How To Prepare To Buy A Rental Home In California

It’s always a dream to have a second home in a warm, desirable climate. Especially if your primary residence suffers cold, icy winters, you may want a second home in California. If you’re not planning on living in the house a majority of the time, you can use the property as a rental income. Many people come in and out of the state for work and play throughout the year, making the housing rental market here in California hot. Through renting the property out, you can cover all of your expenses including things like the mortgage and property taxes.

Making The Purchase

Buying a second home is not unlike buying your first home. You’ll need a downpayment, to find the best mortgage rates and more. The difference is that you’re taking on a more significant financial burden when you purchase a second home. That’s why the decision to buy a second property is so significant. You’ll need to consider the following:

• Your current financial situation
• The amount of down payment you have saved
• Mortgage rates
• Who your real estate agent will be

It’s especially important to take a close look at your financial picture because a second home may carry a bit more of an expense than your first home. In addition to the mortgage, property insurance, and taxes, you’ll need to consider the management of the property while you’re away. 

• Who will be responsible for setting up new rentals?
• Who will clean the home?
• Are there additional management fees involved?

Finding these management options will all require quite a bit of research on your part. You’ll want to price out different options and services. 

Of course, if you are paying cash for your property, you’ll have fewer expenses on your plate. The management of the rental property is crucial to ensure that your property stays in good condition and keeps rentals rolling.  

Taxes

Tax breaks are one of the perks of being a homeowner. A vacation or rental property may be a bit different. Depending on how much income you make and the number of write-offs that you have, a second home can either help or hurt your taxes. It’s a good idea to speak with a tax professional to see where you’ll stand tax-wise after the purchase of your California rental property. Like it or not, taxes are a significant part of your financial picture!

Time To Sell

When it comes time to sell your California rental property, keep in mind things like the capital gains tax, and the current state of the housing market. Because you’re buying in a desirable area, it can be easier to sell, but you want to be sure that your transaction makes financial sense.