January 2008 Update

The following will help you form an educated opinion about what you can expect as a San Diego rental owner this year and next:

Property Market Value - The next 12-18 months will be characterized by a buyer's real estate market. Falling prices, surging foreclosures, reasonable mortgage rates and a large inventory of unsold homes means that serious buyers have the advantage in negotiations. This will likely be followed by substantial value increases to properties that are well maintained and enjoy superior locations.

San Diego Housing Supply - Most of the efforts by developers have been on the high end. The current unsold inventory of single-family homes and especially condos will continue to slowdown the ability and motivation of developers to address the affordability issues of our working households. The stock of affordable housing available to rent or buy cannot keep up with the long-term demand. No answers to this dilemma seem to be available in the near future.

San Diego Economy - Our area economy is sufficiently diversified to weather the current recession. Furthermore, San Diego is linked to several key industries that will continue to benefit economically from current state, national and world affairs.

Rental Rates - Rents will continue to increase, but at a slow rate. Lease extensions need to be well-planned and executed to hold onto every good renter as long as possible.

Property Maintenance & Improvements - Higher demands are being made by both renters and buyers for quality living. Owners need to be prepared to put money into their properties. Good judgment, experience and networking will be valuable tools to make the right decisions in a timely fashion. The current recessionary environment along with the mortgage and foreclosure problems will put downward pressure on interest rates which is good for property improvement plans.

Tenant Issues - This will be a period requiring owner sensitivity and good judgment. Shifting economics, a wartime mentality, affordability concerns and the lack of housing supply will continue to put pressure on the landlord-tenant relationship. Tenants will aggressively exercise their rights if they do not receive fair treatment.

Legal Issues - The investment of time and energy will continue to rise in the areas of fair housing compliance, rent collection, credit abuse, tenant eviction and other consumer protection areas. Don't use outdated forms and don't take short-cuts. Mediate; don't litigate.

Comparable Investment Return - Leveraged real estate ownership has been overshadowed by the stock market as a prudent way to build wealth. This will shift as the pendulum swings back to a more traditional wealth-building approach that calls for people to own investments that they can understand and control.

Tax Planning - You are probably under-utilizing the "tax preferential" treatment available to San Diego rental owners. This is an important element of your wealth-building strategy. What you don't know can hurt you.

Property Management Liability - Property management of rental homes and condos is a real estate specialty that is not conducive to part-time attention. Ownership liability is manageable if sound policies and attention to detail are followed. Hire accredited management by professionals. Monitor your property operations on a regular basis by reviewing reports. Your preferred communication should be email. Email allows a better follow-up on details and documentation to keep everyone on the same page.