Titles and Deeds
Author: Valerie Kriss, Digital Marketing Specialist for Real Estate Experts, a full service real estate firm in Chapel Hill, North Carolina
Trends in San Diego real estate have proven to present ample opportunities for investors. The National Association of Realtors (NAR) ranked the city fifth on its list of hottest real estate markets in America and recently moved it to fourth. And in September, San Diego rent prices reached a record high. Lastly, homes have a much shorter listing life than the average for the country. However, this doesn’t necessarily mean that finding the right property is easy for investors who are looking for the right move. To capitalize on San Diego real estate, it’s important to find an investment property that is most likely to yield a profit.
Location, Location, Location
There’s much more to the location of a property than the city it’s in. As investors, you need to be able to understand what’s valuable in the area, and what nearby attractions you can leverage to your advantage.
Furthermore, when you purchase an investment property, you’re looking at the entire block, and not just the house. Each block has its own unique value; the property on one block can range from one on the next for this reason alone. This emphasis on highly specific location isn’t just unique to San Diego communities. Whether you’re in the Pacific Beach neighborhood of San Diego, or checking out Hillsborough realty in North Carolina, you need to understand your surroundings just as good as any other local.
Rather than just glance at the numbers and neighborhood statistics, do some field work. Drive around the neighborhood, and then walk on foot to visit some of the local stores, restaurants, and other businesses. This will give you a much better feel of the community vibe, and you may even learn about things you didn’t have previous knowledge of, like upcoming developments in the area.
Search For The Right Realtor
Not all realtors are created equal, and the realtor that you choose to help you during your search can easily make or break your experience. Your realtor should have highly relevant experience that aligns with your goals. For example, if you’re looking to invest in and run a bed and breakfast, a realtor with luxury home experience isn’t exactly best-suited. Or, if you’re looking to invest in a major condo project, a realtor that specializes in smaller apartment buildings won’t exactly fit the bill. It may be best to work with a local San Diego brokerage to get the best deals and most relevant agents.
Dig Deep Into Details
The age-old saying goes, “the devil is in the details,” and when it comes to real estate investments, this much can be true. Real estate tycoon Barbara Corcoran told Good Morning America that she once bought a 12-unit motel that had a great rent roll, and after the purchase was finalized, discovered that those tenants hadn’t paid any rent in nine months.
You’ll also need to consider property taxes. It’s not uncommon for property owners to discover that property taxes skyrocket after a buy. For example, if you bought a property from previous owners who had a homestead exemption for many years, you could be looking at a huge chunk of taxes.
Determine Realistic Maintenance Costs
The larger the property, the more maintenance it requires. When investing in any property, you need to be able to determine realistic maintenance costs of that property. Many landlords have gone bankrupt because they failed to properly calculate their future expenses and grossly underestimated the cost of owning an investment property. If you don’t already own a property in the area, start by asking local San Diego property managers. Most will be more than willing to help you better understand what to expenses to expect in the area. You can also reach out to companies who issue the expenses to look for a previous average expense prices on the property (or comparable properties).
To develop a comprehensive budget, start by identifying your fixed expenses, like water/sewer, property taxes, electricity, garbage, insurance, and Homeowner Association Fees. Then consider your variable expenses, such as vacancies and repairs. While repairs are tough to predict, it’s always a safe bet to set aside a repair budget just in case.
Research Potential Tenants
Researching potential tenants for investments in properties like apartment buildings and condos is important—especially early on. Tenant screening bureaus allow you to look up tenant names and see if they’ve been involved in any housing court case. You’ll also need to keep an open eye on tenant red flags while you’re scouting a property.
Credit and background checks also help you learn more about a renter’s criminal and rent history. If you’re unsure about a potential tenant, you’ll only need a social security number to order a background check from a company like StarPoint. You’ll also want to talk to a previous landlord about the payment history (were they on time, did they cause any damage to the unit, etc.).
Legal Restrictions
Finally, it is important that you understand any legal restrictions that might affect your investment. For example, if your property is coastal, you may be under California Coastal Commission jurisdiction. If you are looking for a vacation rental, you should check local restrictions. The city of San Diego, for example, is considering regulations and restrictions on vacation rentals.
photo credit: ericneitzel San Diego, California, United States of America via photopin (license)