Landlords have been taking it on the chin in recent years with skyrocketing property taxes (don’t even get me started), rising insurance due to a bad run of luck with hurricanes and falling rents due to rising inventory from owners who cannot sell and are looking to the rental market for relief. Now the government is looking for the most convenient ways to boost their budgets.
The local and state governments are in crisis mode looking for ways to balance the budget and with the slower economy causing a decrease in tax revenues, the push is on to find ways to increase revenues.
Most of the fees were relatively small so as not to gain much attention, but they really socked it to landlords by increasing the cost to file evictions by 400% The cost for filing evictions has been $75 for the past twenty years, but now as a result of this bill, the cost for eviction filing will become $265.
I am a member of the Florida Association of Residential Property Managers who joins with the Florida Apartment Association to lobby the state in regards to issues that effect leasing of residential properties. In fact, they just met with legislators last month and were completely in the dark about this bill. By the time we found out about it and started contacting legislators it was already a done deal.
When will times get better for landlords? I believe that when the sales market begins to stabilize and property values find support, many of the owners who never intended to be landlords, but were stuck with properties they could not sell will begin to unload their properties. Then, with a reduction of supply and hopefully an increase in demand as the local economy rebounds, we will finally begin to see rising rent rates. But in the mean time watch out for government carnivores seeking new food sources.
What Does It Take to Get a Property Rented These Days?
That’s a great question and getting the answer is like nailing Jello to the wall. It is allusive at best and constantly moving. That’s the short answer. The more reliable answer is strong marketing and offering a superior value.
Strong Marketing: Fish where the fish are.
I read a column in the
According to the fishing guide, if you have not gotten a hit after 30 minutes, move on. Well to bring this back around to property management terms, if you are still placing ads in the weekend paper thinking that people are circling your ad and making calls to get info, you will just drown a lot of expensive bait. Tenants these days are sitting in the comfort of their home any evening of the week looking at pictures and map locators on their computers. They can see if the kitchen is updated or whether there is tile or carpeting. They can conduct a Virtual Drive By and weed out the 80% of properties that will not work for them. That is why we have increased our marketing allocation to internet sites significantly over the last few years. At last count we were using 7 or 8 different sites and looking into adding more.
In addition to choosing the right advertising vehicle, another aspect of strong marketing is pricing and condition. Since the market is constantly in flux and is whipped around by the real estate market in general, we have to be light on our feet and ready to change direction quickly. If in two weeks we are showing that 300 people have viewed a listing online, but we have had few contacts and little action as far as showing the home, we have to have our good listening ears on. The market is speaking to us. Its time to reduce the price by 5%. It is critical to make this evaluation every two weeks. The second worst thing to have happen to a rental property (1st by far is a bad tenant) is having a property sit empty and costing the owner money every month.
You would be surprised to know how many properties are sitting vacant on the market for month after month. Some owners and Agents have an attitude that says “I have gotten X amount in the past or My Realtor told me it was worth Y so I am not going to give it away. If I price it too low, then I will only get tenants who can’t afford it. (Wrong – the tenants who budget their money and intend to pay their bills are know where the best values are).
Its like the fisherman who stays in the same place on the shore using the same bait he has used for 20 years and belives the fishing is terrible.
We will cover Property Condition in a future article.
IS IT A GOOD TIME TO BUY?
Are we in a free fall, or is this a great opportunity to add another property to your real estate portfolio? That is a good question. Noted financial advisor Dave Ramsey (nationally syndicated radio talk show host and Fox News contributor) recently said in
In addition, last week I was at the national convention for the National Association of Residential Property Managers (NARPM), and heard a talk given by Paul Brewbaker, Ph.D., Chief Economist for the Bank of Hawaii. He stated that despite the current financial upheaval, it appears that we have seen the low in the real estate market and he sees considerable improvement by 2012.
Interest rates are near historic levels and prices have fallen to 2003 levels or lower. Most properties on the MLS are still priced too high, but I am seeing investors moving back into the market if they can find the right deal. Whether foreclosure, short sale, forced sale or if the seller has owned the property long enough to have sufficient equity that they can afford to price it at the current market, there are some great deals to be had. The key is to find the values out there and conservatively estimate your rental income. I can’t tell you how many investors have come to us in the past few years having purchased a property with unrealistic assumptions about rental values Usually they were assured that they could get an unrealistic amount for rent by uninformed Realtors. These people are hurting.
An example of a recent transaction we were part of was a small 3/2 with pool which sold for $140k. This property could conservatively rent for $1100/month. With 20% down, your mortgage payment for a 30 year note at 5.75 would be $655. P&I.. If taxes and insurance were $1800 & $1200 your total expense per month would be $905. Not a bad return even before appreciation. This is my style of investing. Low risk and good upside potential on a property which will pay for itself. I do not like having to add additional funds for repairs or taxes. Another investor I know paid 365k in 2005 for a 3/2. That same home is now on the market at 225k. (Can you say “On Sale”?)
No one can say for certain that prices couldn’t fall further, but with the consistent appeal of Florida sunshine and with Baby Boomers nearing retirement, most experts believe that we are just in a deep correction from an over heated market of the early 2000’s. Warren Buffet said in a recent interview “I believe you should be greedy when everyone else is fearful, and fearful when everyone else is greedy”. Five years from now, I believe we will look back and wish we had added more to our real estate portfolio in 2008-2009.
If you would like to look into the possibility of acquiring additional properties, let us know. We are compiling a list of good properties that we would be happy to help you purchase.