Even though investment property purchase prices and rents here in the Napa Valley don’t make the best economic sense, owning property here sure does. By economic sense I mean to break even after all expenses and before taxes, you need to generally need a 35% down payment for the City of Napa and approximately 50% for the up valley town of Yountville or city of St Helena.
Most investors look to only to only put down 25% to leverage their money better and up their return on investment. I will go more into this in a future post. No matter where you buy, you might find the following suggestions helpful.
Tips on buying and renting a Napa Valley home for extra income, being a landlord
Although the housing market is showing signs of recovery, demand for rental housing is expected to remain strong. Follow these tips from rental experts on becoming a landlord or investor in rental property.
- Understand what it means to be a landlord. If tenants are paying the rent, rentals can be a strong source of income; however, if they’re not, landlords must be prepared to cover costs.
- Buy in an area with a history of strong rental demand: Neighborhoods near universities are a good option. For homes in residential areas, proximity to schools can be a good draw for families.
- Consider using a management firm: Landlords should determine whether they want to select the tenant and handle property issues or hire a company to do it. Property management firms can charge a percentage of the rent, sometimes 10 percent or more.
- Do the math: Although prevailing rental prices will go a long way toward determining what can be charged, getting the best return on an investment starts with making sure the rent is enough, ideally, to cover expenses and costs.
- Screen tenants thoroughly: Once the rental starts drawing inquiries, it pays off to screen prospective tenants by asking for previous landlord references and running a credit and criminal records check.
- Get familiar with landlord laws: Two good resources for rental rules are the U.S. Dept. of Housing and Urban Development’s website (www.hud.gov), and The Landlord Protection Agency (www.thelpa.com), which includes state-specific rental guidelines and standardized forms for rental agreements.
If I can help you find the perfect Napa Valley property, please contact me