5 Questions to Ask When Buying a Santa Cruz Investment Property

Buying a Santa Cruz investment property can be a great long-term investment.

If you do your research and get help from an expert real estate agent, you can make passive income, as well as a positive return on your investment.

But, before you dive head first into Santa Cruz investment real estate, ask yourself these 5 important questions to make sure you’re ready:

Can You Afford an Investment Property?

This is the first question you should ask yourself before taking the plunge on an investment property in Santa Cruz.

Usually, mortgages on rental properties require a larger down payment than primary homes. In fact, they’re usually 20% or more.

Also, mortgage rates are typically higher on investment properties because they’re seen as more of a risk than primary homes.

To make sure you can afford an investment property, visit your banker to get pre-approved for a mortgage. Your banker will analyze your finances and tell you exactly how much the bank will loan you.

Are You Prepared For the Extra Expenses?

On top of the mortgage payments, investment properties have regular expenses that can sometimes become pricey. So, before you buy, make sure you’re in good financial shape to afford the extra costs.

Typical expenses include property taxes, home insurance, and security. You should also account for the price of general maintenances and repairs.

If you’re not going to be managing the homes yourself, you should also consider the price of a manager.

Who’s Going to Manage the Property?

Owning an investment property doesn’t always mean you can sit back and let the passive income roll in. It can be far more work than that.

When you own a rental property, not only do you need to find a renter, but you need to deal with any issues, repairs, and maintenance that might arise.

Although managing your own property is a great learning opportunity, it’s certainly hard work.

When you manage your own rental property, you’re the first point of contact for the renter. That means you might have to answer late night calls about emergency repairs and issues.

If you can’t manage your own rental property or you simply don’t want to, hire a property manager. Although they add to the monthly expenses, they make owning a rental property as easy as pie. They find suitable renters, as well as handle maintenances, repairs, and paperwork on your behalf.

What Neighborhood is Right For You?

Where you buy your investment property in Santa Cruz greatly affects the type of renter you attract.

If you own a property by the beach, you’re more likely to attract young and active renters. If you own a property outside of the city, you’re more likely to attract young families and professionals.

So, when buying a property in Santa Cruz, consider what kind of renter your neighborhood will attract.

There are tons of phenomenal neighborhoods in and around Santa Cruz that are perfect for rental investments.

Watsonville is a small town that used to be a center for agriculture and farming, so you’ll likely find sprawling properties in this area. One of the best things about this town is that it’s outside of the hustle and bustle of the city, so the homes are more affordable.

Scotts Valley is a phenomenal community for growing families and young professionals alike. This town is located in the Santa Cruz Mountains and has plenty of family oriented amenities, like parks, walkways, and recreational areas.

Aptos is yet another outstanding community in Santa Cruz. This historic neighborhood has charming condos and townhouses that will likely attract young renters wanting to be near the water and the redwood forests of Nisene Marks Park.

There are tons of great neighborhoods where you can find Santa Cruz investment real estate. Visit our community pages to learn more!

How Much Income Will The Property Generate?

Before you settle on buying a Santa Cruz investment property, figure out how much income the property will generate.

A rule of thumb is that the potential rent of a home should be no less than 1% of the homes’ sale price.

Also, your mortgage for the home should be less than 50% of the monthly rent.

When determining the potential income of the property, make sure to consider the neighborhood’s average rent, as well as its vacancy rate. All of this comes into play when determining how much money the property will generate.

For more information on buying an investment property in Santa Cruz, talk to one of our expert agents today!