5 Things To Know Before You Buy A Rental In Temecula Or Murrieta
There is a lot of research that a home buyer should complete before buying a rental in Temecula or Murrieta. In this blog post and video, we will discuss 5 Things To Know Before You Buy A Rental In Temecula or Murrieta. Temecula and Murrieta are cities that keep growing and will have the great rental potential for years to come. Great schools, safety, parks and recreation, and amenities within these communities are all factors that make Temecula and Murrieta solid choices for a rental property.
Know Your Numbers?
I won’t spend too much time on this one because it’s common sense. How much is your mortgage and how much will you collect in rent each month is something you need to know. Preferably, you want to be in the black. Here is a rental calculator to help figure out the numbers.
Many people use the 1% rule, which states that the gross monthly income on the property should be at least 1% of the property’s price which should cover monthly rental expenses. According to this 1% rule, the property above has good income-generating prospects. It generates a gross monthly income of $1,000, or exactly 1% of the property price.
Knowing The Specific Neighborhoods In Temecula And Murrieta
Where are schools located? How convenient is it in regards to getting to the grocery stores, restaurants, or everyday needs? Do your neighbors keep up their properties, mostly in way of curb appeal? These are all things tenants will look at and are important for you to research. You need to buy a rental and think about it as being your primary residence. Ask yourself if you would live there and why?
One of the advantages of both Temecula and Murrieta when it comes to conveniences and pride in ownership is both of these cities have many neighborhoods close to important amenities and communities are well-kept. Murrieta and Temecula don’t have many neighborhoods like other cities throughout Southern California with “bad areas.”
Find An area with Low Taxes Or No HOA
This is a big one, especially in Murrieta and Temecula. Many homes throughout both of these cities have HOAs, special assessments, or Mello-Roos tax. If you are paying $100 for an HOA and have special assessment tax of $3,000 to $4,000 a year, this can really add up and cut into your profits. Generally speaking, the newer homes are going to have higher taxes. It’s a double-edged sword, new homes will have far fewer calls to fix things but you will also pay more per month in taxes.
Older Versus New Homes in Temecula and Murrieta
As I mentioned above, older homes in Temecula and Murrieta are going to have a lower tax rate in general. Personally, if you are handy or have access to someone that can fix things, I would go with the older home, especially if the taxes are very very low. Costs can definitely add up in an older home, water heaters, roof leaks, appliances breaking the list goes on and on and if you are not handy or have somebody to do this work, you could have many months of large repair bills which in the end, make it less appealing than a newer home.
Pulling Rental Comps In Temecula And Murrieta
This is very important and simple to do. First, find a couple of areas in Temecula or Murrieta that you really like. Then have a real estate agent that understands how to pull comps, and figure out what you will most likely get for rent each month. You should be able to narrow it down to within $100 to $200. Figuring this out will definitely help you sleep better at night during the buying process.
Who Will Manage The Property?
Everybody’s situation is different, if you were busy and you don’t want to deal with managing a property you can always find a property manager. They will charge you 10% to 15% of the monthly rental income. Personally, I would suggest trying to manage the first few homes yourself. Once you build your portfolio to multiple properties and you find yourself on the phone all the time dealing with issues, hire a professional management company.
Short Term Rentals
The Airbnb craze is real. There are things that you need to be aware of and watch out for when buying a short-term rental. First, in Temecula specifically, you cannot have short-term rentals in the city, only in wine country. Do your homework and make sure that short-term rentals are allowed in the city where you are purchasing the home. Also, if the property does have an HOA, make sure that the HOA allows for short-term rentals. Oftentimes, HOAs and cities will have a 30-day limit for rentals.
In my opinion, there are certain areas that I would absolutely shy away from. California has many many areas or cities that do not allow short-term rentals. Think about the future and what could be implemented by these cities and the risks involved. You could be allowed short-term rentals for 1 year and then the city comes in and changes the rules.
There are websites that track Occupancy rates and how many nights a month on average you would rent your property in a certain area. One of those is called Airdna
Buying a duplex or Triplex
Not only have I found that monthly return is a little higher but you are also minimizing risk. If one tenant stops paying for 3-5 months, it won’t destroy or crush you. I don’t think that this gets talked about enough. I truly believe that buying a property with multiple units is one of the best things you can do, if you want to be in the rental business.