Landlording in the Santa Cruz Mountains
In the San Lorenzo Valley, it is easier to admit dope smoking than ten years of successful landlording. But I am not the only paraplegic who depends on passive income for caregiving. Landlords play two games:
The Big Game: Capital Gains
Landlords seek rising prices for capital gains in leveraged investments: if you buy $1m Scotts Valley housing with a 500k mortgage at 7%, and it rises in value the typical 3%, then you pay under $35k of interest the first year with $60,000 equity growth. “Marry the house but date the rate!” realtors say and know that the deal gets better with refinances expected. Despite high interest, insurance and code compliance costs, declining prices make landlord purchases lucrative right now and my bullishness comes knowing zoning limits housing supply while the AI boosted tech industry generates demand here for homes as close to San Jose in commute time as Morgan Hill or Pleasanton. Home prices should rise. Local Realtor Dylan Linde argues:
“This is the best SLV market I have seen for buyers in 5 years. I am seeing more price reductions, seller concessions, and other buyer requests granted in our area that would have rarely been considered in the past few years. The investor/landlord buyers are the real winners in 2025 – purchasing homes with favorable terms, renting out one or multiple units, and planning to refinance and stabilize their investments in the coming years as rates adjust. It’s a long-term position, but one that will surely provide great cash flow…”
Realtor Dylan Linde, surfing Santa Cruz, sees great opportunity for buyers in Santa Cruz Mountain real estate
The Small Game: Landlording Cash Flow
Landlords need regular bill payments, layman landlord law and the ability to supervise repairs—not my college degrees or realty and mortgage licenses. In rental interviews, carefully check credit, income and references. Regulations prohibit questions not just about race, shared religion, gender-identity and ethnicity, but also family, and immigration status. Accept government-paid Section 8 tenants and government inspections; payments may be higher but risks of uncompensated damages increase.
Provide “reasonable accommodation” for disabled tenants, but let them finance costly modifications. Include asbestos and lead disclosures. Pets are wonderful but lawyers probably devised them for damage they cause. Dog urine made my rental uninhabitable and I had to replace not just rugs, but flooring beneath. I once bought out a tenant for two months’ rent because of cat-damage, smoking and a door constantly left open to the wind.
The security deposit can only be two month’s rent for unfurnished units. Apartment cleaning, painting and minor construction and repair skills keep rents flowing regularly and prevent tenants from deducting repairs from rents legally. This year, my tenants accepted higher rents to cover higher Fair Plan insurance. Positive after-tax income, helped by depreciation, affects the big game because net rents justify loans for rentals that may multiply piggyback.
The Risks and Rewards of Santa Cruz County Landlording
Most Santa Cruz Mountain houses survive fire, floods and treefall and few airplanes crash! But landlords expect bad tenants. In apartments, Tenants may only be evicted “at fault” for non-payment of rent, nuisance, criminal activity etc or “no fault” for owner move-ins or “substantial” remodeling. Lockouts and other landlord retaliation are illegal. My Boulder Creek tenant simply stopped paying rent and my self-prepared eviction forced the tenant to move his family in with friends when the Sheriff knocked on the door. I was very lucky that the tenant did not stall in the courts. It took two people a week to clean unwarranted messes and repair damage.
Investors fear rent control. In 2025, the California Apartment Association blocked AB 1157, which would have limited rent increases to 2% and taken away current rent increase exemptions for new construction, single family homes and condos. AB 1482 limits yearly apartment rent increases to five percent plus costs of living. Yet 62% of 2024 voters struck down Proposition 33; “(Voters) understand that the answer to our housing crisis isn’t more red tape — it’s building more housing,” said Nathan Click.
Good landlords befriend and retain tenants, mine for ten years. Hedging stocks with local real estate gives tenants housing choices: Landlording won’t make you Mother Teresa, but you can still do well by doing good!
Robert Arne, EA, CFP, MS, of Carpe Diem Financial Life Planning, gives holistic financial advice as his client’s fee-only fiduciary. He serves mostly Santa Cruz Mountain dwellers. These articles must not be read as personal financial, mortgage, tax or investment advice; consult appropriate professionals.