We often hear from investors wondering what they can earn and what they will have to spend to run a rental property in Orange County. While many people like to think of real estate investing as a set-it-and-forget-it investment strategy, there are actually a lot of moving parts and recurring expenses that you need to take into account.
We’re giving you all the information you need to make a sound choice about your next Orange County investment opportunity.
We’ll talk about what you can expect to make each month from rent, and we’ll break down the costs associated with owning a rental property. You’ll learn just how much you need to budget for these expenses and what this will do to your net income.
Average Rent in Orange County
As of September 2024, the average rent in Orange County, California, is $2,678 per month, and the average property size is 924 sq. ft. This makes Orange County one of the most expensive cities in the U.S.—it’s 71% higher than the national average of $1,563 per month.
A studio apartment in Orange County will cost $2,300 on average; a one-bedroom is $2,366 monthly, and a two-bedroom is $2,888 monthly. If you’re looking for a three-bedroom property, you could pay $3,533 or more.
| Property Type | Average Rent | Average Sq Ft. |
|---|---|---|
| Average Orange County Rental | $2,678 | 924 sq. ft. |
| Studio | $2,300 | 559 sq. ft. |
| One Bedroom | $2,366 | 728 sq. ft. |
| Two Bedroom | $2,888 | 1,038 sq. ft. |
| Three Bedroom | $3,533 | 1,313 sq. ft. |
Determining Your Own Rental Income
Setting the right rental rate can significantly impact your vacancy rates and the profitability of your rental property. A lot goes into setting a rental rate for your property—you need to understand the local market and your property to be able to set a competitive price that is also attractive to potential tenants.
Before you set your rental rate, spend time doing research on the Orange County rental market. Look at popular listing sites like Zillow to see how much comparable properties in your area are renting. This will give you a sense of what tenants are willing to pay.
Next, you need to weigh the location and amenities that come with your property. Properties in desirable neighborhoods often garner higher rents. Consider the shopping, transportation, and entertainment surrounding your property. If your property had extra amenities like a pool, gym, or on-site laundry, you may be able to charge a higher rent.
You can also use an online rent estimator to analyze your area and property and get an idea of what you can charge for rent. Our rent calculator provides a free, instant rent analysis for Orange County properties and can help you narrow down your focus when it comes to setting your rental rate.
Finally, if you’re still unsure how to price your Orange County rental effectively, working with a professional property management company is a great solution. A property manager can conduct a comprehensive market analysis to help you get the best rent for your property.
The Costs of Rental Property Ownership In the OC
The first expense associated with owning a rental property is purchasing it. Whether buying a new property or repurposing an existing one, the property will be the most significant expense on your journey.
But there are other expenses to take into consideration when planning your rental property budget. One of the most popular rules in rental properties is the 50% Rule—you should expect to use half of your monthly rental income to pay for associated expenses.
Let’s put that rule to the test.
Property maintenance and repairs
Maintenance and repair costs often fall into the “unexpected expenses” category for rental property owners. These expenses don’t happen every month, and they can come out of nowhere. But being prepared for these expenses is one of the best things you can do as a rental property owner.
Several factors can impact the cost of repairs and maintenance for your property. Several factors can impact the cost of repairs and maintenance for your property. High turnover rates in between tenants could affect how much money you are spending on items like paint, flooring and other repairs to get the property market-ready. The age of the property is another factor to consider. Newer properties most likely won’t need as many repairs as older ones.
As a general rule of thumb, we recommend our clients budget approximately one month’s rent to function as their annual maintenance budget. While this is a great rule, there is no guarantee that a month’s rent will be enough to cover their costs each year. That equates to 12% of their monthly rent.
Property management fees
Whether you’ve decided to hire a property management company or are still debating, it’s a good idea to consider property management fees when planning your budget. You never know when you may not be able to manage your property and need a property manager.
On average, property management companies charge between 6% and 12% of the monthly rent. Here at Good Life Property Management, we charge between 6% and 8%, depending on the type of property. There are other fees associated with property management, and it’s good to be aware of them—our guide to property management fees breaks down all the fees you can expect from Orange County property management companies.
Insurance
In the past, we used to think of landlord insurance as a fixed cost that was easy to plan for and calculate. You would simply get a few quotes and compare them to find the best rate. However, the insurance landscape is changing in California, and unfortunately, it’s quite volatile. The rates you see today may not reflect what you might see in the very near future.
This means landlord insurance has become more challenging to budget for at the moment—some carriers are not writing new policies in California, and others are charging very high premiums.
That being said, landlord insurance for your rental property is essential. Contact insurance companies, get quotes, ask about their policies and pricing options, and find a policy that meets your needs. Once you have a policy in place, it will be easy to determine your monthly insurance cost.
While it’s difficult to estimate how much landlord insurance will cost in Orange County, to set your budget, we’ll use the industry standard of 4-6% of the monthly rental rate.
Vacancy costs
It’s easy to think of vacancy rates as a lack of income versus an expense, but it’s important to factor the cost into your budgeting to avoid a financial loss.
The average vacancy rate in the U.S. was 6.6% in June 2024. While you can use this number to estimate your own costs, it’s better to crunch your numbers—your vacancy rate may be higher or lower based on location, pricing, and the quality of your tenants.
If you’ve owned rental properties for some time, you’ll have a good idea of your vacancy rate. To calculate the cost of vacancy, multiply your vacancy rate by your expected annual revenue. So, if your vacancy rate is 5% and you rent your property for $3,000 a month ($36,000 a year), the cost of vacancy is $1,800 a year. Divide that by 12, and that’s $150 a month or 5% of your monthly rent.
If you don’t have an established vacancy rate, it’s best to use the average Orange County vacancy rate of 6.86%—this is more accurate than simply using the U.S. average and gives you a great starting point for budgeting purposes.
In our experience, most rentals experience one month of vacancy between tenants. This gives you one to two weeks to get the property move-in ready and another three weeks to find a new tenant.
Property taxes
While they change slightly on an annual basis, property taxes are straightforward when it comes to budgeting. Every jurisdiction sets its own tax rate, which changes annually. So it’s important to be up-to-date on the shifts so you can properly budget.
The calculation is simple—multiply the assessed value of your property by the property tax rate in Orange County. At the time of publication, the average property tax rate in Orange County is 0.79%.
So, let’s say your property is appraised at $500,000. Paired with the 0.79% tax rate, you can expect to pay $3950 annually. Divide that by 12, and you’ll pay $330 per month or 11% of your monthly rent.
Other expenses
There will inevitably be other expenses that don’t fit neatly into a category. Travel, bookkeeping, and even printing costs are just a few examples. Budgeting for these expenses each month is good practice, even if the budget doesn’t get used up. We suggest 2-3% for these types of costs.
Crunching the Numbers
So, now that we’ve explored all the different expenses that come with a rental property, it’s time to put these numbers together. Using our above calculations, here is what a property owner can expect to spend per month on expenses:
| Expense | Percentage of Monthly Rent |
|---|---|
| Property maintenance and repairs | 12% |
| Property management fees | 6-12% |
| Insurance | 5-7% |
| Vacancy | 6.86% |
| Property taxes | 11% |
| Other expenses | 2-3% |
| TOTAL | 43-52% |
As you can see, the 50% Rule holds up well. We’ve earmarked 43-52% of our monthly rental income to cover the expenses we discussed above. Remember, several factors impact these values: the location, age, and price of your property, how much rent you charge, and the service providers you choose.
Calculating Net Income
To calculate your net rental income, subtract the monthly rent amount that goes to expenses, then multiply that number by 12 to get your annual net income.
Using our above example, let’s say we pay 44% in expenses each month. That makes our monthly net income $1,680. Multiply that by 12, and our annual net income is $20,160.
Maximize Your Rental Income with Good Life Property Management
At Good Life Property Management, we know the importance of getting the most out of your investment. That’s why we help you set the most competitive rental rate, find the best tenants for your property, and help reduce your vacancy rate.
We believe life should be enjoyed, not spent sweating the small stuff. That’s why we set out to make property management easy. We care about you, your property, and your tenant. And we do it all so you can Live the Good Life.
Schedule a call to speak with one of our Good Life experts.
Orange County Rental FAQs
What is the average cost of rent in Orange County?
The average cost of rent in Orange County is $2,678 per month for a 924 sq. ft property. As the properties increase in size, so does the rent. The average for a two-bedroom unit is $2,888, and a three-bedroom unit will cost $3,533.
How much do property managers charge in California?
Every property manager in California has their own fee structure. In Orange County, you can expect to pay 6-12% of the monthly rent to a reputable property management company. Good Life Property Management charges 6-8% depending on the size of your property.
How much do you have to put down on a rental property in California?
Most lenders in California require a down payment of 20-25% of the purchase price for an investment property loan. A bigger down payment often gets you better interest rates, which helps your cash flow as you move forward.
Is California a good state for rental properties?
California is a great place to own a rental property. It is a tenant-friendly state, and so many people are looking to rent. The excellent weather, strong job market, and wonderful beaches, parks, and recreational opportunities also create a rental market defined by high demand.
Steve Welty
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