So you have purchased a great South Florida income property. Congratulations! Now comes the task of making your investment work for you.
Income properties in South Florida can be leased to someone local or rented out as a vacation property or short-term rental. Either way, they require an investment of your time and resources, beyond the initial purchase.
To keep the property profitable, it is important to have a plan in place. As an investor myself, I have developed best practices for keeping income properties from consuming too many resources over the life of the investment.
Here is my complete guide for keeping your South Florida income property profitable.
Anticipate and reduce expenses
Before you start collecting rent, create a plan for the property’s expenses. Too many investors count on every dollar rolling in as profit, without calculating any maintenance costs or working to reduce those expenses ahead of time.
Remember what I tell my clients: For a foolish investor, all expenses are unanticipated. A wise investor includes even unforeseen costs as part of her business strategy.
Create a schedule for repairs
The first step to increasing the profitability of your South Florida income property is to assess the property thoroughly. Your goal is to anticipate needed repairs and budget for them before they cause major disasters. For example, it’s better to fix an old toilet sooner, rather than pay for water damage after it breaks.
Hopefully, a property inspection was a part of the purchasing process. This will give the best starting place to know what repairs are needed immediately and in the near future.
Recently, I have seen many investors skip the property inspection process in order to make their offer more competitive. This unfortunately is a reality in the tight seller’s market in South Florida. If that has been your experience, I would recommend you hire a professional to inspect the property after the sale has closed.
Once you have a good understanding of the state of your property, create a schedule for repairing and upgrading it over the timeframe you anticipate keeping it. Will the home need a new roof in five years? Estimate how much that will cost now. Do you want to upgrade the kitchen during next year’s off season? Start budgeting for that upgrade today.
Research the property taxes
The state of Florida does not have income taxes, which is a draw for new tenants moving into the area. However, that means you can expect to pay a good deal of property taxes on your Florida income property each year.
Research the local property tax rate. Keep in mind that often the county and the city will levy separate tax rates, both paid through the county tax appraiser’s office.
Even if you have a professional to prepare your taxes, I would seek out the advice of a local accountant. Someone who is familiar with the local tax policies may help you reduce your tax burden.
Additionally, many local governments in South Florida offer incentive programs if you make improvements to a property. Contact us at Royal Empire Realty for more information about capitalizing on these local programs.
Anticipate monthly costs
Finally, you should have a good idea of what your income property will cost on a monthly basis. Of course, you should invest in good property insurance to protect against hurricanes and flood damage. If you live outside of South Florida, here are some other costs that you might not consider.
Many single-family homes in Florida are part of a homeowner’s association, or HOA. Expect the association to levy a monthly or quarterly HOA fee.
And if your property is part of an HOA, you can expect to maintain a higher standard for the property’s outside upkeep. In South Florida, grass needs to be mowed all year long, and a heated pool can stay open throughout the year. Budget in a monthly landscaping costs and pool upkeep, if the property has a pool.
Finally, due to the warm weather, South Florida pests have been known to be a year-long problem. Monthly pest control can go a long way to maintaining your investment and keeping tenants or vacationers happy.
Based on all the expenses you have outlined, determine your rental rates, either for the year or per day.
Establish professional standards
Thinking through your policies and creating professional standards will go a long way to obtaining and keeping your desired tenants.
I often recommend that my investors hire a property manager to handle maintenance issues, tenant turnover and unexpected repairs. This is especially true for investors who are out-of-state, who manage more than one income property or who rent out even a single property on a short-term basis.
It can be tempting for new investors to take on a do-it-yourself mentality. However, your job is to manage your investment in the most time-efficient way possible. A laundry list of minor property concerns can easily distract even the most focused investors from their big-picture goals.
If you are renting the property out for vacationers, consider how you will transition from one booking to the next. Along with thorough cleaning in between renters, you will need a policy for laundering towels and sheets and transferring the key to the property, to list a few examples.
A solid lease agreement, reviewed by a lawyer, is vital to maintaining your property to your established standards, no matter the length of the intended stay.
However, for vacation renters, it’s important to add extra layers of communication, since they are less likely to review the lease thoroughly. If the city needs emptied trash cans removed from the curb by 6 p.m., for example, be sure to explain that to your short-term renters a couple of different times.
Determine your ideal renter – and go after them!
Now for the fun part! Once you have made the necessary preparations, you are ready to pursue new renters!
Your marketing strategy may vary depending on the type of income property you have purchased. A luxury vacation rental may merit its own website and word-of-mouth referrals.
Or a plethora of rental listing websites will help your single-family home to get as many views as possible. Consider Rent.com, Avail.co, Apartments.com and Zillow, to name just a few. Sites like Craigslist and Facebook Marketplace may help you target specific locations.
Local Realtors who specialize in rental properties can offer tailored advice. Additionally, some property management companies can also help you keep the property booked.
For local recommendations or to find your own South Florida income property, Royal Empire Realty is ready to help build your Empire!