Buying an investment property to rent can be a great opportunity yet there are a number of factors to consider before you submit an offer.
Leasing / Chris
Southwest Florida is full of investors that purchase property to rent. Doing so is a business so it is absolutely important that you consider a number of factors outlined below before committing to the purchase.
When calculating the return-on-investment for a rental property, you must take into account the Homeowners Association or Condo Association fees. Some fees are so high that they are simply cost-prohibitive when you compare the income from renting vs. the monthly expense. You simply can’t get a rent high enough in some neighborhoods to make up for the fees. The other factor to consider is the history of fee raises. If we look back a few years, have the fees been consistent or can we expect them to rise every year?
Some neighborhoods are in demand and vacancies are very low. A renter moves out and there’s a number that want to move right in. Other neighborhoods have many rentals on the market so you can expect a higher vacancy and consequently, less annual return as a result.
Many neighborhoods have cable television and high speed internet included in their quarterly fees. Some even include water! Imagine how powerful it is to tell a prospective tenant that cable TV, Internet and water are already included in the rent!
Investors make money on both the monthly rent and the price appreciation. Are sale prices in the community rising each year? Or, will we take a loss or break even a few years down the road if we decide to sell? Although we can’t predict the future, we can certainly see how much homes go up in price over time and use that as an indicator of potential price appreciation.
Every property in Naples that is governed by an Homeowners Association (HOA) or Condo Association will have rental rules. There are a couple of rules that must be examined before investing.
If you do not mind a tenant having a pet, pay close attention to the pet policy. For example, Pebble Shores in North Naples allows pets for owners. They do not allow a tenant to have a pet. You have to understand that if you disallow pets you shrink your pool of potential tenants.
This varies widely from community to community. Summit Place in North Naples allows only 2 leases per year and they must be 6 months or longer. There goes your seasonal rentals! Naples Continental allows 12 leases per year with only a 30 day rental! If you want to rent seasonally (or at least have the ability to do so), you’ll need to pay close attention to these terms.
Should you buy a 4 bedroom single family home or a 2 bedroom condo? It’s a tough decision on where to invest your money yet a good Realtor® will be able to give you facts to help you decide. Pulling prior rentals and looking at days on market and actual rented amounts will help you calculate a potential return-on-investment.
When I get phone calls from prospective renters, most will mention certain schools right up there with how many bedrooms and bathrooms they need. Although you still have a pool of potential renters that do not have school-aged children, buying an investment property in a good school zone is a great way to expand the pool of potential tenants.
Many renters have a list of amenities they desire when they call me to help find their next rental. For example, I’ve had people mention Pickleball. While most neighborhoods do not have this one feature, having a community that is amenity-rich certainly helps to find tenants.
If you buy an investment property in Collier County, you’ll pay far less in property tax than a similar home in Lee County. If you find a great unit in Lee County to invest in, will the expected rent collected be enough to justify the higher tax?
There is an interesting phenomenon that happens when neighborhoods have a lot of renters. The neighborhood develops a bad reputation and other prospective renters don’t want to go there. I’ve seen it happen many times. https://listingnaples.com/subdivision/the-enclave-at-naples is an example of a neighborhood I’ve had renters immediately disregard as it has a high percentage or renters. It’s unfortunate because the units offer a lot for the money yet renters will turn a blind eye to those sorts of neighborhoods.
Checking crime statistics in Naples is very easy. You can even see the calls the police receive for given areas. The sex offender registry is another resource renters will check. Having a safe neighborhood will keep your unit from being scratched off the list by a renter.