Educate Yourself on the Local Rental Market

Every rental market has its nuances as well as its strengths and challenges. The more you know about your specific market, city, and even neighborhood, the more you’ll be prepared for the process ahead. You’ll benefit from understanding the shifts in demand, the competing properties, and the tenant demographics. 

• Know your audience. You could find yourself renting to students, families, surfers, retirees, and Silicon Valley commuters. These are all part of the tenant pool here.
• Seasonal demand. Rental demand often spikes in late summer and early fall when UC Santa Cruz students return. There’s also strong spring and summer demand, when people feel freer to move while their children are out of school.
• Rental rates. Check current market rents in your specific neighborhood by talking with property managers like us. We can provide reliable data and give you a professional rental analysis.

Understanding where your property fits in the market will help you set a realistic rental rate and attract the right tenants.

Learn Local and State Rental Laws and Tenant Protections

California has some of the most tenant-friendly laws in the country, and Santa Cruz County adds its own layers of regulation. Staying compliant is critical to avoid fines or legal disputes. You’ll want to get to know the rent control ordinances and whether your property is included or exempt. You’ll also need to understand eviction laws, security deposit limits, the requirements around tenant applications and screening, and the photos and documentation that’s required during the move-in and move-out process. 

The City of Santa Cruz has specific rental regulations, including rental inspection programs and limitations on short-term rentals. Don’t risk a legal mistake. Instead, consult with your property management partner or a local attorney who specializes in rental law to ensure you understand your obligations before you list the property.

It’s easy for even experienced landlords to make an unintentional legal mistake. When you work with property managers, you don’t have to worry about the extra risk and liability. We’ll make compliance a priority. 

Inspect and Prepare the Property

Before you rent out your new property, take time to evaluate its condition and make necessary improvements. A safe, attractive, and well-maintained property will not only deliver higher rents but also attract better tenants.

• Prioritize Safety. Install smoke detectors, carbon monoxide detectors, and check for mold, pests, and structural issues. California law requires landlords to provide safe and habitable housing. Local governments are receiving more pressure to enforce habitability standards, so you don’t want to find yourself having to explain why something wasn’t fixed. 
• Repairs and upgrades. Fix any deferred maintenance left by the previous owner. If you were moving into the property yourself, it’s possible you would put off minor issues such as closet doors that don’t close properly or funny window blinds in the bathroom. When you’re renting out a property, all of these things need immediate attention. Consider upgrades like fresh paint, new flooring, or energy-efficient appliances to increase rental appeal.
• Landscaping. Think about first impressions. Curb appeal matters. Trim trees, clean up the yard, and ensure pathways are safe and welcoming.
• Locks and security. Always rekey or replace locks between tenants to ensure safety. This is a good time to consider upgrading to a keyless entry system. Tenants enjoy the convenience of a digital keypad, a lockbox, or even an app to access their home. 

If your property is older, a professional inspection can uncover hidden issues before they become expensive surprises.

Choose a Property Manager 

If you’re not already working with a property management partner, now is a good time to start. A local manager will have the expertise and the resources to take care of advertising, tenant screening, lease enforcement, and maintenance. 

A lot of new owners believe they won’t need a property manager until it’s time to collect rent. Or they’ll intend to manage on their own and quickly realize how time consuming and challenging it can be. The earlier you have your professional support team in place, the less stressed you’ll be as you launch into the business of renting a home. You’ll also set yourself up for better profitability now and in the long term.

Professional property management is just the start. Successful landlords don’t do it all alone. Assemble a team of reliable professionals who can help you manage your property effectively. Develop relationships with: 

• Real estate attorney
• CPA or tax advisor
• Handyman or licensed contractor
• Landscaper
• Pest control service

The good news is that your property manager will already have relationships in place, and you’ll be able to leverage those for faster service and better rates. Having trusted contacts ready will save you time and stress when issues arise.

Set Up Your Finances Properly

A rental property is a business, and you should treat it like one from day one.

• Separate accounts. Open a dedicated bank account for your rental income and expenses.
• Bookkeeping system. With a property management partnership in place, you’ll already have their software and systems in place to support your accounting and financial records. If you’re managing on your own, you’ll need a system to track rent payments, repairs, and tax-deductible expenses.
• Reserves. Set aside money for vacancies, unexpected repairs, and capital improvements. A common rule of thumb that we recommend is to save at least 10% of monthly rental income for maintenance.
• Taxes. Remember, rental income is taxable, but you can also deduct expenses like mortgage interest, property taxes, insurance, and depreciation. Consult with a CPA familiar with California rental properties.