California is the land of dreams, from Hollywood to Silicon Valley. But for landlords, sometimes its a different story.
California Vastness
California’s coastline stretches over 1,000 miles, and the state population exceeds 38 million. Whether you prefer owning property near the shoreline, on flatland, or in the mountains, or whether you prefer to own in areas that offer hot summers and cold winters (inland areas) vs. milder temperatures year-round (coastal properties), California has it all. Due to the geographical variety across the state, natural disasters may affect the entire state (such as the current drought) or impact specific areas (such as an earthquake or wildfire). Check with your insurance agent as to what coverage is required (and recommended) in the area in which you own property to clarify what IS and is NOT covered under your current policy. In addition, make sure your landlord/property manager informs your tenant(s) in writing (at the time the rental agreement is signed) of the type of insurance they will need to insure their personal property. For more information, go to www.dca.ca.gov/publications/landlordbook/catenant.pdf.
Location, Location
California is the world’s seventh-largest economy, bolstered by rising employment, home values, and personal and corporate income. “It’s the diversity of the California business environment, from movies to the Internet to agriculture — the incredible array of businesses that make up the state,” said Governor Jerry Brown. Sacramento, San Francisco/Oakland (Bay Area), San Jose, Los Angeles, Riverside, and San Diego are the six largest metropolitan areas in California, of which two (San Jose and Los Angeles) were included in CNN’s list of the ten hottest housing markets for 2015.
The same diversity, however, makes it impossible to simplify investment rules across the state. Property along the coastal areas in the major population areas (listed above) is densely populated, and rents are extremely high. Overall, California was found to be the most expensive state in which to lease a home in 2014; yet, almost a quarter of Californians live in poverty, which is the highest rate in the nation.
California home prices climbed an average of 12 percent last year through Sept. 30, 2014; however, you need to check the prices where you own property to get a true sense of how much your property values have changed. California also has jobless rate of 7.2 percent, tied with Mississippi for the second-highest unemployment rate in the United States. Therefore, rather than rely on state-wide averages, you should look at the major industries where your property is located and the related growth rate(s) over the past few years to get a better sense of how much, if any, future growth is expected. For example, electronic equipment and computer-related markets have increased rapidly over the past few years, while both aircraft and naval construction have largely ceased. In addition, California’s current extended drought may have a large negative impact on the agricultural (and related) industries, which would significantly impact real estate values in the farmland areas.
References:
www.dca.ca.gov/publications/landlordbook/catenant.pdf
http://en.wikipedia.org/wiki/Economy_of_California
