investor (3)

I am a realtor and a Santa Cruz rental property investor since 2000. There are many reasons to invest in Santa Cruz rental properties, some of which I have discussed in this article. Today I want to talk about what the pros and cons are in renting to UCSC students. 


Here are the pros that I have experienced.

1. Vacancies are virtually non existent: There are almost $18,000 UCSC students and in any given year there is only room to house about 8,000 of them on campus. There are always many thousands of students looking for a place to rent, so the potential pool leaves no vacancies in your Santa Cruz investment rental properties.


2. Students pay more money:  They frequently will pay more per bedroom and sleep 2-3 in a room just to have a place to stay. Here is a link to what students expect to pay from the UCSC community housing page.


3. The rent money is very secure: The students get financial aid and/or are supported by their parents. In 17 years and 4 rental properties as a Santa Cruz rental home investor I have only had a problem getting paid once.


4. UCSC makes the rental process very easy for a Santa Cruz rental investor: They give workshops to the students on what they need to do to look attractive to a Santa Cruz rental investor. They come to you with complete rental applications, credit reports, references, and certificates saying they understand what it takes to be a good renter. The university posts your rental for free so you have a large pool of possible renters.


5. Students replicate themselves making the rental process even easier: My experience has been when one student moves out they have another take their place making the process seamless for the Santa Cruz rental investor.


6. Santa Cruz students are often long term renter: If you get the students early, in their sophomore or junior year they often stay for 3-4 years or more. making the cost of turnover very low.


7. Santa Cruz students can vacate in the summer if you want a summer beach home that is rented for 9 or 10 months: If you are a Santa Cruz rental property investor who wants a place in the summer for yourself you can rent to students during the school year and keep it for yourself in the summers. Many students go home in the summers, and the ones who don't can always find a sublet from another student who is going home. It is a way to have a vacation home that more than pays for itself.


Cons of renting to UCSC students:


1. Insurance on the house can be tricky: Recently many insurance companies, including the one I have always used, State Farm have decided they do not want to insure homes that are filled to the brim with students in college towns. They see them as Frat houses and won't write new policies. You can get commercial insurance, which is more expensive than residential or find the rare insurer who will do it. I found that CIG insurance out of Monterrey was willing to write a residential policy at competitive prices.


2. Large homes can be a hot bed of petty emotional issues for the Santa Cruz rental property investor.: If you are the owner of a large home with 6-10 students they may turn to you when there is a spat between the tenants. It is a time and emotional drain. I put one person in charge and have that person deal with issues like who is going to clean the house, noise complaints, bullying, etc. They have the final say. It works pretty well.


3. Students are often unaware of what it takes to take care of a house: Students do not always understand what it takes to care of a home and things can be damaged by mistake, even without large parties or Frat behavior. The way to ameliorate this is to buy a house that does not have delicate finishes and educate the students on basic home maintenance. My tenants know they need to call me right away if something is wrong and not let a small problem get out of hand. I would rather be over called than under called, and they know it.

So as a long time owner of Santa Cruz rental property I can enthusiastically say that renting to Santa Cruz students is a good thing from an investor perspective and not something to be afraid of.


If you have any questions about becoming a Santa Cruz rental property investor please feel free to contact me.

Marcy Moyer

eXp Realty of California


Specializing in Probate, Trust, and Investment Properties

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As a nation on edge and in the midst of the worst economic crisis since the Great Depression, many of the daily aspects reflected in “Americana” seem to have become taboo. For the past two years our stunned and gun-shy population has wandered through news of continued job losses, store closings, grim foreclosure statistics driving the economy south, and consumer confidence to all time lows.In times of chaos and turmoil it’s normal to wonder who is to blame for our collective misery as it is expected that we all seek solutions to our temporary slump. However, one unfortunate by-product of this circumstance is the blurred distinctions between actions that lead to recovery and those that caused our loss. In the real estate industry this has become most evident in the grouping of profit with greed, and investment with speculation.Profit vs. GreedIn a recent article for the Washington Post, conservative columnist George Will writes, “Greed, we are agreed, is bad. It also is strange. It has long been included among the Seven Deadly Sins, which suggests that it is a universal and perennial facet of the human fabric.” He continues on with the example of ticket brokers, like Stub Hub, to illustrate his point that the open market properly punishes greed with missed opportunities and sudden collapse due to improper timing. “Greed is worse than a moral defect, it is a cause of foolish pricing. That is why markets know it when they see it.”Without entering a conversation about regulation versus free markets I would concur that greed unchecked leads to downfall. Further, the collapse of the US housing market shows that the unfortunate side effect of unchecked greed is the collateral damage done to those who were not greedy but remain caught in the crossfire.Profit on the other hand is a basic tenet of Capitalism and the cornerstone to our free market society. Profit is the engine that propels entrepreneurs, investors, and jobs, manufacturing, creativity, and expansion alike. In his seminal book “The Science of Getting Rich” Wallace Wattles explains that one must always give more in “Use Value” than they receive in “Cash Value.” His clear yet sometimes lost point among business ventures is that a properly functioning marketplace allows for a reasonable entrepreneurial profit to those who add value to the business process. This distinctive balance lies within the intent of the business performing the service.In illustration of this point can be found in the real estate industry by comparing investors to speculators.Investor vs. SpeculatorA real estate investor is an individual or entity that invests equity into a real estate asset for the purpose of generating income from or adding value to the existing improvements. Investors can have long term or short-term strategies. They may use their own capital or they may borrow (leverage) equity to varying degrees. Some create value by curing defects either physical (dilapidation) or financial (cash buyers with quick closings), while others employ long-term hold strategies that gather value from timing and appreciation. Yet all prudent investors share the distinction of returning to the marketplace “Use Value” for the profits or “Cash Value” they earn.Speculators can share timing and leverage strategies with investors, yet that is where the similarities end. The intent of a speculator is not to add value to the economic engine; rather they look to take advantage of the marketplace by simply getting in line first. The speculator is driven by greed. Profit margins and financial gain are not based on business strategies that help balance supply and demand, thus making the business plan viable in the long term. Instead the speculator looks to horde or corner markets to their advantage intending to reap exceptional short term profits before quickly exiting the marketplace without regard to what is left behind.The Soap AnalogyMost all of us bathe on a regular basis. To do so effectively we use water and some form of cleaning agent. For this example let’s assume we all use soap.If one were to plan for a shower and find all the soap gone, the reasonable response would be to go down to a convenience store (grocery store, warehouse store, or drug store) and buy another bar. Most of us would look for the best bargain or our favorite brand and gladly pay the store’s asking price. For this transaction to occur we realize that some other business distributed the bars of soap in large bulk quantities to that store to accommodate our smaller purchase. Before that, a manufacturer bought raw materials mixing together bars of soap to later package and sell to that same distributor.Each step along the way a business invested their capital to provide a service both for the entity before them and customer who comes after them in the economic process. For this privilege and purpose each investment entity earns a tidy profit. By charging too much for their service they lose customers and go out of business. By contrast, not charging enough leads to loss, inhibiting the ability to remain a viable and profitable concern. Either way, free market forces act to keep profits in balance and all of us clean. Further we support these profits and welcome the service provided by continuing to buy bars of soap.But what happens when someone only seeks to take advantage of system for the short term and their own personal gain. Let’s imagine we’ve all taken a two-week cruise across the Pacific Ocean. Forced to share close quarters for an extended period of time it would quickly become apparent that good hygiene practices are necessary to the shared enjoyment of the passengers. Again, enter the need for soap.For this example let’s assume that the passengers did not realize this need until the boat was long to sea and the boat’s sundry shop was grossly undersupplied with the sudsy necessity. Enter the speculator. Realizing that other passengers have nowhere to turn, too little supply and extraordinary demand, he quickly gathers all of the available soap and waits for the pandemonium to begin. Beyond the myriad of possible disasters awaiting the group one outcome remains certain – Imbalance and market failure.The Real Estate WorldExamples of our ship bound soap pirate were seen all across America this past real estate cycle. From Brooklyn to Las Vegas, Florida to California speculators bought or reserved condominium units before homeowners could find their place in line. Speculators bought income property that did not earn enough income to support the prices paid intending to sell it in short order by way of rapid appreciation. Eventually the music stopped. The result – Imbalance and market failure.Yet amid the ashes born of greed and speculation, comes the profitable investor intent on creating value within the economic system. Recognizing a need and providing a valuable service, the investor uses free markets to find balance in the economy and provide profits for its coffers. Identifying “Use Value” in exchange for “Cash Value” the profitable investor solves problems, creates jobs, provides a service, fuels growth, inspires innovation, and is the cornerstone to the American Capitalist System.That is never wrong.

Allan S. Glass is a real estate broker in Los Angeles, Californiaspecializing in REO and Short Sale transactions. Allan is also a featured blogger on The ASG Real Group has over $1 billion and 17+ years of transaction experience.
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