Buying a rental property in Santa Fe: what to know first

A Santa Fe rental works when you buy the right kind of property in a neighborhood where people actually need to rent, at a price that leaves room after the mortgage, taxes, insurance, and the repairs that a 7,000-foot climate demands. Appreciation here is slow and steady. The monthly numbers have to work on their own. Here is what we tell investors before they start looking.

Decide long-term or short-term before you look

The two businesses want different properties.

Long-term rentals serve people who work here: the hospital, the state, the schools, Los Alamos National Laboratory, and the service economy. Demand is steady, tenants stay for years, and the best units are clean, well-heated, and close to town or to the commute. Condos and small homes on the south side, in South Capitol, and in Eldorado rent reliably.

Short-term rentals serve visitors, and in Santa Fe they are regulated. The city limits the number of short-term rental permits in residential zones and requires registration, lodger’s tax, and a local contact. Permit availability changes; check with the city before you buy a property counting on it. The county has its own rules. Properties that work are walkable to the Plaza, on the Eastside, near Canyon Road, or in Downtown, and they cost accordingly.

Do not buy a short-term rental plan with a long-term rental budget.

Run the numbers the Santa Fe way

Start from the rent, not the price. Get real comparable rents for the unit type and neighborhood, then subtract:

• Mortgage, taxes, and insurance. Property taxes in Santa Fe County reset on sale, so use the number for your purchase price, not the seller’s bill.
• A vacancy allowance. One month a year is conservative for long-term.
• Maintenance. Budget more than a national rule of thumb. Flat roofs, stucco, boilers, and wells cost money, and a single roof can erase a year of cash flow.
• Management, if you will not do it yourself. See do you need a property manager.
• Utilities you will carry, and water in particular if the unit is on a shared meter.

If the result is negative, the deal depends on appreciation, and Santa Fe appreciation is not fast enough to rescue a negative monthly number.

Buy the boring property

The best rentals in Santa Fe are rarely the charming ones. Tenants want reliable heat, parking, laundry, and a landlord who fixes things. A 1990s frame-and-stucco house with a pitched roof and forced-air heat is easier to own than a 1920s adobe with a flat roof and radiant floors, even though the adobe is the one you would want to live in. Save the charm for your own house.

Inspect for the things that break here

• Roof membrane age and condition, canales, and parapets.
• Boiler or furnace age, and whether radiant loops have ever leaked.
• Stucco at the base of the walls and around windows.
• Water source: city, community system, or well, and the well’s output and age.
• Septic, if there is one, and when it was last pumped.
• Plumbing in crawlspaces and exterior walls that may have frozen before.

Our winter checklist is a reasonable list of what an inspector should look at.

Know the rules

New Mexico’s Uniform Owner-Resident Relations Act governs leases, deposits, notices, and evictions. Larger security deposits on longer leases can owe the tenant interest. Notice periods are specific. Fair-housing law applies to your advertising and screening. None of this is hard, but it is not optional, and a manager or an attorney who knows it is cheaper than learning by mistake.

Where to start

Tell us your budget and whether you want long-term or short-term, and we will show you what rents and what does not, from every active listing. We have managed Santa Fe rentals for decades, so we know which properties come back with problems. Read our guide to where to live in and around Santa Fe for the neighborhood trade-offs, then call us.