Home Buying in Rancho Mirage>Question Details

User16, Home Buyer in Irvine, CA

I am a first time buyer looking to buy a investment property to rent as a vacation rental. Which area is best for it Rancho Mirage or Palm Springs.

Asked by User16, Irvine, CA Fri Mar 12, 2010

My Budget is within 150K

Help the community by answering this question:


Do you plan to live in this investment property or do you plan to manage it from Irvine, CA?

Do you have a trusty property manager in Rancho or Palm Springs to mange your investment? If no, then the average cost is approx. 10% of monthly rental income, or an ala carte fee for service plan.

Are you willing to give up the 10% of the investment return to the property manager? If yes, what would be your "net" return on investment (ROI)...it should at least be "higher" the national avg. CD and US Govt. bond rates...http://www.bloomberg.com/markets/rates/keyrates.html

If you have never owned a property, then it is much "lower" investment risks to buy a property closer to where you are (not more than 1/2 hour drive.) Because the farther away, the greater chance of home owners neglecting their properties resulting in a gradual deterioration of their investment assets.

Ok, let's break down your "budget of $150K":

1. Assumed the purchase price is $150K, 5% rate, 30-yr term, the monthly P&I is approx. $805 (EXCLUDING property tax, insurance, maintenance and property management costs)...is this still within your budget "after" your current living expense in Irvine?

2. What is your current monthly "net" income? Is it sufficient to cover "both" housing expenses in Irvine (if any) and the investment property? Lenders would allow approx. up to 75% of total rental income to be applied towards available income for debt service.

3. As an investor and due to the current (and future) economic conditions, you need to assume "vacancy" risks. So do you have at least 6-month reserves to cover maintenance and mortgage obligations (if finance) for the investment property?

As a first time home buyer, the "last" thing you would want is to become part of the statistics of short sale or foreclosure...if you disregard proper financial planning with your qualified CPA an/or tax advisor.
1 vote Thank Flag Link Fri Mar 12, 2010
Dear User16,
Palm Springs is a very popular week-end get away for Los Angeles County residents. I would say Palm Springs would be the best choice.
0 votes Thank Flag Link Fri Mar 12, 2010
They are both good areas for vacation rentals. So are other desert areas as well. If you are a senior, Sun City in Palm Desert is a great rental location. Other country club residences along Country Club Drive are popular too. Keep in mind that many of our visitors enjoy golf and tennis so you might have more success renting it out if you have some amenities to offer your prospects.

I would be glad to show you around and help you find the investment property that is right for you. Just give me a call or drop me a line.

Kindest regards,
Elizabeth Schulze
License #01860415
Keller Williams Realty
70005 Mirage Cove Dr
Rancho Mirage, CA 92270
760-969-1000 OFFICE
760-333-2134 CELL
760-770-9510 FAX
0 votes Thank Flag Link Fri Mar 12, 2010
Your budget is kind of irrelevant. Yes, it is very important in allowing you to buy, but does not matter if the property does not make you money.

You have to ask how much a month can this rent for. What is the cap rate, can you handle at least 1 month every year without a tenant. What about maintenance? When a furnace dies can you afford to replace it and fix the roof?

The rental has to make you money every month or it is not an investment. Price appreciation in an investment is a BONUS, not a goal. Hopefully someone who really understands this will reply more. I can see how it would be easy to buy it for $1,000 and only get $800 in rent. That does not work.
0 votes Thank Flag Link Fri Mar 12, 2010
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