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How to Spot a Profitable San Diego Rental Investment - Article Banner


Are you an investor looking for San Diego real estate? If so, this is a good time to invest. A lot of buyers are putting off their purchase plans, thanks to rising interest rates and higher home prices. If you’re ready to invest, this is the right time. There’s a lot of opportunity, especially in the San Diego market. 

But, you have to choose the right property. 

How do you spot a profitable San Diego rental investment? 

It depends on you and what you’re hoping to do with it. New investors who are planning to buy their first rental property are often looking for different things than experienced investors who are adding to a portfolio that’s already established. 

If you’re buying a property that you plan to use as a retirement home one day in the future, you’ll be looking for different things than an investor who plans to rent out the property for a few years before selling it to buy something else. 

A good investment property fits your investment goals. Make sure you know what you’re hoping to accomplish this year, next year, and in the next 10 years. Decide what you want and figure out what makes the most sense financially for you now and in the future. 

Outside of your own unique investment goals, there are several common factors that will make any property a good choice. We’re taking a look at those things in this blog. 

Profitable Properties are Attractive to San Diego Tenants

To earn money on a rental property, you need to make sure there are tenants who are willing to rent it. 

One of the first things tenants will consider, like buyers, is location. 

You don’t have to be an experienced San Diego real estate investor to know that location matters. Tenants here want to be close to work, schools, and shopping. They want to be minutes away from conveniences like grocery stores and restaurants. They want easy access to entertainment and recreation. 

A lot of tenants want a walkable neighborhood. They’re looking for plentiful parking. Tenants with families will be looking at school districts. Look for a property that’s accessible and easy for commuters, students, and families. 

Buying something too remote will not be profitable. Instead, you’ll be left with a long vacancy or a lower rental value. 

A good location is about more than just aesthetics and ease. You’ll also want to invest in a property that’s in a safe neighborhood. Research crime statistics and make sure you know where the closest police station, fire stations, and medical centers are. Think twice if there tends to be a lot of vandalism in the area or a lot of vacant, unoccupied properties. 

What else do tenants care about? 

They care about property conditions. A fixer-upper might seem like a good deal, and you’ll be attracted to the lower price tag. But, make sure you’re willing to invest the resources that will be needed to make it rent-ready. Tenants are looking for an attractive, well-maintained home. They’ll want updates and upgrades. A profitable investment property is nearly ready to rent. A few cosmetic changes aside, you’ll want to be able to collect rent right away. You can’t do that if you’re spending weeks or months fixing it up.

Before you buy an investment property, take a close look at its condition and its age. The amount you spend on maintenance will cut into your cash flow and your long-term ROI. All properties will need some work and routine repairs. However, older homes will often be more expensive to fix and repairs may be more frequent. This affects profitability.

Estimate the Expenses for a San Diego Rental Property 

A good investment property will guarantee short-term income through rental payments and long-term returns through appreciation and increasing values. It’s fairly easy to estimate what you’ll earn, and when you identify a property with high earning potential, you know you’re looking at a profitable investment.

But, there will also be expenses. Those expenses are often more difficult to estimate. 

You don’t pay for the property once and then forget about it. Instead, there are ongoing expenses thanks to marketing, maintenance, professional property management, vacancy, and other fixed and variable costs. 

You can’t anticipate every expense when you’re deciding whether or not to invest in a home. But you can budget accurately and set aside a reserve for any of those sudden surprises. 

When you’ve identified a potential opportunity, try to get an idea of what these fixed expenses will be:

  • Mortgage
  • Property taxes
  • Homeowner’s Insurance
  • Property management fees 
  • HOA fees (if applicable)
  • Preventative services such as landscaping and pest control

Variable expenses will almost always be more challenging to predict. These will be your unexpected repair costs, vacancy costs, and general wear and tear. 

A good investment property will allow you to at least identify where most of your money will be spent. 

Working with San Diego Real Estate Professionals 

Real Estate ProfessionalsAs you begin to look for an investment property, you’ll likely talk to real estate agents, brokers, and lenders. You’ll get good advice from people familiar with the process of identifying a property, buying a property, and settling the financing on a property.

Don’t forget to find yourself a property management partner

San Diego property managers aren’t just for the leasing and management of your home. We can be extremely helpful as you look for an investment property, too. A property manager with local experience and industry resources can tell you how much you’re likely to earn on a particular property, what kind of improvements will be necessary before it’s ready for the rental market, and how much you can expect to spend maintaining your home. You can discuss tenant demographics and market factors. 

We’d be happy to help you find a profitable investment property in San Diego. Please contact us at Ann Tasias & Associates. We manage investment homes in San Diego, along the I-15 corridor.