Is Buying a Condo as a Rental Property a Sound Investment?

By , 9:00 am on
Is Buying a Condo as a Rental Property a Sound Investment?

In June 2019, the California State Assembly passed AB-1482, a proposal intended to avoid unreasonable rent increases at a time when certain rental markets in the Golden State are heating up. Prior to the introduction of AB-1482, rent control measures were mostly imposed at the municipal level, but the bill seeks to spread them all across California. In essence, rent increases would be capped at no more than 7 percent (with the additional consideration of the cost of living) on an annual basis. The idea is to not place undue financial strain on tenants who may be an annual rent increase away from getting evicted.

The intent of AB-1482 makes sense insofar as current market demand in San Diego, particularly in the downtown districts. In the middle of 2019, median rental rates for a one-bedroom apartment were estimated at around $1,700 per month. However, a small renovated loft in the East Village, for example, could easily fetch $2,900 per month. If you’re wondering whether a downtown San Diego condo will still be a good investment after AB-1482 is enacted, here are a few things to consider.

Market Conditions

In late 2017, Zillow listed San Diego as the eighth most efficient rental market in the United States, and this was determined by the total amount of rent paid compared to the previous year. By early 2019, this ranking had risen to the fifth position, thanks to an annual increase greater than 5 percent. The tenant segment that has grown the most is composed of senior citizens who are attracted to the many conveniences of living in downtown San Diego, but the real money can be found in the new condominium towers, particularly those that offer boutique amenities, which is what more affluent renters are willing to pay for.

Maintenance

Maintenance is a factor that will always present an investment advantage when compared to single-family homes. The condo fees you must pay to the association take care of maintaining common areas, grounds and amenities, which is a great relief not only for you as a landlord but also for your tenants, and these fees are often considerably lower than those at gated communities.

Property Value Appreciation

If you’ve heard about single-family residences appreciating at a faster rate than condos, you haven’t been misguided. However, this assertion is mostly based on national and regional assumptions. Once youget into micro market conditions, downtown San Diego is a more enticing proposition because quality of life is higher. Nonetheless, one thing to keep in mind is that condo markets tend to be more sensitive to severe real estate downturns.

Rental Restrictions

This is when you and your real estate agent must sit down and carefully evaluate the potential of a condo unit as a rental property. The condo association bylaws will tell you everything you need to know about rental restrictions, and you need to think about everything. For example, if condo rules don’t allow pets, this could narrow your pool of prospective tenants.

If you’re searching for real estate in downtown San Diegoyou’d like to turn into a rental property, enlist the help of a local agent who knows the downtown San Diego area well and can help you find the perfect property to purchase. Contact 92101 Urban Living today at 619-649-0368 to find out about the latest listings.

Contact San Diego Realtors
  • A True Downtown Expert
  • Extensive Knowledge of Downtown Neighborhoods
  • Works and Lives in Downtown
  • Over $100 Million in Downtown Real Estate Sales

92101 Urban Living
Phone: 619-230-7149

Need Help? Contact Us:

92101 Urban Living
550 W.B Street
4th Floor
San Diego, CA 92101.
Phone: 619-230-7149
Email:

Have Questions?

New on the Market

@

Price: $1,495,000

@

Price: $549,900

@

Price: $539,000

@

Price: $585,000