Tips and Tricks for New Palm Springs Real Estate Investors

California is a unique real estate market, and in cities like Palm Springs, you should anticipate an especially nuanced experience when you decide to invest. This is a popular area for tenants; you’ll find residents looking for long term lease agreements, seasonal residents who are hoping to stay for a few months, and vacationers looking for short term rental homes. 

It’s not for every real estate investor. 

But, if you’ve decided there are opportunities here that fit your investment goals; you’re probably right. As you plan to invest in Palm Springs real estate for the first time, you’ll need to prepare yourself as much as possible. You’ll want to understand the local market (we’re talking about the real estate market and the rental market). You’ll want to trust your investment goals, and surround yourself with experts who can help you make smart decisions and avoid unpleasant and expensive mistakes. 

Even experienced investors can find themselves bewildered in Palm Springs. Here are some of the best tips and tricks we can provide to first time real estate investors. 

Set Those Investment Goals and Stick to Them

It’s easy to chase the wrong deal. The price will seem impossibly low or the property will already be occupied with what you believe to be stellar tenants. 

Always dig a little deeper and don’t run after what doesn’t fit your investment goals. 

If you don’t have investment goals already established, that’s your starting point. Before you can start looking at dream properties and determining how you’ll put together your financing, you need to know what you’re doing and why. 

It’s pretty similar to putting together a business plan, and what you have to remember is that when you invest in rental properties, you’re essentially running a business.

Put together and prioritize the following:

• • Cash flow requirements.
  • Expected appreciation for your property value.
  • Scope of your investments; do you want to buy a single unit, a bunch of units, or an entire building? 
  • How long do you plan to invest and what’s your exit strategy?

These are some of the immediate questions you’ll have to ask before you invest. It will shape what you buy and in which Palm Springs neighborhood you decide to look. 

Most investors understand that owning rental property in the current market is not a way to earn immediate cash fast. Real estate investments are a great way to build wealth, but you’re not going to do it overnight. You’re probably not going to do it in the first year. 

Prepare to invest more than just money. You’re investing time and trust as well. That’s the only way to build the kind of wealth that real estate promises. 

Get Your Financing Together 

There are likely plenty of properties out there you’re ready to make a move on. But, you need to have your financing in order first. Financing is an early part of the equation, and it’s another detail that should be informed by your investment goals. 

Some of the questions you should ask before acquiring a rental property or finding the means to pay for it are:

• • How much do you have for a down payment? You should plan on having at least 20 percent in cash set aside.
  • What will you do to finance the rest of the purchase? You can go the traditional mortgage route or work with hard money lenders. Lots of other opportunities exist for creative financing, but you’ll have to figure out what kind of risk you’re comfortable with.
  • Do you have the available cash to spend on things like repairs, vacancy, and marketing?

Maybe you’re paying in cash. Normally, this wouldn’t be your best idea because leveraging your real estate investment with other peoples’ money is a good way to increase your ROI as your tenants pay down that loan. But, with interest rates rising and the market remaining competitive, it’s not a bad idea at all, especially for new investors who aren’t crazy about financing their investment.

Keep all your options open.

Prepare for the Costs Involved in Palm Springs Investment Properties

Investing in rental real estate anywhere comes with fixed and variable costs. You can plan on mortgage payments, property insurance, property taxes, and routine and preventative maintenance. 

What surprises most new investors are those expenses that they did not see coming. 

Vacancy. Turnover. Emergency maintenance. Evictions. Property damage. 

You’ll need to budget for even the costs you haven’t thought of yet. 

Work with a CPA or a good tax accountant who can explain exactly what you can expect to pay as a real estate investor in California. You’ll also want to understand your tax benefits, because even though you’ll have to pay taxes on your rental income, there are many ways to reduce your tax exposure when you’re renting out property. 

Partner with Palm Springs Property Managers

Smart investors begin working with property managers before they even buy their first investment property. 

Why does this make sense? You may think about a property manager as someone who helps you lease, manage, and maintain the home after you’ve already bought it and you’re ready to rent it out. 

That’s true, but your property management resource can also be extremely valuable as you’re purchasing your first investment property. A property manager who understands the local market can tell you:

• • What the rental range might be for the property you’re considering. 
  • What kind of upgrades and updates may be necessary before it’s ready for the rental market.
  • How much you can expect to spend on maintenance, based on the home’s condition and age.
  • What your tenant population will likely be for the home you’re considering. 

All of this insight will be beneficial before you buy. Look for a property manager who specializes in working with new investors. You’ll gain a lot of resources, expertise, and tools before you even purchase your property. This puts you at a much stronger starting point. Trying to do everything yourself is not a good idea.

We enjoy working with investors who are just starting their real estate journey. If you’d like to talk through the Palm Springs market factors, contact us at Xepco Properties. We’d be happy to help.