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Why Real Estate is Such a Good (Great) Investment: Part 2-Rent it

This is the next installment of a 7 part series exploring ideas of why real estate is such a good investment. The focus will be on single family and multifamily real estate, but a good idea is a good idea, enjoy. 

Today we are exploring using real estate as a rental property.

It is the most common use for investment residential real estate, the first question is whether to go with short-term rentals, or long term (fixed term) rentals.

For short-term rentals (Airbnb or similar), first make sure about city ordinances, for example, City of Anaheim has extremely restrictive rules relating to short term rentals. The rules can be many, burdensome and ever-updating, in fact, I would not recommend doing short term rentals in Anaheim at all. In addition to cities, HOAs (Homeowner's Associations) are common in areas that have high Airbnb demand, and they have not been friendly to it either.

Secondly, please note that short-term rentals have the primary competition of hotels, or at least resorts (such as timeshares). This may not be suitable if the house is not furnished, or simply purchased as a regular rental. Additionally, small handyman vendors should be on call, as well as a cleaning vendor (at least washing of linen's) that can eat into profits.


Preferred Property Management* does not do short-term rentals currently, but fees for high trafficked areas can expect to pay 20% - 35% management fee (it is more of a partnership), and can expect to get twice the gross rent of long-term rentals, it can work out if expenses are controlled with competent operators.

The second is for fixed-term rentals, rents are pretty robust as of April 2019. After first preparing the property for lease, mainly paint and cleaning, you are ready to show, steps to lease include:
  • Marketing
  • Communicate with interested parties 
  • Schedule showings
  • Attend showing
  • Receive application and documentation
  • Screen Applicant
  • Negotiate and sign lease
  • Move in tenants
Then to manage the property would include:
  • Receive rent 
  • Pay bills
  • Maintain/repair property
  • Statements/bookkeeping
  • Communicate with tenants
Current expected rate of return for single family is about 2%-3%, apartments are 4.5% based on current market rents minus expenses divided by current market prices. Not that different from 10-year treasury bonds, or California muni bonds (which are triple tax free, federal, state, city)


*Gene has an interest in Preferred Property Management

Feel free to #askGene about real estate, it is a little bit of a focused topic for him. 

 Yorba Linda, CA-TRREG DRE#01843673-RP100 DRE#02059058-P:714-831-1800-E:info@theresultsrealestategroup.com-W:www.theresultsrealestategroup.com-Facebook - Twitter - Instagram - LinkedIn
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Location: Brea, CA, USA

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