Property Management Services
Frequently Asked Questions

I am thinking of purchasing a second home on the Monterey Peninsula. What are the first things I need to know?

First of all, you need to know that none of us who own Monterey Peninsula real estate that was purchased with a traditional mortgage (20% to 25% down) have instant positive cash flow. There is simply too much discrepancy between what the property costs and what it will generate in rent.

However, there are some other good reasons to purchase property here. One is the long-term appreciation potential. Despite the recent softening of real estate values, the history of appreciation on the Monterey Peninsula matches or exceeds other locations. Another aspect to owning property here is that rents do go up. Sooner or later, the rent will catch up with, and eventually exceed, the mortgage payment. Many people purchase now with the idea of ultimately retiring to the area. The rental income certainly offsets the cost of maintaining the property.

Second, you need to know that Monterey Peninsula real estate prices cover a very wide range. There are properties in a few areas under $500,000.00 and a few for several million, and everything in between. As a general rule, the higher the purchase price, the wider the gap between property cost and rent, but this is not a hard and fast rule. It is affected by the location and condition of the particular property. Once we know your approximate price range, we can advise you as to the best properties for income production.

Should my property be a long-term, unfurnished rental or a short-term, fully-furnished rental?

We can help you determine whether your property is best suited for a long-term or short-term rental, depending on your personal preferences. One of the personal decisions you must make is whether or not you want to use the property yourself. If your personal utilization of the property is important to you, you will want to consider the short-term, fully-furnished rental of your home to facilitate your own access. On the other hand, ask yourself what tolerance you have for being surprised every month when you get your monthly statement. Short-term rental income is very erratic. In some months, it is great, and in some months, it is non-existent, so it is important not to be too reliant on the income stream.

It is a mistake to elect short-term rentals in an effort to earn more income. While short-term rents are traditionally higher than long-term rents, the expenses are higher as well! Short-term management commissions are higher, utility costs are greater, and the cost of maintaining furnishings and equipment is more in a short-term rental than in a long-term rental. For most homes, the net income to the property owner is greater with a long-term, unfurnished rental.

Are there risks to renting my home?

Certainly no business endeavor is without risk. However, in all our years of managing property, we have seldom had to evict a tenant. We have occasional damage such as broken window. But it would be foolish to assume that major damage or the need for eviction will never occur. Nevertheless, with proper management, the risk in the rental business is low.

Sometimes it is difficult for a property owner to make the transition from regarding his property as a personal residence to perceiving it as a business asset. To be successful, the owner must look at it as a resource from which he will most certainly generate business income and from which he may sustain some business losses. It is also important to remember that unless a business asset is maintained, it will produce less and less income, so it is vital to keep the property in top condition at all times. There will be some wear and tear, just as there is wear and tear in your own home. For this reason, Monterey Bay Property Management works extremely hard to assure that the properties are being maintained in the condition that will generate the most income for the owners we represent.