Condo insurance should be much less than 150 a month. I pay only 30 a month on a 3br 3ba that I rent out. My spend on advertising is ZERO – I use craigslist.com which is free, and it generates huge response. Also, they wont have MeloRoos in MA, this is a uniquely California cost, created by the CA legislature as a way to get around Prop 13 limits on property tax increases.

Condo insurance should be much less than 150 a month. I pay only 30 a month on a 3br 3ba that I rent out. My spend on advertising is ZERO – I use craigslist.com which is free, and it generates huge response. Also, they wont have MeloRoos in MA, this is a uniquely California cost, created by the CA legislature as a way to get around Prop 13 limits on property tax increases.

I suspect you are being a bit pessimistic about all the costs. Big city mgmt fees, at least in the SFBay area, often run around 7-8%, so that’s $112, not $160. Advertising via craigslist is more than sufficient. Maintenance number seems high – I’ve got 3 older (pre-1980) SFHs rented and I haven’t had major problems yet, except for 1 furnace replacement, in 10 years of renting them out. And how did the 1% for maintenance become $200/month? I must have missed something. 1% would be less than $200/year.

Look, all in all, I agree the guy will lose some money. But it’s all relative. If he deducts all those costs, as well as depreciation, every year on his taxes, it’s a nice way to offset some small percentage of income, while you have someone pay you for all your interest and some of your principal on a property. If he thinks he’s buying close to a bottom, and he thinks he’s keeping it for a while, it’s not a bad deal.

Cheers,
Scott

I suspect you are being a bit pessimistic about all the costs. Big city mgmt fees, at least in the SFBay area, often run around 7-8%, so that’s $112, not $160. Advertising via craigslist is more than sufficient. Maintenance number seems high – I’ve got 3 older (pre-1980) SFHs rented and I haven’t had major problems yet, except for 1 furnace replacement, in 10 years of renting them out. And how did the 1% for maintenance become $200/month? I must have missed something. 1% would be less than $200/year.

Look, all in all, I agree the guy will lose some money. But it’s all relative. If he deducts all those costs, as well as depreciation, every year on his taxes, it’s a nice way to offset some small percentage of income, while you have someone pay you for all your interest and some of your principal on a property. If he thinks he’s buying close to a bottom, and he thinks he’s keeping it for a while, it’s not a bad deal.

Cheers,
Scott

I suspect you are being a bit pessimistic about all the costs. Big city mgmt fees, at least in the SFBay area, often run around 7-8%, so that’s $112, not $160. Advertising via craigslist is more than sufficient. Maintenance number seems high – I’ve got 3 older (pre-1980) SFHs rented and I haven’t had major problems yet, except for 1 furnace replacement, in 10 years of renting them out. And how did the 1% for maintenance become $200/month? I must have missed something. 1% would be less than $200/year.

Look, all in all, I agree the guy will lose some money. But it’s all relative. If he deducts all those costs, as well as depreciation, every year on his taxes, it’s a nice way to offset some small percentage of income, while you have someone pay you for all your interest and some of your principal on a property. If he thinks he’s buying close to a bottom, and he thinks he’s keeping it for a while, it’s not a bad deal.

Cheers,
Scott

I looked into ‘buy to rent’ in California, North Carolina and Texas. As a cash buyer my focus was on net returns, but as the original post suggests, finding a rental management company makes sense, particularly if you have no interest in day-to-day dealings with tenants. I found one such company in Orange County who were obviously doing so well they couldn’t be bothered to return my emails. In North Carolina and Texas I found two companies that are selling tenanted income properties, both with reasonable returns, and offering full management services. The idea seems very attractive, but obviously, to get a proper feel for these companies you would need to visit their offices and view their properties. However, there remained a couple of nagging doubts. Why would a company able to find cheap properties, and achieve high rental returns, want to sell them on? Are these companies just trying to find ways to keep afloat in a depressed market, and will drop the management service once the market returns to normalcy?

That aside, for me the most sensible form of income property is the apartment, because they are low maintenance, and are found in the more traditional rental markets where populations are concentrated and transient. California is the antithesis of this, and I have struggled for some time to come to grips with it. While there are apartment style properties in downtown areas of LA, Pasadena and San Diego many are either way over-priced, have high HOA fees, or don’t encourage rentals. In Pasadena, there are a few very nice apartment blocks but they are nearly all owned by the developer and therefore are not for sale. This strikes me as bizarre, and I have pretty much conceded that investing in California Real Estate is just for the pro’s. There are simply too many people pursuing the same goals, and unless you are prepared to do a lot of leg work, the competition is too great for the casual investor, and focuses too much on leverage and appreciation potential, not cash flows.

I looked into ‘buy to rent’ in California, North Carolina and Texas. As a cash buyer my focus was on net returns, but as the original post suggests, finding a rental management company makes sense, particularly if you have no interest in day-to-day dealings with tenants. I found one such company in Orange County who were obviously doing so well they couldn’t be bothered to return my emails. In North Carolina and Texas I found two companies that are selling tenanted income properties, both with reasonable returns, and offering full management services. The idea seems very attractive, but obviously, to get a proper feel for these companies you would need to visit their offices and view their properties. However, there remained a couple of nagging doubts. Why would a company able to find cheap properties, and achieve high rental returns, want to sell them on? Are these companies just trying to find ways to keep afloat in a depressed market, and will drop the management service once the market returns to normalcy?

That aside, for me the most sensible form of income property is the apartment, because they are low maintenance, and are found in the more traditional rental markets where populations are concentrated and transient. California is the antithesis of this, and I have struggled for some time to come to grips with it. While there are apartment style properties in downtown areas of LA, Pasadena and San Diego many are either way over-priced, have high HOA fees, or don’t encourage rentals. In Pasadena, there are a few very nice apartment blocks but they are nearly all owned by the developer and therefore are not for sale. This strikes me as bizarre, and I have pretty much conceded that investing in California Real Estate is just for the pro’s. There are simply too many people pursuing the same goals, and unless you are prepared to do a lot of leg work, the competition is too great for the casual investor, and focuses too much on leverage and appreciation potential, not cash flows.