What Will Your San Diego Property Rent for and Cost You? San Diego Landlord Advice

San Diego investors are often asking what they can earn and what they will have to spend when they have a property to rent out. This is a quick and dirty way to figure out what your property will rent for and cost you.

Determining Income

Get a professional market analysis done. A professional property manager will have access to comps and the MLS, which shows what properties actually rented for. This is more valuable information than what’s available to the public, which is simply what’s available on the current market.

Looking at what people are asking is important, but it’s not the same as what people actually get. If you copy your neighbor’s rent amount just because your property is similar to theirs, you may be copying a failed strategy. So get good data on comparable properties.

Calculating Net Income

Once you figure out what your rent is, multiply it by 12 months of the year, and then multiply that number by four percent, which is the current average vacancy rate in San Diego. If you want to be more conservative, do eight percent, which is one month of vacancy per calendar year. So if your tenant leaves every year, the property will be vacant one month per year.

Subtract $2,000 from that amount for make ready costs. That’s the average cost of repairs to make your home rent ready. On average, the cost is $2,000. That might sound high, but it is the average. If your property is in great shape, it might be less. If it needs major repairs, it may be more.

If you’re hiring a property management company, you’ll want to deduct those fees as well. The average in San Diego for property management is between 8 and 10 percent every month. Once you subtract those, deduct your PITI payment – principle, interest, taxes, and insurance.  

For most of us, that’s just the mortgage payment you scratch to the bank every month. If you don’t have your insurance and taxes included in that payment, add those on top with any HOA fees.

Maintenance Costs

You’ve got your income minus your expenses, which will give you a net income before maintenance costs. For ongoing maintenance, set aside $50 per month for a normal house or condo in good shape. For an older or bigger house with deferred maintenance, save $150 a month. You don’t have to expect you’ll spend that each month of course, but if you put the funds away, you’ll be able to access them when you need them.

To find out what your home can rent for in your neighborhood, get your free instant rental report!

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Hi, my name is Steve Welty. I’m the broker owner at Good Life Property Management where we manage single-family homes, condos, and small apartment buildings throughout the greater San Diego area. Today I want to give you a quick and dirty way to figure out what your property is going to rent for and what’s it going to cost you. So first on the rental side, what’s the income going to be? You need to get a professional market analysis done. A professional property manager is going to have access to the comps in the MLS, which is what have properties actually rented for. This is a lot more valuable information than what’s available to most of the public, which is what is currently on the market. For instance, Zillow Craigslist, looking at what people are asking is important, but it’s not the same as what people actually got for rent. So if you copy your neighbor across the streets, rent them out because you feel it’s a comparable property, you might have just copied a failing strategy. So more important to look at the actual comps, what have things rented for and comp is short for comparable property. So once you figure out what your rent is, you want to take your rent times it by 12 months in the year and then multiply that by a 4% vacancy loss. The current vacancy rate in San Diego County is 4%. So if you want to be more conservative, you can use 8%, which would equal about one month of vacancy per year. So you figure worst case scenario that tenant leaves every year, I’m going to have it vacant one month a year, it’s about 8%. Next, subtract about $2,000 for what we call make ready costs. The average make ready or the cost of repairs to make it rent ready is about $2,000 on average. Now for some of you that might sound high, if your property is in better shape, it’s going to be a lot less, if it needs a lot more work, it will be more, but that’s an average amount that you can use. And if you’ve actually done the numbers, you can use the actual number you have, but 2,000 is an on average. And then if you’re hiring a property management company, management fees are about 8% to 10% generally. So I would just use 10% which would include maybe some ancillary fees, a management company might charge like a leasing fee or a leach renewal fee or things like that. And then lastly, subtract what’s known as your PITI, which is your principal interest taxes and insurance payment. For most of us, that is just the payment you scratch to the bank every month because you have your taxes and insurance impounded. But if you don’t, you’re going to want to figure out what those are and add those on top and then any HOA fees. So you’ve got your income expense, minus your expenses, going to give you your net profit before ongoing maintenance. Now, ongoing maintenance, I would set aside for a normal house that’s in good shape or a condo, maybe as little as 50 bucks a month, too. If it’s an older house or a big house that needs some deferred maintenance up to maybe 150 a month. And not expecting you’re going to spend that every month, but that cumulatively over the year, you’re going to have those access to those funds for the ongoing maintenance because just like your car, your house needs maintenance, but unlike your car, your house is a great investment. So I hope this gave you some things to think about. If we can assist you with anything at all, please give us a call and make it a great day.