Host, Christine Karpinski:  Today our guest is Meredith McKenzie. She has more than 17 years of professional real estate brokerage experience in southern California, including certification as a second home specialist and designation as a second home elite agent for escapehomes.com.

Because Meredith has graduated from Loyola Law School, she is a strong negotiator and can help her client analyze investments, taxes, and local ordinance factors that will affect their vacation rental purchase and rental opportunity.

Meredith also has hands‑on experience as a homeowner and real estate investor. She's previously owned and managed her own vacation rental. She lives in Ventura, California, and specializes in properties and vacation rentals along California's Gold Coast.

Welcome Meredith. Thank you so much for joining. Can you tell us a little bit about‑‑when people come to your area, when they're looking along the beaches of southern California, what are some things that prospective buyers might be looking for?

Guest, Meredith McKenzie:  Well, I think there are three factors. The first is that they're looking for location. Obviously, they want their investment to increase in value over time.

The second thing they're looking for, if they're looking for a vacation rental property, of course, is income potential. They want to make sure that they can make money off the rental.

But a third factor, at least in my marketplace, is that the buyers are also looking at retirement potential. I see a big trend where the buyers are actually buying a property to rent out as a vacation rental right now, with the intention of ultimately moving into the property and retiring there within the next 15 to 20 years.

Christine:  Right. Some years down the road. I would have to guess that that becomes somewhat difficult. Because if your personal enjoyment and personal emotions come into it, it becomes a much more complicated purchase process than if you were just strictly purchasing a vacation rental that you were going to use, say, a couple weeks a year, and really not have any long term intentions for living there. Does it complicate the process for buyers?

Meredith:  I think sometimes. But what we find here is that many of the people who decide to buy a vacation rental here have actually been vacationing here themselves for a number of years.

Christine:  Right.

Meredith:  So this isn't a situation, say, that I find common in places like Hawaii. People go to Hawaii. They have a great experience. They say, "Hey! Let's buy a condo here and rent it out."

Here, it's more a case where over the past 10 to 15, 20 years, or maybe from childhood memory, that people have been playing on our beaches.

Christine:  Right.

Meredith:  Now that they're in their investing and prime years, they're saying, "You know what? I've always loved the," fill‑in‑the‑blank,

Christine:  Right.

Meredith:  Ventura, Carpinteria, Channel Island. So I think they come in with a mindset that, it's a business mindset. But at the same time, there's an affection already there for the area.

Christine:  Right. So it doesn't play into it. Probably just picking the individual property then plays into it a little bit, but they're pretty comfortable with the market and with the area because they have vacationed there. They're probably even pretty familiar with the vacation rental process in general. Is that true?

Meredith:  Oh, absolutely. I've had many clients who were actually coming up here for years and renting a vacation house for a week or a month for their family during the summertime, and finally said, "Wow! Why don't we just get our own place?" And then of course for them, what they've come to realize is that then they can come up and enjoy their house for two weeks,

Christine:  Right.

Meredith:  And then the rest of the time generate some income.

Christine:  Absolutely. Yeah. It probably makes for an easier transition into the rental process, because if they have been on the other side for years, then they're looking at it from the perspective of, "Oh gosh. When I stayed in this house, it had this and I really enjoyed that. But this other house, well, it didn't have this but it had that."

You know what I mean? They can easily sort of weigh out the benefits of the various homes that they've stayed in through the years. Now, what type of property do people primarily look for? Is it condos? Is it single family dwellings? Or is it just sort of a mixture?

Meredith:  Well, I think it's a mixture, and I think it depends upon what the people are looking for. Condo rentals are popular here,

Christine:  Right.

Meredith:  Especially the condos that are very close to the beach. They're just a very easy turnkey, and then people can go play in the water.

Single family homes are popular here, but mostly what I kind of call the beach bungalow. You're close to the beach but you've got your own home. These tend to be a little bit more popular, because you've got your own little yard and it's a little bit more private.

We also have a small, but nonetheless active, rental situation in our boat dock marina, where people want to come up for a few weeks and they can actually rent a home with a boat dock.

Christine:  Oh, neat.

Meredith:  And just bring their boat up from San Diego or LA or down from San Francisco and play and then they don't have to worry about getting into slip fees at the marinas or even availability. They can just bring their boat and dock it. As long as they have a boat that's less than 60, 65 foot.

Christine:  Right.

Meredith:  It works.

Christine:  It sounds like a pretty diverse bunch of properties that you can choose from. Now, with regards to those homes, do they typically rent year round or are there certain seasons that are better than others?

Meredith:  Well, obviously the summer season, and the summer season in southern California starts basically Fourth of July, because of the way both school gets out in June, and also that, here locally, we have what is known as "June gloom." So it's not very sunny here in June.

So the summer season usually goes from about July 1st through the middle of September,

Christine:  Neat!

Meredith:  And that's the high season. But on the other hand, we also tend to have a strong off‑season, too. Obviously, Thanksgiving, Christmas, Easter holiday times are important times for rentals.

And then, in addition to that, we have a number of opportunities where people may be interested in a rental off‑season. Why would that be? Well, our proximity to the entertainment industry is such that I actually handled a rental for a month, where five screenwriters came up that were working on a movie and were told to get away. Get in this house. We want you to be creative. We want you to go out in the sand and think. We want you out of Hollywood so that you can get‑‑I think they wrote like 12 scripts in that month.

Christine:  Oh my word!

Meredith:  So that's just one example as an alternative. We also have a lot of fishermen that fish. We have some restrictions off the coast now, but this is still a very active fishing area. So as a result, we have port fishermen and others who come in year‑round to fish. Some of the best fishing times are in the early spring and late fall, not during the summertime.

Christine:  Right.

Meredith:  Again, for them, knowing that they've got their little place.

Christine:  Right, and now what about snowbirds? Do people come down, say, from Seattle or even Vancouver or Calgary? Do people come from Canada to stay in California for part of the year?

Meredith:  You know, they do. But in terms of our area, unless they have a prior connection to this part of southern California, I don't see snowbirds here so much.

Christine:  Right.

Meredith:  What I do see, is I see the desert people, who really like to come here, especially during the summertime when it's hot. And when I say the desert people, I mean not just the California desert people or the people who live inland in places like Bakersfield.

Christine:  Right.

Meredith:  And Riverside. Also, we see a migration over here of the Las Vegas crowd, the Phoenix crowd, when it gets very, very hot in the summertime. So we kind of have a famed latitude, but it tends to be the desert to the ocean as opposed to the snowbirds.

Christine:  They just need some water.

Meredith:  They do. They do, and they'd like to be someplace where it's not 125 degrees.

Christine:  Absolutely. I've got properties in Tennessee and the same thing applies. We get a lot of Floridians. People go to Tennessee from Florida just because it's a little cooler. Regardless of what motivates people to go there, it's just great that we've got the audience of potential renters to draw from.

Now what about the market there? How is it doing right now? It's always a question that the media asks me in general. I have my perceptions of every vacation market in the United States but, specifically, how does the California Gold Coast, how is it sticking through the ebbs and flows of the market today?

Meredith:  We're soft right now candidly, which means that it's a great buyer's market.

Christine:  Right.

Meredith:  I think we are experiencing the readjustments that have been going on for a little bit over the year. Because many of our properties here are second homes, there has been a decrease in sales. Statistically we know in California that second home sales I believe have dropped up about 27%.

Christine:  Oh wow.

Meredith:  In the past year. Well it's a readjustment.

Christine:  Right. They couldn't keep up with those trends for so long. For a couple of years a third of all homes sold were second homes. If they kept up with those numbers, nobody would be buying first homes.

Meredith:  Well the good news is that there are more opportunities coming on the market for sale. I'll give you one. I just represented the buyer in a little beach bungalow, two bedroom, one bath. But because the property was a distressed situation sold for $765,000. Now I know that most of your listeners are thinking, "Oh my goodness! $765,000!" But the last closed house on that very lane was $932,000.

Christine:  Right.

Meredith:  So it was a real valued sale.

Christine:  Well it also allows people to stop and think and really analyze and make sure it's the right purchase for them as well. I would venture to guess, I know in the other markets that I have researched, the buyers are taking more time. They're not acting as quickly, which I don't think is not necessarily a bad thing. I think it's bad if you make a quick decision that you're not happy with.

Meredith:  I think that's very true. But the good news is that when it comes to the income rental aspect, the demand for vacation rentals is strong. We're coming into the summer season. I do not personally handle vacation rentals. There are some property management companies that will work with owners.

Christine:  Or you can do it by owner.

Meredith:  Yeah that's exactly. That's right, or rent by owner. But on the other hand, I know from the inquiries that I've had from my clients, that we're getting into the season and there are lots of requests for people who want to come here for the summer.

Christine:  Right.

Meredith:  So even though the sales market is soft right now, the rental market absolutely isn't. I should add that because the little towns along the coast here, Carpenteria and Ventura in particular, are charming old California towns that still have some quaintness to them.

Christine:  Right.

Meredith:  Our beach destinations here are very popular with Europeans, foreign visitors. I know at least one vacation homeowner who has really tapped into the European marketplace. All her renters who come back year after year are Brits and Germans.

Christine:  Amazing, amazing.  There is actually a huge market in Europe for what they call holiday rentals there, but there are actually more Europeans that travel and stay in vacation homes or holiday homes than in the United States, which I found to be very interesting. I didn't really learn that until I came to work for homeaway. But it is an interesting perspective to sort of market your homes to the European travelers as well.

One of the benefits too is they have different holidays. I was over in London just a few weeks ago, and they'll have two weeks off for Easter every year. In the United States, kids, some of them have the week before and some have the week after. Like my son his spring break was in March. So it definitely opens your property up. Now what about the cost of homes? You had mentioned that one was around 700. What is the average cost of say a two bedroom, two bath condo today?

Meredith:  Well the condo market has gotten more attractive, and again, it's proximity to the beach. I would say the average price for a two bedroom two bath right now is probably in the mid 500s, about 550 or so.

Christine:  That's actually similar to parts of Florida. Do you know, with that price range, whether these properties can break even with their rental revenues? What kind of revenues do you see being generated from a property of that price?

Meredith:  Well, right now, what we're finding is that at high season for a fully furnished rental in a great location, that it's going to generate about $1000 a week.

Christine:  OK.

Meredith:  That's on average.

Christine:  Right.

Meredith:  Obviously if you're right on the sand, you're going to get $2‑3000.

Christine:  Right.

Meredith:  And then off season we can rent probably three fourths of the year. Somebody who's actively managing and marketing their vacation rental will have it rented out a lot,

Christine:  Right.

Meredith:  If they're paying attention. And so off season more like $400‑700 a week.

Christine:  Oh really.

Meredith:  The numbers are good. The real issue comes down to what the down payment is and how you're going to structure your initial money in.

Christine:  Absolutely.

Meredith:  We've had this trend in the last few years where people want to come in, because they could, and do 100% financing, but that creates a higher monthly payment that, even with good rental is going, to put you in a negative cash flow for a couple of years.

Christine:  Right, right, right.

Meredith:  What I tend to find with the more experienced vacation rental owners is that they're coming in with a good 10‑20% down or more, looking at this as a long‑term investment, and then just really furnishing the property well and marketing it very well and just being consistent. I don't think it takes very long for a new vacation homeowner here to generate business for people to come to stay.

Christine:  Oh that's good. That's good. Now what about in your area? Now I know pretty darn close to you guys is Encinitas and even Big Bear. There's been a lot of talk about vacation rental bans in those areas. Is there anything that a prospective buyer might need to be aware of in your region?

Meredith:  Well it's interesting that you bring that up, because the City of Ventura has just gone through a process where a number of local beach homeowners wanted to ban rentals at the beach. Just for your listeners' information, in California, the longest ban that's been permitted by law is 30 days. In other words, Carmel, Laguna Beach, Encinitas and a few other beach communities and Monterey have said that you can not rent out your property for less than 30 days at a time,

Christine:  Right.

Meredith:  Because of concerns of nuisance, trash, things like that. In Ventura what the city council decided to do was to become more active in regulating the vacation rentals, so that now all the vacation rental homeowners must file for a conditional use permit and comply with city regulations, but they put no limit on the number of days.

Christine:  OK. Now with regards to those regulations and those licenses and stuff like that, is it a pretty easy process? Is it a just a matter of how much money you pay?

Meredith:  Yeah, yeah, it's very easy. You basically go down, and I believe the fee is $150. And then you also have got to agree that when you pay the fee to abide by city regulations, which have been drafted into an ordinance. And then, in addition to that, you must collect and pay what we refer to as transient occupancy tax.

Christine:  Right.

Meredith:  TOT tax, which in our city is 10% of what you're taking in. And of course, what owners do is they just tax, like everything, the cost is passed on to the renter.

Christine:  Right, right, right.

Meredith:  And so it's pretty easy and it's not very time consuming. The critical thing that a vacation homeowner who's going to rent out here needs to do is to make sure that they get to know the neighbors on the lane or on the beachfront where they are.

Because what brought this up was just people coming in for the weekend, mostly from LA and the bigger cities, that were just doing 24 hour partying,

Christine:  Right.

Meredith:  And being noisy, and their trash was all over the place, and they were drunk and things like that. So it's just what I call the "good citizen rule."

Christine:  Yeah, and the thing that homeowners need to realize as well is it's good to communicate those things, because vacationers don't necessarily realize that, "Hey. People permanently live here and we could be disturbing them." Really, do you want somebody that's going to be drunk for 24 hours in your home that you paid $500,000 or $700,000 for?

You've got a big, huge investment. If you're only renting it for $1000 or a couple thousand dollars a week, or if you're especially only renting it for the weekend, is that liability really worth it?

So I am a big advocate of really spelling everything out to your renters and making it very clear, and being friends with your neighbors who live there permanently, because they're the ones that are voting members of their community. If we get them really upset, they could affect our business.

Meredith:  Oh, absolutely. I live at the beach in Ventura, and so as one of those residents myself, when you're in closed in living, and that's the other thing about being at the beach. It's very closed in living. It's not like renting a property up in a mountain resort where you may have three or four acres with a mountain chalet, that having that sense of community becomes even more important. I'll also say that, unfortunately, it was three bad apples who got the whole thing going.

Christine:  It's always just one or two or three.

Meredith:  Yeah.

Christine:  And then the rest just are all good and happy. But it just takes one overly vocal person.

You say that you're one of those local residents. I think I mentioned this in a previous Podcast, that when I go to my vacation home, I sort of can step over that edge and become one of those, "Hey! I own this place." I can get annoyed with things too. So we have to understand that people that live there full‑time are really just wanting to preserve the nice place.

Let's face it. If you bought that property to eventually move into when you retire, you want to preserve it as well, because you're going to become that neighbor someday. So definitely keeping cognizant of it, communicating it to your renters, is really, really important.

Now when you're buying in your area, is there anything else that people need to be concerned with, need to know up front? Such as like, environmental issues, maybe beach erosion issues. You spoke about the ordinance and the sales taxes, but anything else? What about insurance? Anything we need to be concerned with?

Meredith:  Insurance, for the most part, is pretty normal levels for this area. Beach erosion, we don't have a lot of beach erosion here, because this part of the coast is pretty much a natural coast and there are several beach areas that are actually environmentally protected.

I think that the main environmental issue that the vacation homebuyer needs to be aware of, if they're buying along the Gold Coast, because we're north of Los Angeles. So we have a moderate climate, but it's a little cooler and a little damper than LA. And as a result, mold is common at the beach.

So in terms of mold being common, what that means is that when you buy a property here, it becomes important from a maintenance standpoint that the owner is taking care of things and not creating conditions that will allow the mold to occur.

Mainly because, in southern California, it's a huge factor. Not only for renters not wanting to rent there, but in terms of litigation and everything else. And again, it's totally preventable. It can be addressed without being a problem, but I would say that this is probably our primary environmental issue.

Christine:  So it's something that you definitely look for. When you buy a property, do you always advise people to have a mold inspection done?

Meredith:  Oh, absolutely, and I also advise them, when they buy the property and disclose to them, that this is a high mold area.

Christine:  Right.

Meredith:  And that in terms of purchasing the property, they're on notice that they should be doing periodic checks on the property. Remediation, whatever they need to do to make sure that they don't have, not only a huge problem that's going to affect the value of their property, but just as much have a huge problem that's going to affect the rentability of their property.

Christine:  Correct. Nobody wants to go on vacation and get sick.

Meredith:  No, absolutely not. Different people have different levels of sensitivity. The other thing that's interesting is that we often think that because we live at the beach all the time, and people are coming here to rent for the summer, that they're beachcombers like us.

Christine:  Right.

Meredith:  In many cases, they aren't. So the change of climate for them to the beach is a huge thing, regardless of the mold issue.

Christine:  Right.

Meredith:  So it's just having that sensitivity to it.

Christine:  Right. Well, that's always good to know. Now, we need to get wrapping up. I really appreciate you joining me for this time and sharing a little bit about your area. I would like to know, if people are interested, because obviously if you're looking to buy on the Gold Coast of California, Meredith McKenzie is definitely the real estate agent that you want to speak with.

When I was writing my second book, Profit from Your Vacation Home Dream, I interviewed her and just found her a plethora of information. She really comes with a vast bit of experience, not just from the real estate aspect, but also with her law background and tax issues that she knows about.

Then really having been a vacation rental owner who rented her property herself by owner, really comes with a well‑rounded bit of knowledge and experience. So Meredith is definitely the person to call. Now, Meredith, how do we get hold of you?

Meredith:  Well, there's a few ways. First of all, you can call me. My phone number is 805‑455‑3955. Or you can visit either of my web sites: www.venturacoastliving.com is my main marketing web site.

Christine:  OK, venturacoastliving.com, or‑‑

Meredith:  Or my online real estate blog for the area, which is www.meredithmckenzie.com.

Christine:  OK. And Meredith is spelled Meredith, and McKenzie is McKenzie, and we will, by the way, have these on our web site.

Meredith:  OK, great. Yes. I'm happy to answer any inquiries. It's always my pleasure, not only to help people buy their vacation property, but also to just get them oriented to the area so they can make the right decision as to whether this is the beach area where homeownership and vacation rentals make sense for them.

Christine:  And really, that's probably the biggest compliment that somebody could possibly give, is that they go, they listen to you. They seek your advice. You tell them about your area, and then they decide, "You know what? This isn't the right area." Because you obviously don't want somebody buying there that doesn't want to buy there.

Meredith:  Well, absolutely. Every beach area has its own lifestyle. The lifestyle, just for example, in Ventura, quickly is a very old type of California beach surfer dude community. Casual, laid back, but not very sophisticated. If the buyer is someone who has been used to living in a very upscale area and they want that Santa Barbara feel, for example, they're not going to find it at this beach.

Christine:  Right, right. So it's best not to buy there. Well, thank you so much, Meredith. I really enjoyed speaking with you. And again, go to Meredith's web site. It's www.venturacoastliving.com or www.meredithmckenzie.com. Her phone number is 805‑455‑3955. Again, thanks for joining, and have a great day.