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Being a distant landlord in never a good idea. I'd pass.
Never? Almost every successful individual I know does some distant landlording. It has its good and bad points and every landlord has bad decisions they wish they had not made, but each will tell you distance landlording is a must for success for 90% who do rental houses. Unless you are the lucky 10% in the best return markets stepping out a bit gets you better returns and better operating conditions. Now it may not be the best choice for investment #1, but as you get experience it becomes a very astute move to grow and to diversify.
There is quite a bit of difference with investing in Florida real estate and buying Florida real estate today. If you are looking to purchase a vacation home with a possibility of offsetting some of the debt through rental income, the time may never be better. If you long term goal is to show a profitable bottom line, it may take more years than you could ever anticipate (and it may never attain fruition).
When the real estate bubble burst in Florida, my personal vision was to purchase a "near beach" condo and rent it for the next ten years. The end result would be to retire to my place in the sun soon thereafter. The ultimate goal was a "revenue neutral" investment. Unfortunately, after the search began, our realization was that this was a poorly conceived plan in the foreseeable Florida real estate market place.
What we found were two types of Florida renters, the tourist and the full-time resident. We found a very competitive and limited tenant pool of full-time residents, who could consistently pay the rent, respect the property, and be without "issues" (pets, bankruptcies,criminal history, large families, etc.) . That would leave us with the tourists. Most of the condo associations had very specific and often restrictive rules about rentals.... some prohibited/ severely limited rentals, some required age restrictions, some assessed owners higher fees/penalties, some could assert immediate eviction if certain association rules are violated.... almost felt like Big Brother was telling us how we could use our property. To top it all off, we found that the "associated costs" of management of the rentals was absolutely ridiculous for what services were to be provided.
The OP jokes about spending his money on the Ferrari or the Florida rental. My answer would be that the Ferrrari might be the better investment. Assuming that purchasing a $120000 condo (cash) will eventually appreciate to a value pre-bubble is assuming a lot within the foreseeable future. In the meantime, we calculated our non-resident property taxes, association fees, utilities (A/C is never turned off when away), homeowners insurance, and general maintenance & repairs would be be very close to $10000 annually.
Competition is very keen in Florida among landlords attempting to find the best tenant(s) to offset the costs of property ownership. Some are reducing rent to unprofitable levels, offering added perks, and/or taking on the high risk tenants. There is a reason for the many short sales and foreclosures.....
There is quite a bit of difference with investing in Florida real estate and buying Florida real estate today. If you are looking to purchase a vacation home with a possibility of offsetting some of the debt through rental income, the time may never be better. If you long term goal is to show a profitable bottom line, it may take more years than you could ever anticipate (and it may never attain fruition).
When the real estate bubble burst in Florida, my personal vision was to purchase a "near beach" condo and rent it for the next ten years. The end result would be to retire to my place in the sun soon thereafter. The ultimate goal was a "revenue neutral" investment. Unfortunately, after the search began, our realization was that this was a poorly conceived plan in the foreseeable Florida real estate market place.
What we found were two types of Florida renters, the tourist and the full-time resident. We found a very competitive and limited tenant pool of full-time residents, who could consistently pay the rent, respect the property, and be without "issues" (pets, bankruptcies,criminal history, large families, etc.) . That would leave us with the tourists. Most of the condo associations had very specific and often restrictive rules about rentals.... some prohibited/ severely limited rentals, some required age restrictions, some assessed owners higher fees/penalties, some could assert immediate eviction if certain association rules are violated.... almost felt like Big Brother was telling us how we could use our property. To top it all off, we found that the "associated costs" of management of the rentals was absolutely ridiculous for what services were to be provided.
The OP jokes about spending his money on the Ferrari or the Florida rental. My answer would be that the Ferrrari might be the better investment. Assuming that purchasing a $120000 condo (cash) will eventually appreciate to a value pre-bubble is assuming a lot within the foreseeable future. In the meantime, we calculated our non-resident property taxes, association fees, utilities (A/C is never turned off when away), homeowners insurance, and general maintenance & repairs would be be very close to $10000 annually.
Competition is very keen in Florida among landlords attempting to find the best tenant(s) to offset the costs of property ownership. Some are reducing rent to unprofitable levels, offering added perks, and/or taking on the high risk tenants. There is a reason for the many short sales and foreclosures.....
Any time that other people will buy real estate for me, I take it.
I have a property in Dallas that I bought for $75K and it makes me $350/mo profit after property management and PITI. Doesn't sound like much. My goal is to have 10 of these, all paid off, in the next 10 years so I can retire on my $12,000/mo income. All of a sudden it's looking like a Winner!
I have an excellent property manager and sometimes I have expenses but the $350/mo has been paying these.
I don't really care what the housing market does as long as I get my rent and the $1100 rent is on the lower end of the market so not really affected by global dramas.
Any time that other people will buy real estate for me, I take it.
I have a property in Dallas that I bought for $75K and it makes me $350/mo profit after property management and PITI. Doesn't sound like much. My goal is to have 10 of these, all paid off, in the next 10 years so I can retire on my $12,000/mo income. All of a sudden it's looking like a Winner!
I have an excellent property manager and sometimes I have expenses but the $350/mo has been paying these.
I don't really care what the housing market does as long as I get my rent and the $1100 rent is on the lower end of the market so not really affected by global dramas.
Not to sound disrespectful, but you really cannot compare a Dallas rental, or a Pittsburgh rental for that matter, with the Florida marketplace. The rental populace is so much different there than virtually anywhere in the country, and the out-of state landlord has significantly more obstacles to overcome than what you are dealing in Dallas. The economy and tax structure of Florida is built around tourism. Everyone wants a bigger slice of what monies you garner from your rental property in Florida making it nearly impossible to attain the financial stability that you are attaining elsewhere.
hello all,
I have a question and would like to get your un-biased opinion on the matter...
I just turned 30, married, no kids.
I make 120k as an Engineer and have 87k in 401k savings (~100% stocks), 6 months emergency cash, another 15k company stocks, 150k equity in a 500k house, and my wife has some additional cash for emergencies as well. (~50k)
We have no debt. (other than mortgage)
I wanted to buy a condo/TH in Florida to rent out and pay off quickly. 2 bedrooms are going for under 100k and easily cover their own rent. my question is whether that's a good idea, or whether i have enough risk in my portfolio not to do that.
i would be hiring a property manager since i'm a thousand miles away in the DC area.
Please let me know if you can think of any tips/pointers.
Thanks in advance.
I think buying property out of state is kind of a bad idea. Ultimately it's still your responsibility even if someone else is managing it. Property managers have their issues, too.
My boyfriend has several properties out of state with various property managers and he is doing ok, but he still has to fly out of state for the weekend sometimes to check on properties, etc. I have another friend who lives in FL but has 2 investment properties in New Orleans. He can't find a decent property manager there and has had a lot of problems with tenants, etc. I think he's going to eventually lose those properties (although I hope I'm wrong) because he doesn't have the cash on hand to cover emergencies, vacancies, etc. Although unlike my friend, you have more cash on hand and seem much more level headed.
Ultimately, I guess the question is whether or not you have the ability to fly down to Florida if necessary if something goes wrong. I woldn't want that headache in a million years. I want my weekends to be MINE...but that's just me.
Never? Almost every successful individual I know does some distant landlording. It has its good and bad points and every landlord has bad decisions they wish they had not made, but each will tell you distance landlording is a must for success for 90% who do rental houses. Unless you are the lucky 10% in the best return markets stepping out a bit gets you better returns and better operating conditions. Now it may not be the best choice for investment #1, but as you get experience it becomes a very astute move to grow and to diversify.
Being a long distant landlord has never made much sense to me. I've known a few landlords that provided such lousy service to their customer, they might as well be living out of the country. Whether it's a house, condo, business... I want to see it, smell it, and be in total control of all decisions. I just don't think you can do this and do it well when you live in far away city. If we turn the equation around. I wouldn't rent from someone that I couldn't easily get hold of 24/7.
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Yep... Never... Not almost never... Just never.
