South Florida is one of the most transient areas on the planet! This means... a constant flow of renters.
Our work force is strong, which means there are plenty of potential qualified tenants at all times of the year looking to rent. There is a constant flow of real estate properties for sale and for rent. These factors, coupled with higher than average rental rates means landlords, when using smart strategy, will win in the rental property investing game.
Current Challenges in the South Florida real estate market?
1. Property values have been rising steadily
2. Interest rates have been rising steadily
3. Both factors cannot coexist successfully.
What does this mean?
So how do these factors affect a rental property investor? Besides the initial investment of buying a rental property (or converting an already owned property into a rental), the biggest decision to make is HOW to make the property work for you. Considerations: investment to upgrade/rent-proof the property, establishing the right rental rate, landlord insurance, establishing a solid tenant screening/application process, establishing a responsive network/system for tenant repair requests.
If you're a seasoned landlord, you'll have your systems in place. If you're a new landlord/investor... make sure to set everything up right, before you begin. Minimizing costly pitfalls is key to your bottom line.
However, here's our question to you:
Since your monthly management fees are most likely tax deductions, why not hire a Professional Property Manager to handle your rental property for you? EXPERIENCED property managers know how to help you avoid pitfalls, effectively and swiftly address issues BEFORE they become costly, provide your monthly/annual bookkeeping records for taxes, and actively work to increase your ROI.
For Buyers and Sellers: there are lots of properties on the market available to buy, and both sellers and buyers should be open to negotiating the prices in the current market. Interest rates are still historically low, making it an excellent time to get into a mortgage and/or buy, but they ARE creeping up. If you are a buyer and want low interest, now may be the best time to consider buying (before interest rates jump up higher!).
Another GREAT factor for sellers to sell NOW, besides having lots of qualified buyers in the market looking to buy is that Owners and Appraisers are now AGREEING on the value of a property! One of the biggest issues we've had since the market collapse in 2008 is that owners and appraisers didn't agree on the value of the home. Which meant many sales contracts were BLOWN UP because bank-appraisals were coming in way lower than sellers were willing to sell for. No more! Read more about this FANTASTIC new report on how Owners and Appraisers are agreeing on home values.
Tenants are having the most difficulty in the 2018 South Florida market. Finding affordable rentals in most areas within South Florida is very difficult. Renewals are now commonly jumping $100 a month or more to remain for another year. Oftentimes there are multiple offers on the same rental property, so anyone with less than stellar credit scores or less than 3:1 income/rent ratio need a longer time frame to secure a new rental property as well as lots of patience. Because South Florida is very transient (lots of people move in and out, more in... all the time) rental rates remain well above the national average and continue to rise.
If you are new to rental property investing, need to become a landlord because you aren't able to sell right now, or you tried flipping and got stuck with a property you aren't able to sell... it's crucial that you take the time to learn the ins and outs of landlording, all the potential pitfalls, and equip yourself with the knowledge (and professional help) to set up and run everything legally and SMARTLY!
For instance, how much will you charge for security deposits? Will that amount cover potential damage or eviction costs? And what about maintenance: will your tenants be responsible for the yard or paying all utilities, and how will you enforce it without costing yourself extra money? Who will prepare your lease, and will that lease be tailored to your property and needs? What about bookkeeping of all the expenses and income, and 1099 tax prep needed? While it's all definitely doable by anyone... it takes a lot of research and education to make sure you set everything up for success. It's VERY easy to lose money in the real estate/rentals niche. And what if you DO have losses? Are you documenting them to be able to take the right losses on your tax returns? Real estate losses can, in some circumstances, SAVE you money!
We have many years of experience with rental property investing, and all the management challenges that come with each different property and tenancy. We like to share our experiences on this site, so bookmark us and visit us often!
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Check out the News page for our favorite relevant news articles of the week!
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