6 Great Reasons to Own Rental Property in San Diego

Tracey March   April 21, 2016   Comments Off on 6 Great Reasons to Own Rental Property in San Diego
San Diego Map

[photo credit: SanDiego.org]

Like much of coastal California, San Diego is an expensive place to buy property. Even if you have a flexible time frame for purchasing along with cash in hand, finding reasonably priced rental properties can be a challenge, to say the least.

So why put in the effort? Well, it turns out there are some great reasons to own rental property in San Diego. Here are six:

1. Rentability

In San Diego, now is an awesome time to be a landlord. Vacancy rates are very low, close to 4 percent for the entire San Diego County. If you have a rental property that is in decent condition and priced at market value, you will most like have multiple applications from which to choose. Which means it’s easier to find great tenants.

2. Rising Rents

According to the real estate data base RentRange, rents for single family homes in for San Diego rank 10th in the nation for rising rents. In San Diego, rents rose 13.6 percent during the period from the third quarter of 2014 and the third quarter of 2015. Even better, the San Diego County Apartment Association stated the increase was greater at 20 percent from a year ago. They reported that rents have increased more than 44 percent from 2005.

A NOTE: Rental prices across the U.S. have increased at about two times the pace of the median hourly wage growth, which was a mere 2.1 percent from last year. I believe rental owners do need to be wary of squeezing good tenants out of the rental market. We need to recognize that we have role in the big picture of housing in the US. Finding that balance will be the subject of a future blog post.

3. Increasing Property Values

Home prices in San Diego County increased 0.6 percent between the two months of August and September, and they have increased 6.6 percent from September 2014. This monthly increase ranked as one of the best in 20 large real estate markets, and the annual increase ranked seventh. This is according to the Shiller Home Prices Index tracked by Standard & Poor’s. The index began with the cost of housing in each of those 20 markets in January 2000 by affixing them with a value of 100. They subsequently tracked each movement in the markets. San Diego’s value was 216.62 in September 2015, meaning that home values had more than doubled in those 16 years. This reflects the second fastest increase in home prices, and is just behind Los Angeles.

4. Population Growth

Population growth remains a critical factor in producing the rising demand for housing. San Diego County’s population increased an average of close to 33,000 people for each of the two past years. Some of this is due to a higher rate of births over deaths, but some results from great employment opportunities that continue to attract new residents to move here. The California Department of Finance estimates that the population of San Diego County will increase by around 31 percent by 2060 for a total population of 4.07 million residents.

5. Short-Term Vacation Rentals

San Diego has approximately 12,500 short-term rentals, and the region is quickly becoming the most rapidly growing market in the country. Average rents in several beach communities reach over $4800 versus $1800 for long-term rentals.

6. Climate

You can’t sing enough praises for the perfect climate in San Diego, which has approximately 145 sunny days and 117 partly cloudy days each year. Because the climate is so mild, particularly along the coast, many vacation rentals do not require air conditioning. From the standpoint of a real estate investor, this means greater life expectancy for both exterior and interior materials. With some drought-tolerant landscaping, your property should be relatively low maintenance, especially compared to properties in the mid-west and northeast.

These are just a few of the reasons San Diego is the quintessential place to own investment property. This marketplace can’t be beaten!