There are lots of options to consider if you are a savvy real estate investor. The traditional buy and hold, home flipping, and the short term vacation rental model.
But did you know there is another way that allows you to cash flow positive in today’s high cost, high rate environment?
The Team Kolker way: Monthly Furnished Rentals
This is our jam! We own a number of rental units personally and have helped our investor clients buy San Diego properties and rent using this method. Check out our portfolio of rentals here.
Let’s play the Goldilocks Game…..
Short Term Rentals (“STR” - under 30 calendar days).
A STR carries with it a lot more red tape, taxes, and headaches. For some, it’s still a fabulous way to make income in San Diego, but for me it’s too expensive and labor intensive. For starters, San Diego lawmakers introduced a short term rental licensing system, set to limit the number of airbnb style properties in the City and the County. These licenses are limited in numbers and costly. San Diego also levies a tax on short term rental landlords, again another costly expense. Fall foul of either of these regulations and you will be in for a serious fine! You can find out about this stuff here. Additionally, you will pay 30%+ to a management company to manage the rental, or have to coordinate the move in/move out/ cleaning process on your own, no thanks!
Long Term Rentals
Unfurnished, traditional rentals where you rent to a tenant for 12 months or longer, is the most simple and least labor intensive buy & hold model, however, it doesn’t cash flow positive these days. Cost of Real Estate and high Interest rates make this model very hard to pull off, UNLESS, you purchased the property prior to 2020 and have a low rate, or own it out right! In that case, this is a great model! Otherwise, you will never get the rental to “pencil” in San Diego based on today’s costs and rates.
Just Right….Our monthly, fully furnished rental model avoids both the licensing requirement AND the tax levy, and at the same time, the numbers pencil! Watch more here:
Great so how does it work?
We lease our rentals on a monthly minimum basis and offer them fully furnished with an all inclusive rate. Monthly rentals command higher rents. This allows us to charge a rental premium, typically around 30-50 percent higher than a long term rental property, depending on location, demand, and property condition. This helps to generate cash flow from the start. And you will begin to gain valuable equity as the property increases in value.
Fun Fact! Don’t believe the negativity you read in mainstream media. San Diego property prices are not set to tank. You can read more about this here, based on our experiences of buying and selling homes in North County, San Diego.
55+ Retirement strategy: This model also works for some of our retired clients who spend the winter in San Diego to enjoy the perfect climate and travel back to their family homes in the summer months. The income generated through renting their San Diego homes in the summer, pays their expenses and also means they get to keep the family home out of state. As experts on the 55+ communities of San Diego, we can help you identify the best choices for this model!
Worried about how you will manage tenants, leases, and market your property? Don’t worry! Team Kolker has built a network of fabulous renters composed of trustworthy working professionals and retirees. We love to take the headache of becoming a landlord away from our clients and have a team of experts ready to help you with every step.
We are very detailed and make the rental process extremely easy for our clients!
How can I make the numbers work?
If you are an all cash buyer, the sky's the limit. But most clients have some cash to invest but not enough for an entire purchase?
Note, this “cash” can also be in the form of a HELOC which is what Heather personally uses to fund these types of deals. Please reach out. We would love to chat it out with you.
How Do I Get Started? What Should I Expect?
Step 1: Hire a Realtor with experience in this model, aka Team Kolker:)
First, you will need to hire a savvy Realtor that is good at finding desirable properties that people will actually want to rent in a “vacation” or “Professional” mindset for 30, 60, 90, etc days. We look for properties that have lots of amenities that are an attractive proposition for our renters.
Step 2: Analyze the deal.
Next you'll need to analyze the cash flow for the property. This entails details such as loan costs, property taxes, insurance, rents, vacancies, management costs, and appreciation to name a few. There will also be start-up expenses to purchase the property, make improvements, furnish it, and advertise it for rent.
Step 3: Prepare your purchase for showtime.
After you have found a property that works, the next step after acquisition is getting it ready for rent. Depending on the location and who you are hoping to attract as renters, you will want to put some money into the designing and furnishings of your property. It’s important that the property shines and isn’t filled with a bunch of dated used furnishings, as you want to be competitive and rent it as much as possible. You will also want to make sure that it’s fully stocked with dishes, cleaning supplies, soaps, cups, towels, bedding, etc. People are expecting YOU to provide everything except their toothbrush! We have a team of expert designers and contractors who can help get your property show ready.
Step 4: Market and book.
The final step is marketing and booking. It’s important that you hire professional photos of your beautiful property to capture its full potential. Using AirBnB or VRBO can help make advertising and booking easier. Note that VRBO charges 8% for the privilege of using their site, so be sure to price accordingly. However, the benefit is it helps you find renters and it collects payments for you. What you will need to do on your own is establish a lease for each renter in compliance with the HOA. You will also need to manage turning it over on your own (making sure it’s fully cleaned between renters, nothing is broken, people can access the property when it’s their turn to rent).
We are experienced in this arena and are able to help you find and analyze properties, get financing, help get the property looking desirable to command the highest profit, and help you manage the process if you don’t want to DIY. Also, the experience renters have with our team is top of the class. All of our marketing and concierge services are professional and high class. Renters are wow’ed with their experience and come back to book repeatedly!
For more information about our team, head over here!
If you have any questions on this please reach out. We LOVE this stuff.