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Old 03-20-2011, 06:42 PM
 
Location: Spain
17 posts, read 21,479 times
Reputation: 12

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If you were to buy a house in Florida in order to rent it because you are not going to live in it, its just business, what area would you chose?
I need an area with low crime , an area really sought after by tenants, where I can rent the property for a profitable monthly price, either long term or short term.
What area would you recommend? Where do you think I can buy low and rent high ?
I suppose Orlando is a good choice as so many people travel there to visit Disney World. The thing is: where in Orlando?
Another doubt, would it be better to buy in a beach area near Orlando or is it not as sought after as the areas near the parks?

I am from Europe, so please forgive me if I make silly questions. I do not know Fl well.
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Old 03-23-2011, 09:42 AM
 
4,159 posts, read 4,213,805 times
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Well, I owned rental property in Stuart, FL for 20 years and would recommend that you really look at the numbers.

- You won't be able to "Homestead" the property which means you property tax will go up each year. Under the Homestead exemption, the increase is usually around 3 percent or less, but without it, you might get hit with a much higher increase. As the real estate market recovers, eventually, and prices start to rebound, wham!. you will get hit. I was getting 25 percent a year increase in my property taxes for several years.

- Home Insurance - You will have to get a commercial property insurance policy, which is more difficult to obtain. Most likely, you will have to go with "Citizens Insurance" which is the state owned company. They, by law, have to charge the most, and they just raised their rates.

- If you home is near the water, less than 1,000 feet, the cost will go up more.

- Location - Florida is about sand, sun and fun. If you could buy a place near the water, easier to rent, but more in taxes, property insurance and hurricane trouble.

- Hurricanes - We are in "hurricane alley" we will get hit. So when you look at a place to buy, look at
"how often and how bad" has this area been hit. Jacksonville area is pretty safe.

- Places to look at. I would recommend staying away from South Florida. Higher taxes, crime, insurance, etc... Look at Jacksonville first.

- Orlando has nice beaches 60 miles away. Disney is the big thing here, but actually, UCF is a much better draw for you. If you could rent out your place to someone attending UCF that would be a bet.

- You will have to hire a local property manager to look after your home, and keep it rented. That is usually 15-20 percent of the rent.

- Rent Income - What you charge depends on location of the property 1st, condition, size, etc... Always buy in/near a good school district.

There are a huge number of condos and homes on the market, but you will have to be very careful. A larger number of condos'/homes were built during the boom and the quality of construction is "not so good".

- Maintenance - Be ready to fix/paint/replace after each tenant moves out. Of course you can keep
the deposit, but be ready to evict too. That process can take several months and about 1-2k in legal fees.

Being a long distance land lord has a bit of risk so be careful of the "hype" of making millions in rental property.

Good Luck!
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Old 03-23-2011, 10:02 AM
 
Location: Spain
17 posts, read 21,479 times
Reputation: 12
totsuka, thank you very much for pointing all that out.
It may seem silly but I was truly not taking into account the difference in real estate issues and taxes between my country and US.
And what a difference that is! How come taxes can be raised that dramatically? Home owners who could afford a house when they bought it can actually end up losing it with so much tax raising.

One the other hand, there's something here you have not mention but I'd like to add. A foreigner must be very careful about the real value of what he/she is purchasing.
In my case, I was trying to make a permanent house swap for my beach condo in Spain and I received offers from people claiming to have a 500000 USD value house in Fla and when consulted with a real estate agent, that house in that area would not cost more than 200 000 usd at present.

Unless I see a real oportunity, I will not risk myself buying a house to rent it.
It may be a good business or end up being my ruin. One is never too careful, specially in these times of crisis.

Thank you again for your informative post, I trully appreciate it.
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Old 03-23-2011, 05:11 PM
 
Location: Orlando
8,221 posts, read 10,980,417 times
Reputation: 4022
Quote:
Originally Posted by totsuka View Post

- You won't be able to "Homestead" the property which means you property tax will go up each year. Under the Homestead exemption, the increase is usually around 3 percent or less, but without it, you might get hit with a much higher increase. As the real estate market recovers, eventually, and prices start to rebound, wham!. you will get hit. I was getting 25 percent a year increase in my property taxes for several years.

- Home Insurance - You will have to get a commercial property insurance policy, which is more difficult to obtain. Most likely, you will have to go with "Citizens Insurance" which is the state owned company. They, by law, have to charge the most, and they just raised their rates.

- Hurricanes - We are in "hurricane alley" we will get hit. So when you look at a place to buy, look at
"how often and how bad" has this area been hit. Jacksonville area is pretty safe.


- You will have to hire a local property manager to look after your home, and keep it rented. That is usually 15-20 percent of the rent.

- Rent Income - What you charge depends on location of the property 1st, condition, size, etc... Always buy in/near a good school district.

There are a huge number of condos and homes on the market, but you will have to be very careful. A larger number of condos'/homes were built during the boom and the quality of construction is "not so good".

- Maintenance - Be ready to fix/paint/replace after each tenant moves out. Of course you can keep
the deposit, but be ready to evict too. That process can take several months and about 1-2k in legal fees.

Being a long distance land lord has a bit of risk so be careful of the "hype" of making millions in rental property.

Good Luck!
I have a couple of clarifications.

1) taxes won't increase if the property value doesn't increase. If the home is purchased low that will usually cause a correction in the assessment and make taxes manageable

2) UCF is a good area to rent in I have also done well with Windermere properties as well. Schools aren't always a factor but nice when they can coincide.

3) I don't think most managers charge rates that high, I do mine at 10%

4) No one makes millions in rentals, unless you have many properties and still it is only a percentage of investment. a decent return would be around 15%

5) the eviction process, if it were to come to that can be done for $500-$800. I've done it. The ideal is to get good tenants where that isn't needed. It takes a little over a month to complete.

6) buying right means you have a good deal that the numbers make sense. The home is a good solid property and any repairs are taken into consideration with the numbers.

7) I would avoid coastal properties because of the insurance. My clients are finding coverage around the 1000-1200 mark. remember you are not covering contents so it is a little cheaper.

Hurricane Alley? We had 1 in the early 60's and in 2004 we had 3 come through Orlando. only one had winds over 90mph ( Charlie at 105) cat 3. many homes got new roofs as a result. We have had none since.
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Old 03-23-2011, 05:31 PM
 
Location: Spain
17 posts, read 21,479 times
Reputation: 12
Smile To Ken

Thank you, Ken, for jumping in and give your viewpoint. I am glad to know everything is not that bad. I was specially worried about the time for eviction. I must say in Spain that´s a real problem, as it may take months to make someone leave a house and if he declares himself in bankrupt, you will not see a dime of the money he owes you.
I will take the opportunity to say that Ken (AONE) has been really helpful and it is guiding me a lot. He is the one that warned me about the real value of some houses I was being offered for swapping and gave me a lot of information about Orlando areas. He seems to be very experience real estate agent and I recommend him anytime.
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Old 03-24-2011, 08:41 PM
 
Location: Orlando FL
1,065 posts, read 3,679,925 times
Reputation: 424
AONE is spot on and I can't argue with his recommendations or information.

One thing though I have to add to make sure people don't jump into residential rental property thinking they will find these very high returns safely.
I have found a realistic 15% return on a rental property investment is not typically attainable. Unless you leave out property management fee's, a maintenance reserve, vacancy reserve, find a spectacular deal, and can leverage the property with ARM financing. OR find a very cheap property in a less undesireable area....and ignore higher likely vacancy and credit loss, and likely higher maintenance cost. OR you are factoring in unknown future appreciation and tax benefits that will differ from person to person.

80% of my business is working with long-term investors and for cash purchases in good area's the highest one can expect is 5-7%, and with positive leverage perhaps add 1-3% to those returns.

So remember when checking to make sure the numbers "make sense" always figure out exactly what numbers your looking at, what you consider the total return, when you get those returns, and how likely you beleive those returns will be. Numbers are numbers and they don't lie, but the way each person interprets them as to their own goals can be completely different.
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Old 03-25-2011, 05:41 AM
 
Location: Spain
17 posts, read 21,479 times
Reputation: 12
GregTraub, Thank you for your comments.

Quote:
Originally Posted by GregTraub View Post
Numbers are numbers and they don't lie, but the way each person interprets them as to their own goals can be completely different.
That is so true!

Quote:
Originally Posted by ;18429078
80% of my business is working with long-term investors and for cash purchases in good area's the highest one can expect is 5-7%, and with positive leverage perhaps add 1-3% to those returns.
As to my goal , those numbers are not worth the investment.
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Old 03-25-2011, 08:26 AM
 
Location: Orlando FL
1,065 posts, read 3,679,925 times
Reputation: 424
Quote:
Originally Posted by fromspaintousa View Post
As to my goal , those numbers are not worth the investment.
That is why real estate investment is not for everyone. I personally beleive it is the best "slow and steady" way to win the rat race but that is also likely because I understand the nuances of the investment and the risks so I'm more comfortable with the proposition.

Also keep in mind the returns I referenced are your cash on cash returns only while holding the property. Not including any appreciation of the property over time, and not taking into consideration tax benefits of real estate investment vs. other forms of investment. Remember, to always look at HOW the returns are considered and what you would consider important vs alternatives.
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Old 03-25-2011, 10:41 AM
 
Location: Spain
17 posts, read 21,479 times
Reputation: 12
That's right. The thing is that "slow and steady" is not want I look for for. I look for something that is not so slow and not so "in the long run" Plus I realize that for the moment the real estate market in US is quite unstable. Too much uncertainty about an investment makes it not a good investment.
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Old 03-29-2011, 05:11 PM
 
Location: Orlando FL
1,065 posts, read 3,679,925 times
Reputation: 424
When you find an investment that returns more than 8% without uncertainty, let me know!!!

I beleive the definition of investment involves risk (uncertainty) vs reward. The more a person knows about what they are investing in and it's market, the more certain an investment is to that person. That's why one of ther reasons warren buffet has done so well. He only invests in things he understands or a trusted advisor can explain to him, one of the main reasons he never got into investing in the crazy MBS's wall street was pumping out during the real estate boom.
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