Residential real estate remains as lucrative as ever.
For investors looking to secure their future with steady and reliable income, real estate is one of the few genuinely reliable investment opportunities. Below we explore how investing in coastal vacation rental along the shores of Santa Cruz is a wise play for individuals who want to develop a new portfolio (or grow an existing one) and one day soon retire in style.
Why residential real estate?
Even in the most dire market climates—the days and weeks after September 11, the duration of the 2008 financial crisis, and the months following the Covid-lockdowns in early 2020—real estate was the leading segment in the eventual economic recoveries. In many cases, posting sizable returns for savvy investors long be any other non-real property investments.
Real estate succeeds where other investments fail because it's a tangible asset with relatively low risk. As part of a portfolio, property ownership offers diversification and the ability to generate income. You can also reap tax advantages from specific types of ownership and as a balance against periods of inflation.
Ultimately, as an always appreciating asset, real estate is both a frontrunning and a bounce-back investment. Vacation rentals, in particular, can result in a financial windfall for investors adverse to the seemingly all-or-nothing proposition offered by less tangible assets. Long-term, few things are better at generating income and building substantial ROI ownership of Santa Cruz vacation rentals.
Why Santa Cruz?
Situated on the northernmost shores of Monterey Bay, 70 miles south of San Francisco, and a 30-mile drive southwest of San Jose, Santa Cruz is one of California's most underrated gems—an affluent coastal enclave that is both bucolic and remote yet incredibly accessible. It's no accident that this quaint burg of nearly 63,000 residents hosts well over 3 million annual visitors.
Both Santa Cruz and its namesake county are destination locations. The city has five museums, over 20 art galleries and more than 250 restaurants, cafes and bars. Nearby, you'll discover close to 50 vineyards, wineries and tasting rooms. Outdoor recreation is just as plentiful, with 28 city-based parks, 14 state and regional parks, 29 miles of incredible Pacific Ocean coast and more than 300 miles of trails. And the waters just off the Santa Cruz coast are home to 11 of the world's top surf breaks, making it one of the globe's preeminent surfing locations.
In addition to the above, Santa Cruz serves as an ideal jumping-off point for accessing all the Central California Coast offers.
One can quickly surmise how lucrative it is to own Santa Cruz-based coastal vacation rentals.
Benefits of investing in coastal vacation rentals
Given the unwavering popularity of Santa Cruz and its surrounding area as a destination vacation spot, one can see the advantages of securing rental property along the vaunted section of the California coast.
Spurred on by a steady, steady stream of adventure seeking willing to pay top dollar for rentals, the benefits of investing in coastal vacation rentals include:
The most common tax benefits stem from the available deductions, including mortgage interest, depreciation, operating expenses, owner expenses, and pass-through deductions. In addition, you can also qualify to defer capital gains tax and avoid FICA or payroll taxes.
The point being the world of vacation rentals has evolved into a truly turn-key endeavor. Want to be hands-on and make your rentals your full-time job? Absolutely doable. Prefer to keep the day-to-day aspects at arm's length and take advantage of the passive nature of rentals? You can do that too.
Tips for starting your Santa Cruz investment journey
Establish your investment goals
Also, factor in third-party management, which allows you to step back from direct oversight of your asset but comes with its own set of expenses.
Finally, factor in growth plans. The more assets you add to your portfolio, the more you can scale expenses and grow income. Just ensure that whatever your ambitions, you weigh the risks and rewards for reaching specific milestones, including setting tangible and realistic income targets.
Shop around for lenders, and their best loans
However, given the large variety of loans available, and the willingness of certain lenders to work with portfolio-building investors, you may find greater financial flexibility via loan-based acquisitions.
Each avenue offers benefits and disadvantages, so don't be shy about shopping around to identify top lenders, and the most favorable loans before committing any resources to investment.
Assess Santa Cruz's market conditions
Considering your overall plan is an investment in the Santa Cruz market, the next steps are identifying the coastal neighborhoods or rental hotspots that will offer you the best return. And remember, just because one location is earning massive income at the time of your investment doesn't mean it will always be a guaranteed money-maker. Unless your plans call for a quick turnaround with your assets and their ROI, seek consistency in traffic and rental rates.
Long before any acquisitions, jump head first into Santa Cruz market data to pinpoint where to make your wisest investments. The exercise may uncover under-the-radar opportunities where a little risk could result in immense rewards.
Partner with an experienced Santa Cruz real estate agent
Look for highly recommended people who provide reliable, up-to-date market data with a strong skill set that reflects a history of successfully closing deals.
As your guide to the local market, the honest opinion of an experienced professional is critical for building a portfolio with consistent returns. So make sure your agent is one with whom you have an excellent rapport, with open and honest communication.
If you're ready to start your Santa Cruz investment journey or searching for a partner to help you buy or sell a Santa Cruz luxury home, contact the Poncetta Real Estate Group today. Allow Scott Poncetta and his team's years of experience and expertise to help you navigate Santa Cruz's celebrated coastal real estate market.
*Header photo courtesy of Scott Poncetta