How to rent out your San Diego home while you live in Mexico

It's a common strategy among our clients and it works well if it's set up correctly. Management, taxes, insurance and what to check before you buy.

Many of our clients buy in San Diego without moving: they use the property a few weeks a year and rent it out the rest. Set up well, it works. Set up badly, it becomes a headache 125 miles away.

Before you buy: three checks

1. Does the building or community allow rentals? Many condos limit short-term rentals, and some set a cap on the number of rented units. If the cap is full, you go on a waiting list.
2. What does the city say? Vacation-rental rules vary by city within the county and have changed quite a bit in recent years.
3. How much are the HOA dues? In towers with many amenities they can eat up a significant part of the return.

We check these three things on every property before you make an offer. It is where people who buy on their own most often go wrong.

Long-term or vacation rental

Long-term rental (12 months or more): steadier, more predictable income, less management, less wear. It is what we recommend to anyone who lives abroad.

Vacation rental: potentially higher gross income, but with far more operations — cleaning, turnover, guest service — and subject to city regulation that can change. From a distance, it absolutely requires a manager.

The property manager

If you live in Mexico, it isn’t optional. A property manager typically charges between 8% and 12% of the monthly rent and takes care of:

• Finding and screening tenants, with credit and background checks
• Collecting the rent and chasing late payments
• Coordinating maintenance and repairs
• Complying with local rental regulations
• Sending you the report for your tax return

That percentage is usually the best money you spend in the whole operation.

Taxes

You must report the income to the IRS, and for that you need an ITIN. You report net income: you can deduct interest, property tax, insurance, maintenance, the manager’s fee and depreciation of the building.

Without an ITIN, the manager may be required to withhold a percentage of the gross income from you, which is far worse than reporting the net.

The right insurance

A standard homeowner’s policy does not cover a rented property. You need a landlord policy, which covers the building, loss of rental income and liability toward the tenant.

Where it works best

For renting from a distance, Downtown San Diego is the area with the best profile: steady demand, a low entry price and simple management, since these are condos with building management. Chula Vista works well for long-term family rentals.

The legal structure in which you hold title determines the tax treatment of the rent: see our legal and estate advisory before you buy.

We connect you with property managers we have worked with for years.