Advice on buying property for rental purposes (Sarasota, University: real estate, apartment)

[Billa68]

Hi everyone

We live in Georgia and our son is about to start at Lecom Dental school. Rather than have him rent, I was thinking that maybe we can buy a townhouse or an attached villa, which he can share with other renters. The plan would be to use this property as a rental property after he graduates. The budget is about $250K.

I have been looking at properties at Lakewood ranch, Del Tierra, and Creekwood townhomes - all not too far from Lecom. I have been primarily looking at properties 5 years old or newer.

So the question is - does this strategy make sense at all? Any opinion on the long term rental potential? What to watch out for, etc.

Thank you.

[Sunshine Rules]

My first suggestion is to check with each community you are considering to see what rental restrictions are applicable as all of the newer communities do have some sort of rental restrictions.

The next thing is to consider how you will manage a rental from out of state. You will probably want to consider hiring a local property manager to handle the tenant screening, leases, maintenance, emergency issues, etc. So I would suggest checking into property managers as to fees, etc.

You'll want to know the rental rates within your targeted price range/neighborhoods so that you have a good perspective as to market rental rates and demand for rental units within your targeted price/area. Keep in mind that there have been at least 8 rental apartment communities built in the Sarasota - Lakewood Ranch area in just the past 3 years, with a new one under construction as we speak on University Parkway. I would suggest looking into the rental rates of the newer, local apartment communities as well as that may be your main competition for tenants. As a buyer you will be looking for a monthly rental rate that will cover not only your expenses (including mortgage, if applicable) but also give you a cushion for repairs and vacancies. Some experts say that cushion should be about 20%.

It helps to put together a spreadsheet for comparing properties, one in which you can factor in things such as potential annual income (minus vacancy rate), expenses such as insurance, condo fees, property taxes, maintenance/repairs, mortgage (if applicable), appreciation/depreciation, etc so that you can calculate your net operating income and return on your investment. There are sample spreadsheets (sometimes called a property investment calculator) out on the Internet that you can use as guidelines in setting up your own. Doing a spreadsheet on each property you are considering will help you determine if that property will give you enough of a spread between income and expenses to meet your goals. Many investors in rental real estate target a return on investment of 5% - 7%, but I have come across investors that target a higher yield such as 10%.

Before you write an offer, decide how you wish to take title. Many investors set up an LLC (limited liability corporation) to take and hold title for investment properties rather than putting them in their personal names. There are advantages and disadvantages to both, which your tax advisor and attorney can go over with you.

[Billa68]

Thanks for the great advice on what to be on the lookout for when buying a rental property. I will check out rental restrictions on the properties.

Any particular advice on which has better long term better rental potential - lakewood ranch vs Del Tierrra or Creekwood.

[Concert D Major]

Wish I was born into this family.

[Ladywithafan]

Originally Posted by Billa68

Hi everyone

We live in Georgia and our son is about to start at Lecom Dental school. Rather than have him rent, I was thinking that maybe we can buy a townhouse or an attached villa, which he can share with other renters. The plan would be to use this property as a rental property after he graduates. The budget is about $250K.

I have been looking at properties at Lakewood ranch, Del Tierra, and Creekwood townhomes - all not too far from Lecom. I have been primarily looking at properties 5 years old or newer.

So the question is - does this strategy make sense at all? Any opinion on the long term rental potential? What to watch out for, etc.

Thank you.

Check the association documents for rental restrictions; many will allow a "family" but not individual rented rooms. Also, due to heavy investors, the documents of many have been rewritten with clauses as not to allow rentals until ownership of two to three years. Depending on the investor/rentals, after 51% you can not get a mortgage & must be a cash buyer within associations.

[Veniceman]

You might want to have any property you buy checked for radon. Some landlord here in Venice got caught up in an expensive lawsuit over radon gas. I would recommend getting the test done prior to signing any purchase deal.

[Sunshine Rules]

Originally Posted by Billa68

Thanks for the great advice on what to be on the lookout for when buying a rental property. I will check out rental restrictions on the properties.

Any particular advice on which has better long term better rental potential - lakewood ranch vs Del Tierrra or Creekwood.

Lakewood Ranch would probably be the better option, but you'll have to factor in CDD fees in the property taxes for most properties there. Del Tierra by DR Horton is a nice community but is further out from Lakewood Ranch. Creekwood is convenient to LWR and I-75 but you'll want to pay close attention to traffic noise from I-75 when you visit as the community backs up to I-75 on the east side. Some of the buildings are more impacted by traffic noise than others.

[Tommygphotos]

We live in Creekwood and loooove the neighborhood. Not very exciting for a 20-30yr old. I'm 45 and we are by far the youngest around.
LWR is great for investment reasons bc it's exploded but only goi to keep growing

[photoman_6]

i think your biggest problem is going to be rental restrictions on property documents. Many communities limit the amount of time per year you can rent out, or prohibit renting within a few years of buying, etc.

[Sunshine Rules]

All condo communities are going to have some sort of rental restrictions. Some allow minimum 1 month rentals, some require 1-2 years for a lease, some require a specific time period of ownership before you can rent out a unit (to discourage investor buyers). All will have an application process for permission to lease -- some will also require tenants to have credit checks, still others background checks for felonies. As I said, it varies widely. And those restrictions can and do sometimes get changed. Which is why it is important to see the condo docs regarding rentals BEFORE making an offer if you plan to rent out the property at some point in time.

The OP did not ask about Tara, but there are several condo communities there built after 2000 that are nice block construction buildings in well maintained communities with more reasonable rental restrictions.