Real estate, often seen as a sound investment, has been a hotter topic than usual amid the COVID-19 pandemic. In 2020, the Federal Reserve cut interest rates to record lows to support the economy. As a result, real estate prices have skyrocketed, though the industry is not without its challenges, especially for landlords.
According to a study commissioned by the Southern California Rental Housing Association (SCRHA), San Diego County landlords have lost close to $2.4 billion in unpaid rent since the onset of the pandemic in March 2020. To better understand the real estate market as a whole, we recently spoke to David Malcolm, a San Diego real estate expert with over 40 years of experience. Malcolm earned his real estate broker’s license in 1974, held exclusive rights to Rally’s Hamburger stores in Los Angeles, Orange, and San Diego counties from 1989 to 1997, and holds the highest professional commercial real estate designation, CCIM – Certified Commercial Investment Member. He currently serves as the President of Cal West Apartments, a trusted provider of quality rental housing in San Diego and South Riverside counties.
You earned your real estate license at a very young age. Looking back, what first inspired you to pursue this particular industry?
President Nixon decided that you should be considered an adult once you became 18 (versus 21) and be allowed to vote. California followed the President’s lead and lowered most requirements (including a real estate license) to 18 years old. One week after my 18th birthday, I was reading the newspaper and saw an advertisement about an upcoming test to get your real estate license. I decided to take the test in April of 1972 and was fortunate enough to pass. Once I had my license, I decided I should try to put it to good use. I immediately fell in love with real estate and the challenges and opportunities it presents. It seems fate (reading a newspaper) led me to real estate versus me pursuing the real estate industry.
What was your biggest ‘ah-ha’ moment as a real estate professional?
When I was 18, I bought my first home with a loan from my grandfather (who charged me 10% interest). After fixing the house up, I sold it and made $5,500. This was an incredible amount of money to me, and I decided right then that this was the business I wanted as a career. I hope I never lose the excitement I experienced in my first transaction and never become too big or important not to savor making $5,500.
What has been the most important part of your professional journey?
Education! You will never have a greater opportunity than your preparation will allow you to make of it! Getting my Certified Commercial Investment Member (CCIM) designation was the most important tool in my toolbox.
How has real estate evolved, for better or worse, in San Diego and the surrounding area?
San Diego is one of the best markets in the United States to invest in due to its geographical location. While many cities keep spreading out (think Phoenix or many cities in Texas), San Diego has to consider the Mexico–United States border to the south, the ocean to the west, Camp Pendleton to the north, and mountains to the east. These factors have helped push valuations up faster than most areas in the United States. However, my fear is California is losing the rule of law and property rights; it’s these two cherished items that have made America great, yet they are more endangered now than at any time in my life.
What risks is the real estate industry facing? How do you, as President of Cal West Apartments, and your team, plan to face those challenges?
Once again, the most significant risk for all firms, not just in San Diego County but all of California, is the erosion of property rights and the rule of law. I have a contract with every tenant that the State of California wants to ignore. The state wants to tell my contracted tenants that they don’t need to pay me, and I can’t evict them for non-payment. Funny that the state didn’t say I can now stop paying the government my property taxes, license fees, water bills, etc. The government wants their money but doesn’t care about me getting my money to pay the government, banker, maintenance, landscaping, management, water, gas and electric, insurance, etc. We have stepped up with the real estate industry to help fight the erosion of these important rights that made America the greatest country on earth.
What would you do with unlimited resources?
I would certainly buy more real estate in states that protect the rule of law and property rights. Is it any wonder that the fastest-growing states are states that protect these rights? Resources flow to where the investor can be assured a fair return on investment. Do you want to invest in an apartment building with rent control or an apartment building that doesn’t have rent control? A sixth grader knows the answer to this question, but most of our elected officials can’t figure this out.
How has your profession of choice helped you make a difference in the world?
My profession has allowed me to make more money than I ever dreamed of having. My wife and I are big believers in giving a portion of our success to those who need a hand up vs. a handout. For over 30 years, we have worked hard to move the homeless back into a productive society with dignity. This means tough love at times (something our elected officials refuse to acknowledge). A drug addict or an alcoholic needs tough love, and you can change their lives in a dignified manner if you are willing to do the right thing.
