but it gets you into the San Diego market with manageable capital. Build equity through appreciation, then 1031 exchange into multi-unit.

Strategy 5: The ADU Conversion

Buy a single-family home with a detached garage or large lot in City Heights, El Cajon, or Lemon Grove ($550,000 – $680,000). Convert or build an ADU ($150,000 – $200,000). Post-conversion, the property generates $4,200 – $5,200/month combined. Refinance with a DSCR loan at the new appraised value and improved income. This often creates enough equity for a cash-out refinance to fund the next acquisition.

Frequently Asked Questions

Is it even possible to cash flow in San Diego with a DSCR loan?

Yes, but you need to be strategic. Single-family homes in premium coastal neighborhoods won't cash flow. Multi-unit properties, ADU additions, military housing areas, and mid-term rentals can all achieve 1.0+ DSCR. The key is targeting the right neighborhoods and property types — not expecting every San Diego property to pencil out.

What down payment do I need for a San Diego DSCR loan?

Standard is 20-25% down. On a $750,000 property, that's $150,000 – $187,500. Some lenders require 25-30% for condos, properties with sub-1.0 DSCR, or borrowers with lower credit scores. Higher down payments improve your DSCR by reducing the loan amount and monthly payment.

How does BAH income work for DSCR qualification?

The property's market rent (per the appraisal/rent schedule) is what matters for DSCR — not the specific tenant's BAH rate. However, knowing that BAH rates set a floor for what military tenants can pay helps you underwrite deals confidently. If market rent aligns with BAH, you have a built-in demand pool.

Can I use a DSCR loan to buy a vacation rental in San Diego?

You can use DSCR financing to purchase the property, but qualifying based on short-term rental income requires documented rental history (usually 12 months). Since San Diego restricts whole-home STRs for non-owner-occupied properties, most investors use DSCR loans for long-term or mid-term rental strategies instead.

What are typical vacancy rates in San Diego?

Metro-wide vacancy for single-family rentals runs 2-4%. Multi-family vacancy is similarly tight. For DSCR underwriting, most lenders assume 5-8% vacancy regardless of actual market conditions. San Diego's low actual vacancy means your real-world cash flow typically exceeds what the DSCR calculation suggests.

The Bottom Line

San Diego isn't a market where every property works for DSCR financing. But the properties that do work offer something rare: reliable cash flow backed by military and professional tenants in a market with chronic undersupply and strong long-term appreciation.

Focus on multi-unit buildings, ADU-enhanced properties, and military housing corridors. Use mid-term rental strategies where the numbers support it. And remember that in San Diego, a property with a 1.0 DSCR today will likely have a 1.3+ DSCR in five years as rents grow while your fixed-rate payment stays the same.

DSCR loans let you access this market without proving personal income — and in a city where the demand drivers aren't going away, that's a tool worth using.