Rental Investment Questions

[DreamnOfFL]

Ok I'm gonna start this off by saying .. I totally do not know what I'm getting into.. so this is why I'm turning to this board for some help and tips lol

My husband, kids and myself have been coming to the area for vacations for the past 10 years and we would love to put some of that money that we are throwing away on rentals into an Investment. Our goal is to purchase a property there and put it on a Rental Program while we are not using it.

We have A LOT of questions about how this all works and welcome any tips from people already doing this. We will be there in the area the week of Sept 19-26th and was wondering if any Real Estate Agents would be willing to sit down with us and discuss our options. We would also love to hear or meet with other Property owners who could give us some words of wisdom.

I'm sure it'll be a stressful adventure that we are wanting to take on, but in the long run.. What is more wonderful then having a place we can call our own in our favorite place on earth!

Thanks in advance!

 

[TooFarTampa]

If you want straight talk about renting this is the place!

Just off the top of my head, I'm sure I will come up with more later:

1) EVERYBODY uses VRBO. So make sure you have a VRBO listing that works in conjunction with your rental company. You can have your rental company field the responses or you can field them yourself (usually for a discount on commission) but definitely do VRBO and use as many pictures as you can.

2) Don't get fancy with the furnishings. Make it easy care but comfortable and inviting. This takes some thought.

3) Renters expect wireless internet these days. And they all want a view and easy access to the beach. A great pool is a huge bonus.

4) Don't expect to come close to cash-flow while renting your property. View it as a way to help you pay your mortgage and be grateful that values are way down so you can get what you want.

5) You probably should just go ahead and get flat screen TVs.

6) There is a wide range of services offered by rental companies. Some will do everything for a higher commission, some will split duties with you. Duties include: communicating with potential renters, booking them and keeping the calendar, collecting rent, paying sales tax to the state, keeping the place clean, keeping it on a good maintenance schedule, replacing missing or broken items, general upkeep, fielding complaints.

7) I have had pretty good luck with fielding and booking my own renters. We also put some family photos in the house. I truly think as a result they think of it as someone's home and not just a rental. This makes a difference when it comes to wear and tear! IMO. But it is a lot of work. Would be hard if I had a full-time job, but I stay at home with my kids and while I am busy, I do have bits of time during the day to deal with this stuff.

Let me know when the time comes if you need a rental company recommendation, I have been very pleased with mine from both a housekeeping and maintenance standpoint.

Good luck!

 

[TooFarTampa]

P.S.:

If you are thinking of this as an "investment" then forget it. (though it may work out well in that regard.) If you are interested in "making memories" with your family now and later and reserving a spot at one of the most beautiful beaches in the world while you can afford it, it becomes not so unreasonable.

Also: Have a storm plan, and be sure to think through what you would do in the event of a total loss. Wind policies in Florida have a 2 percent hurricane deductible. Which means on an insured value of $500,000, you'd have to pay $10,000 out of pocket just to get started on the repairs.

 

[Mermaid]

I would suggest that you read through all the real estate discussions as over the years variations of your questions have been asked before. You are not the first starry-eyed visitor who came down to SoWal with money burning a hole in your pocket!

 

[DreamnOfFL]

If you want straight talk about renting this is the place!

Just off the top of my head, I'm sure I will come up with more later:

1) EVERYBODY uses VRBO. So make sure you have a VRBO listing that works in conjunction with your rental company. You can have your rental company field the responses or you can field them yourself (usually for a discount on commission) but definitely do VRBO and use as many pictures as you can.

2) Don't get fancy with the furnishings. Make it easy care but comfortable and inviting. This takes some thought.

3) Renters expect wireless internet these days. And they all want a view and easy access to the beach. A great pool is a huge bonus.

4) Don't expect to come close to cash-flow while renting your property. View it as a way to help you pay your mortgage and be grateful that values are way down so you can get what you want.

5) You probably should just go ahead and get flat screen TVs.

6) There is a wide range of services offered by rental companies. Some will do everything for a higher commission, some will split duties with you. Duties include: communicating with potential renters, booking them and keeping the calendar, collecting rent, paying sales tax to the state, keeping the place clean, keeping it on a good maintenance schedule, replacing missing or broken items, general upkeep, fielding complaints.

7) I have had pretty good luck with fielding and booking my own renters. We also put some family photos in the house. I truly think as a result they think of it as someone's home and not just a rental. This makes a difference when it comes to wear and tear! IMO. But it is a lot of work. Would be hard if I had a full-time job, but I stay at home with my kids and while I am busy, I do have bits of time during the day to deal with this stuff.

Let me know when the time comes if you need a rental company recommendation, I have been very pleased with mine from both a housekeeping and maintenance standpoint.

Good luck!

Thanks so much for the response.. You have nailed a lot of issues that I was curious about. We would be using VRBO for sure. We have been finding our Vacations Rentals from there for years.
Also when I choose the word "Investment".. I'm not looking to become rich off this place lol Just mean in terms of for us to stop throwing away money and actually putting it into something we own and love. Last summer alone we spent over 8,000 dollars on just two visits there. And to think that could have been into a place of our own is just sickening. And I don't even want to add up everything over the past ten years lol

The tip about putting family photos into the place is very smart! I always wondered about that. Only one that we have rented in the past had personal photos.. and I actually thought it was a nice touch.

As for the Wireless Internet that is a MUST .. We are addicted really bad ourselves and I know others would appreciate the access to feed their addiction as well.

Our long term goal is to eventually move there. The two times we get to come and visit are like coming home. I've always thought the stork dropped me in the wrong part of the U.S.

 

[Matt J]

Since SHELLY is oddly absent I'll go ahead and say it.

If you can't afford the property without renting it don't buy it. It's too much. Rentals are not guaranteed and if you can only afford the property by using it on shoulder months and must have renters from spring break through Labor Day plus a 3 month snow bird you're going to be in bankruptcy and/or foreclosure before you get to sweat the first hurricane.

As TFT said it's not going to cash flow and I wouldn't even count on breaking even. If you ask most owners who have rented for a long time (I mean 20+ years) they'll tell you that the whole point of renting beach homes came about as a way to supplement the maintenance costs, taxes, and general upkeep along with having someone to watch over your home.

Honestly anyone can "make it work" on paper, but again that's no guarantee. You don't know what next season will bring, it could be another 2004/05 style hurricane season. You might purchase a home that is just a black hole. I know a couple that built a beautiful home that was well appointed and had what I would consider a great location. The house just wouldn't rent for some reason.

Before any real estate agents get up in arms and decide to attack me, call me negative, or send me a nasty PM; keep in mind that you have ETHICAL OBLIGATIONS to your clients. Most of the Realtors on here are very ethical and honest, but there are a few that troll for the quick commission and don't care what happens tomorrow much less 6 months down the line. Feel free to PM me for a list of the ones I would use.

 

[ClintClint]

I would suggest that you read through all the real estate discussions as over the years variations of your questions have been asked before. You are not the first starry-eyed visitor who came down to SoWal with money burning a hole in your pocket!

Great advice Mermaid!! If I can be so bold as to offer a synopsis of all those posts it would be Dream on Dream of Fl. As Mermaid so succinctly put it, starry-eyed describes your ambition. I would describe it as well intentioned naivety or outright masochism. The bottom line is, a nice idea guaranteed to lose you more money than if you had just rented and left all the headaches to someone else.

 

[TooFarTampa]

Since SHELLY is oddly absent I'll go ahead and say it.

If you can't afford the property without renting it don't buy it. It's too much. Rentals are not guaranteed and if you can only afford the property by using it on shoulder months and must have renters from spring break through Labor Day plus a 3 month snow bird you're going to be in bankruptcy and/or foreclosure before you get to sweat the first hurricane.

As TFT said it's not going to cash flow and I wouldn't even count on breaking even. If you ask most owners who have rented for a long time (I mean 20+ years) they'll tell you that the whole point of renting beach homes came about as a way to supplement the maintenance costs, taxes, and general upkeep along with having someone to watch over your home.

Honestly anyone can "make it work" on paper, but again that's no guarantee. You don't know what next season will bring, it could be another 2004/05 style hurricane season. You might purchase a home that is just a black hole. I know a couple that built a beautiful home that was well appointed and had what I would consider a great location. The house just wouldn't rent for some reason.

Before any real estate agents get up in arms and decide to attack me, call me negative, or send me a nasty PM; keep in mind that you have ETHICAL OBLIGATIONS to your clients. Most of the Realtors on here are very ethical and honest, but there are a few that troll for the quick commission and don't care what happens tomorrow much less 6 months down the line. Feel free to PM me for a list of the ones I would use.

Great post. Distance from your primary home also should be a factor. Are you close enough to come down for the weekends to enjoy it? Do you have family close enough to enjoy it also? Do you envision retiring at the beach? If so it might be a good idea to buy, but think hard about the layout and the location before you do so.

Spending $8K in a year to be a renter may feel like a "waste," but I can tell you honestly from the other side that owners have very real expenses and even the peak rental period is not easy money. If you have the right personality for it, can afford the house without it and wish to spend most of your free time in SoWal, then go ahead.

The whole "investment" idea started when people saw values heading up quickly and thought it would last forever and/or never go down. Whoops. Best not to go there....

 

[30ashopper]

A few more tips, hints, suggestions -

1) Managing a rental is more work than you are probably currently anticipating.

2) Your personal belonging will receive a great deal of wear and tear.

3) Make sure you can afford the mortgage without a single dime of rental income before you leap.

4) Avoid a mortgage if possible, or save up as much as your can and put down a very large down payment.

5) Consider that you will most likely not want to stay in your home during peak rental periods. The market here is seasonal so if you stay in your place three weeks over the summer you'll be giving up critical rental income.

6) Avoid costly properties - nothing over 300-400K or you will be sinking thousands a year on your 'investment'.

7) Invest in a home that has long term cost savings built-in, or invest in cost saving measures once you buy. (dual flush toilets, tankless water heaters, florescent lighting, etc.)

8) Do the math so you know what you are getting into. There are commercial rental spread sheets available online that will help you figure out the real cost, over the life of your ownership. The numbers and return may surprise you.

9) Research rentals in the area for an extended period of time so you understand what people want in a rental. There are numerous rental agencies with online listings, rates, and rental calendars you can look at for detailed info.

I went through all of this last year and came to a simple conclusion - it wasn't what I thought it would be. I've since given up on the idea. I already live here though, so that's something you gain by buying that I didn't factor into my calculations. As a pure investment, I'd go with the stock market instead.

 

[Smiling JOe]

This may sound unusual coming from a Realtor, but renting is not "throwing money away." It is simply an expense for housing, whether it is vacation or primary home. Even home owners have that same expense -- it is also known as interest on the loan, or if you paid cash, it is the opportunity cost of the equity you have in the property. Renting and Owning, each have their +/- You mention the amount of money you spent over the last few years on renting, but you may have easily spent more by owning, and be upside down on your mortgage. So, maybe you actually saved money by renting. Owning is more of a lifestyle choice, a luxury, and a place to park money, than it is anything else. Just my $.02.

Is it possible that property values could increase over time? Absolutely. Can you get tax advantages by owning a rental property? Yes. Can buying a rental property prove to be an investment? Yes, but in my opinion, only if it makes business sense (being able to collect rents of at least 1% of purchase price, per month, every month, which ends up being a return of about 8% per year -- this is with you not paying a management company).