San Diego Property Management Blog

You Need To Avoid These 4 Things When Investing

I’ve worked with real estate investors here in San Diego for 30 years. I've helped investors with buying, with due diligence work, managing the properties, and eventually selling them. I've also invested myself. Here are four things you want to avoid as an investor:

  1. One-bedroom condos. If you're just starting out, possibly a one-bedroom condo is what you can afford now. And that's okay. Perhaps you can trade up over time, or maybe you found a screaming hot deal on one bedroom. By all means, go for it. But in my experience, a one-bedroom is a bit harder to rent. There's not as much demand as, say, a two or three bedroom, plus a one bedroom has more turnover. Usually, it's just one person renting, and things change more often. These people get married, get engaged, transfer jobs, etc. Overall, there's more turnover and less demand.
  2. Too many bedrooms. Just like we don't want one bedroom, we also don't want a six-bedroom house. You may also want to shy away from a five-bedroom house. These homes are also harder to rent. Think about who you're going to attract with a six-bedroom house. You may not even rent to a family, but you are still likely to have lots of residents. So ideally, you want a 2 to 4-bedroom home. That is where the demand is. Large properties, or those properties with too much square footage, mean potentially high maintenance and high turnover costs. 
  3. High maintenance landscape. Look at the outside of the home. Anything with a lot of landscaping can be a problem. For example, my wife and I have a rental property. It's got nice palm trees and shrubs. It's got grass. It’s got a pool and jacuzzi. And many times, we've had to replace those trees. We've had to remove or replace those shrubs. Basically, we've had a lot of big landscape jobs over the years, and we've had some big pool repair jobs. So let's be honest. Tenants don't care much about these things. They aren’t motivated to spend their time and money on the upkeep of your home. Ideally, you want zero-scape or landscaping that you don’t need to regularly spend money on, or regularly service. Get rid of things that grow if you can, or settle for minimal growth. If you have a lot of landscaping, be prepared. Ideally, you need a home or apartment complex that's easy to maintain and doesn't take a lot of your time, energy, or money.
  4. Unique design or unique colors. Colors can easily be changed. But that peach-colored bathroom from the sixties may not be the most popular thing with tenants. So you want to get back to a very neutral color. If you're purchasing a rental property, stay away from things that are unique. Anything you think is odd or strange is not likely to be a good rental. Why? People don't want to live in odd, strange, and unique places. They want normal.

If that's what we want to avoid, what do we want? We want to play the odds. You want to be aware of what most renters want in a property. From a pure percentage point of view, most renters are looking for a 2 to 3-bedroom, two-bath, two-car garage, fence, single-family home in a decent area. Good schools help. That’s it. There's no magic formula. That's what the majority of tenants are looking for. You also could be looking for a condo, but I recommend a home if you can afford it. You want to attract long-term quality residents that ideally want to renew year after year. Sometimes you're not going to be able to get that perfect rental home. You may find a great deal that doesn't fit those parameters. I get that, and it's okay. But as you grow your real estate portfolio, you may want to find properties that will attract the highest percentage of quality tenants. That will help you rent your property faster, keep it occupied for longer, and keep you and your residents happy.

Feel free to reach out to me if you are looking at a potential rental property. I'm happy to consult with you and give you ideas on the sale or rental value of that property.