Fort Lauderdale was recently picked by Forbes magazine to be one of the best places to invest in real estate. Fort Myers, Orlando, Sarasota, Tampa, Jacksonville, and West Palm Beach also made the list – giving Florida seven cities out of the top 20. Nerdwallet (a financial news site for nerdy Millennials) weighed in with a different set of cities and criteria, promoting diverse cities like Doral, Bal Harbour, Marianna, and Winter Garden. Becoming a landlord to a small investment property in a resort area can be a very appealing idea. It allows you to buy your potential retirement home, acquire a vacation home, and make some money while you do it. The reality of being a landlord – and in some cases a homeowner – is somewhat harsher.
Don’t Count On a Condo
The days of flying high as an air B&B entrepreneur have come to a screeching halt for many in homeowners associations. Issues of insurance, rowdy renters, and full-time residents are putting the brakes on what was the rental equivalent of the Wild West. Some condo boards and homeowners associations are outright prohibiting short-term rentals like air B&B or VRBO, or mandating a certain ratio of resident homeowners to renters.
More Tenants, More Problems
Getting the wrong tenant into your rental property can be worse and more damaging than termites. Individuals are often poorly equipped to handle disputes under landlord/tenant law. While delegating the task of finding and screening tenants to a property management company can seem like a way out, the fees can take a chunk out of your rental income. Additionally, if you are renting a home, you need to come to an understanding with the tenant over who will be doing the yard work and maintenance. A property management company can handle this as well, rather than leave it to the tenant who may or may not.
Your Vintage is Someone Else’s Dated
Rental units also suffer from depreciation. Units experience wear and tear from daily use, and need upkeep and updating to retain their value on the rental market. You might think that the burnt orange bathroom suite and avocado green kitchen with metallic wallpaper is retro and cool, while other people are going to look at it and think “grandma’s house.”
Yes, There are Taxes
Rental income is taxable on your federal return, and maybe taxable on state income taxes. For the most part, vacation home owners don’t take in enough consistent income to have much liability. However, if you are doing short-term rentals, you may find that you are obligated to collect fees that accrue to in keeping establishments. In Fort Lauderdale this is a tax of 11 percent – six percent to the state and five percent to the county.
As you can see, there is a lot more complexity to investing in property to lease than you may have originally thought. Talk to us about what you are looking for, and what your expectations are. We can find the perfect investment home for you.