1. Good prices for buyers
2. Fewer home buyers and more renters are in the market these days.
3. Rents have gone up and are expected to increase for the next five years.
More than 20 percent of homes sold in the U.S. during April and May of this year were purchased by investors (instead of home buyers).
Investors are buying rental properties at good prices, using 30 percent down payment, renting to tenants, and expecting to get even or a positive cash flow from the start.
Example: If an investor buys 3 bedroom Orange County property for $400k, uses 30 percent down payment, and gets a loan for $280k, he/she could get mortgage interest only rate of about 5.5%, and monthly payment estimated to be $1,283. HOA dues estimated at $200 per month. Property taxes at about $334 per month. Casualty insurance at about $100 per month, and estimated reserves at $200 per month. Total monthly payment estimate of $2,117.
The SoCal Multiple Listing Service shows that average monthly rent payments to be made by tenants this year on 3 bedroom lease homes in Costa Mesa, Huntington Beach, Irvine, Laguna Beach, Laguna Hills, Lake Forest, Mission Viejo, Newport Beach, Tustin, and other cities, have been more than $2,117.
When the cost of buying and owning a home is less than the cost of renting, Orange County investors are inspired to buy rentals.
Before buying an Orange County property as rental investment, ask yourself:
Do you want to be a landlord? What are your expectations of tenants? What are your plans for holding the property, selling or occupying it in the future? How will you carry the property if it is vacant or rents are unpaid? Do you know legal protocol for evicting tenants? Will you manage the property (collect and deposit rent, maintenance, repairs, inspections) or hire a professional REALTOR®R or management company? Where will your pool of qualified potential renters come from? Local college or major employers in the area? What type of work will potential tenants do? What income would they need to rent your property?
Contact us about Orange County properties available for purchase as rentals, what rents are in that area, possible vacancies, buyer cost of financing, other costs of owning a property, taxes, maintenance, and needed reserves, where renters will come from, locations around colleges and major employers, and what tenants would do for work to earn a living and pay rent.
Source of information on monthly lease payments presented here is Southern California Multiple Listing Service. Example is based upon hypothetical situation and is for information only. This is not the providing of legal or tax services. Any buyer of real estate should be careful about decisions and talk with a professional accountant and real estate professional to determine whether buying such property is the best thing in their own situation.
Harrison K. Long – solutions for real estate and business – REALTOR® and broker associate, GRI – Coldwell Banker Residential Brokerage – 949-854-7747 (phone) – ExploreProperties@gmail.com(email) – CA DRE 01410855 – SFR short sale and foreclosure resource certified by the National Association of REALTORs®