It’s often said that buying real estate is one of the greatest investments a person can make. Land is a precious resource, and unless you know something I don’t, God isn’t making any more of it. But plenty people have lost their fortunes in real estate, even in lucrative markets. Either they bought properties they couldn’t sell, found themselves drowning in repair costs, or just plain couldn’t afford to keep the house when the market took a turn.
Personally, I like to think of Escondido’s real estate market as a double-edged sword. It can be your best friend or your worse nightmare. Escondido may mean “hidden,” but it’s actually anything but, as it’s drawing more and more renters thanks to its amazing climate and proximity to San Diego and the coast. The average rent for a one-bedroom in Escondido was about $2,287 in June, and that number is on the rise.
Investors from all over the country flock to Southern California to buy houses, hoping to cash in on our crazy market, but they find out the hard way that there’s no such thing as easy money. While investors might be hearing a big “cha-ching!” in the backs of your minds, when it comes time to rent that property out, they tend to discover the hidden pitfalls of being an out-of-state landlord.
What They Didn’t Tell You Before You Bought
Just because a real estate market is hot in a particular location doesn’t mean you’ll automatically make money hand-over-fist if you invest in property there. Plenty of folks with landlord experience are eager to jump into new markets and then find that owning and managing a house in a different state is a whole other ballgame. Here are just a few of the problems you can expect to encounter (if you haven’t already) as an out-of-state landlord:
- Collecting rent: Unless you have perfect tenants who always pay on time, collecting money can be tough. If you’re out of town and the check doesn’t come, you’ll face an uphill battle because you won’t be able to knock on the door and talk to your tenant face-to-face.
- Paying taxes: Taxes are a frequently overlooked problem. Rental income is subject to federal and state taxes so not only will you need to report the income on your federal and home state returns, but you may also need to pay taxes in California, where the home is located. This adds up quickly over the years.
- Dealing with lawsuits: If your tenant gets injured on the property, you could be facing a possible lawsuit. In order to prevent problems, you’ll need to know and stay up-to-date on the area’s safety codes. Regular check-ups on the house are also a must to make sure everything is in proper working order. Since you’re out-of-state, this will usually require a property manager.
- Paying the property manager: You probably have a property manager to oversee the rental, which is a good idea, but it’s not a cheap idea. Some management fees can range anywhere from 4% to 12% of your gross rent. That’s a lot of money to give up for tasks that you could do yourself, if only you were closer.
- The cost of eviction: Court fees for an eviction range from $35 to $100. If the tenant skips out on you and leaves stuff behind, you’re legally required to rent a storage locker to hold the items, which costs even more cash. Then let’s assume you spend one month on repair work at $500 and then the house sits vacant for two months at $2000 a month while you seek a new tenant. You’re already looking at almost $5000 down the drain in the wake of that eviction.
The Cost of Property Maintenance
Let’s pretend some of the things I listed above don’t matter to you. For whatever reason, you feel you can overcome them and have a successful rental for years to come. That’s fine. But have you considered what the house will cost you when it comes to property maintenance?
Imagine the water heater breaks in the middle of the night, and since you’re nowhere nearby to help, you have to call a service man. Since it’s after-hours, let’s say he’ll charge $100 for each hour he’s there. Then you have to purchase a new 50-gallon water heater at $600. Delivery and installation is $329 at Sears. The cost to remove and dispose of the old water heater is in the $150 range.
That’s over $1200 in total costs… and that’s just one appliance. Multiply that by the number of things that can go wrong in a single house and you can see how quickly your bank account will start to dwindle.
If You’re Ready to Get Out of the Business…
Being a landlord is tough enough. If you’re living in a different state, it gets exponentially tougher. The good thing is, Sell Your House Direct is here to help you out of this jam. We’ll buy your Escondido property for cash and help you get on your way. It doesn’t matter if the house is in good shape or bad shape, we’ll take it off your hands in just a matter of days. Use the money to get something closer to home and rid yourself of the headache that comes with being an absentee landlord. Call us today!Views: 11