Market Conditions in Sonoma>Question Details

Ciechel, Home Buyer in Sonoma, CA

Am considering investing in a condo for rent in City of Sonoma or Napa. Which do you think has a stronger rental market and also investment promise?

Asked by Ciechel, Sonoma, CA Wed Sep 1, 2010

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Hello Ceichel,

You should look in both areas if these are the areas you prefer. Your goal is to have positive cash flow and a good investment...this type of property can be found in either city so please don't limit yourself to just one city.

Kamal Randhawa
0 votes Thank Flag Link Thu Sep 2, 2010
I think you can command higher rents in Sonoma, just based on the fact that there are less properties available. In my opinion, you can get some great deals on condos right now, as the market for them is a bit soft. I think condos make good income properties, as they often come with the benefits of amenities, without the hassle of maintaining them yourself. Sure, you can get a house for almost the same price, but compare locations. East side of Sonoma for a condo, would be far more desireable than a home for the same price in another area. Also, if you're considering vacation rental, you should investigate the recent changes to Napa county regulations regarding short term rentals. Call me if you like, I'm dialed into what you're looking for right now.
0 votes Thank Flag Link Wed Sep 1, 2010
I agree with Pam, look at the market and see what makes sense. My advice is to always pick the absolute best area to buy in and don't look anywhere else, even if you have to wait awhile for something to come on the market. Don't invest in 2nd best.
But I forgot to mention in my first comments - before you invest, talk to your financial advisor to make sure investment property fits correctly into your overall financial plan. Most advisors suggest that real estate make up no more than 15% of your investment equity (I agree!). Best of luck!
0 votes Thank Flag Link Wed Sep 1, 2010
I think John makes some good points about condos. And condo inventory is extemely limited right now, with the vast majority of listings available as short sales, which can make for a tenuous sales process at best.

I agree that the money spent on HOA fees would be better spent on a mortgage. In addition, the complexes with high percentages of rentals are probably some of the worst bets.

There are some great complexes in and around Sonoma County, and those that are close to Sonoma State University I think represent a good perennial rental market due to the presence of the college.

If you are in Sonoma it would probably be equally convenient to you to find something in Southern Napa as parts of Santa Rosa or Rohnert Park. You might find some good deals in single family dwellings north of Sonoma in Agua Caliente, or over the hill in Santa Rosa, particularly on the west side of town where prices are a little lower. I had clients who looked in both Napa and Sonoma find some good values in Sonoma and Santa Rosa over the last year or two.

I just pulled the August sales data for all of Sonoma County, which I will present in a blog post later this week. You can look at sales data from the last year on some of my previous blog posts, with links to all of the 2010 reports so far. My reading of the data vis a vis Napa is that Napa contains a bit more distressed property and has not quite seen the bounceback that we have (such as it is.). We have a bit more diverse economy, where as the Napa economy (beyond agriculture and tourism) is more linked to the east bay and American Canyon.

Note--August Sonoma County sales figures will be posted by the end of the week, so you can check back. I can also pull condo data, and the same analysis for Napa County, if you would like to contact me for that information.
0 votes Thank Flag Link Wed Sep 1, 2010
Neither - if you really want to buy a condo. Condos are seldom good investment properties. The exception is when they are located on one of the top beaches in the world or in a metropolitan market where the property is in the absolute finest location. My top reasons NOT TO BUY a condo as a rental property: 1) Financing: it's getting harder to finance condos at good rates, if you can get financing at all. Lending guidelines for condo mortgages are getting tougher daily. 2) HOA fees: the monthly fees come off the owner's bottom line and can fluctuate year-to-year, usually reducing profitability below an acceptable level. Add to that assessments that may be added for improvements to the exterior of the buildings and the common areas. 3) HOA boards: mostly lunatics run for HOA officer positions and HOA board politics can be a real headache. 4) Common area maintenance: as a landlord you want the common areas, especially surrounding your unit, to be perfect all the time - leaving it to the HOA board or association manager to control quality is a gamble. 5) Re-sale: Condos are the first type of property to go down in value when values are going down and the last to go up when values rise. If other units in the complex are on the market when you try to sell yours, the competition can be more apples-to-apples than with a single family home, making it harder to sell.
If you can, I highly recommend passing on a condo and looking for a single family home.
Also, I recommend buying property close to home if you intend to manage and maintain it (go with Sonoma...).
0 votes Thank Flag Link Wed Sep 1, 2010
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