Whether you’re an experienced real estate investor or just starting out, it’s hard to know everything.
This is not a market where you want to be caught off guard. There’s a high demand for well-maintained rental properties. Interest rates are still relatively low, and investors are making a lot of money on their rental homes in San Diego.
Here are some of the things that every San Diego real estate investor should know about buying rental property.
Investing in San Diego Real Estate: Pros and Cons
We’re always encouraging people to invest in San Diego rental properties. It’s a good way to earn and protect your money. However, real estate investing doesn’t come without its risks and challenges. Make sure you know what you’re signing up for. This isn’t a get-rich-quick scheme, and you want to make sure you’re prepared for potential difficulties.
The Pros are pretty easy:
- Recurring and predictable monthly rental income.
- Long-term ROI based on appreciation and rising home values.
- Tenants are contributing to your mortgage and other costs.
- Tax benefits.
Then, there are the Cons:
- Tenants can be risky. You may face late or unpaid rent, property damage, and liability.
- Ongoing maintenance will be necessary.
- Vacancy is always a risk and can cause huge losses.
- Neighborhoods can decline.
Real estate investing is often described as passive, but unless you’re working with a San Diego property management company, you’ll have to spend time and resources managing tenants, coordinating maintenance, staying up to date on rental laws, and keeping detailed accounting records.
How to Identify a Profitable San Diego Investment Property
You can’t make money on real estate if you buy the wrong property.
You’re looking for an investment that will make a good rental home, so think like a tenant. Your San Diego tenants will want a good location, near schools and shops. They’ll want a home that’s well-maintained, attractive, and welcoming. Consider some cosmetic upgrades if the floors look worn or the appliances are dated.
Buy something that won’t need a lot of work before it can hit the rental market.
Calculating your return on investment is also going to help you choose the right property. You’ll need to know how much rent you can expect to earn, what you’ll likely spend on maintenance, and what your other expenses will be. Some of those costs, like your insurance and taxes, will be fixed. Others will be variable. You might spend $0 on maintenance one month and $800 on maintenance the next month.
Positive cash flow in the San Diego rental market might be difficult to earn in the first year or two. Plan for that. Make sure your financial plan makes sense and gives you a path to earnings that make the investment worth your money.
Get to Know California’s Rental Laws
San Diego is a great rental market for investors. It’s also highly regulated. You need to know the state, federal, and local laws. You especially need to know how they apply to your property. Will you be subject to rent control? Do you understand what a just cause eviction is? There are Section 8 laws you must follow, security deposit requirements, and of course habitability standards. Make sure you know the laws so you don’t put yourself at risk. Mistakes are expensive.
Consider working with a San Diego property management company before you even buy an investment property. This will give you some insight into what you can expect to earn and spend. You’ll start from a much stronger position.
When you’re ready to talk about your investment goals, please contact us at Mercer Properties. We work with owners like you throughout San Diego.