The real estate market is growing nationwide, with theories ranging from pandemic related to corporate infiltration to interest rates. With property values rising throughout most of California, a common question is if this is a good time to buy an investment rental property. Santa Clarita residents are no different, looking to take advantage of the current real estate situation to invest in their first property, or perhaps grow their real estate investment portfolios. According to the property management team at Utopia Management, Santa Clarita is a sound investment for investors that want to put a little money into rental properties.
Rising Rents in Santa Clarita
In 2019, rents increased by 2.5 percent over the average rent charged for Santa Clarita tenants in 2018. The 2.5 percent increase in rent ranked Santa Clarita 19th among the nation’s medium-sized cities regarding rent increases. Because of various economic factors that include rent freezes, the data for rental properties in California for 2020 is incomplete at best.
Renters can find more expensive rents in Santa Clarita for similar properties located in other cities in Southern California. The city has earned a reputation for delivering quality public services, especially when it comes to its park and recreation offerings. Highly rated schools attract young parents that want to find a rental property for a short-term housing solution. Although the city enjoys robust growth when it comes to building new rental properties, the incredible demand drives up the rents in most city neighborhoods.
Up and Coming Neighborhoods for Rental Properties in Santa Clarita
Three neighborhoods stand out as up-and-coming areas of Santa Clarita to invest in a rental property.
Canyon Country
Nestled in one of the many canyons that define the geography in and around Santa Clarita, Canyon County is known for its quiet subdivisions and access to a great school system. From hiking to mountain biking, there are many ways to enjoy the nearby Pacific Crest Trail.
Newhall
As one of the oldest neighborhoods in Santa Clarita, Newhall features a combination of older, historical homes and recently constructed rental properties that include apartments and condominiums. With William S. Hart County Park located in the neighborhood, rental occupancy rates soar into the 90 percent range.
Valencia
Situated in the northwestern part of the city adjacent to the 5, Valencia has a strong tax base anchored by several shopping centers and Six Flags Magic Mountain. Spanish-style rental properties with classic stucco and red-tile roof designs make the neighborhood a hit among tenants.
Tips for Rental Property as an Investment in Santa Clarita
With offices located throughout Southern California, Utopia Management knows a thing or two about investing in local rental properties. The first words of advice concern getting to know Santa Clarita. Spend some time in the different neighborhoods, as well as conduct extensive research into the numbers that drive rental demand.
Then, follow 5 tips for rental property as an investment in Santa Clarita.
Tip #1: Develop a Sound Investment Strategy
You can generate rental income by implementing one of several investment strategies. The first question to answer is do you want to invest in a residential, commercial, or blended property. Santa Clarita offers several prime investment opportunities for all three types of investment strategies. If you choose to invest in a residential rental property, do you want to invest in a condo, duplex, townhouse, or triplex? Commercial rental properties can include office buildings, retail centers, and self-storage facilities, just to name a few of the investment options.
Tip #2: Know the Data
Writing down the estimated amount of each expense associated with investing in a rental property gives you an idea about how much of a return you need to generate to achieve maximum profitability. You have to include the cost of utility bills, rental property insurance, and the fee you pay a property management company.
Here are some other number you need to calculate:
- Maintenance
- Property taxes
- Vacancies
- Marketing
- City fees
Tip #3: It is About Cash Flow
The main reason you want to invest in a rental property in Santa Clarita is the cash flow generated by renting out commercial spaces and/or residential units. Although some investors purchase rental properties for reasons such as tax breaks and property appreciation, your financial goal should be to invest in a rental property for the cash flow. Determine how much cash flow you need to generate by writing down your financial goals, as well as understanding your risk tolerance.
Tip #4: Create a Rainy Day Fund
You can expect Murphy’s Law to kick in when your purchase a rental property. “Whatever can go wrong, will go wrong” should be the battle cry of real estate investors. For rental property owners, Murphy’s Law concerns unexpected costly repairs and improvements. Put aside around 25 percent of your aggregate monthly rental income to take care of unexpected repairs and maintenance issues.
Tip #5: Hire a Property Management Company
Yes, hiring a property management company costs money. However, the upside far outweighs the monthly property management fee. An experienced team of property managers can keep your units full, while taking care of all emergency calls for repairs and maintenance. If you decide to expand your little rental property empire, you already have the connection to hire the best property management company.
Santa Clarita is poised to remain a popular city for investors of real estate properties. Follow a few tips to earn a nice living as a rental property investor in the city.
