Overseas landlording... getting a property in FL

[80_six]

Hoping that someone can shed some light on my dreams...

I was playing with the thought recently to buy a property in south west Florida considering the market there right now. Nothing really fancy, somewhere around 200k and this would be financed with a mortgage loan. I'm sitting in europe and this would be managed by a property management company.

After reading some horror stories of long distance landlording the revelation came quickly that probably the best way avoiding most of the troubles would be a new or newer property.

Oh, I consider this as a long term investment, meaning that in some day (20+ yrs) I'd be able to retire there and enjoy all the benefits of the area. Well - I have no crystal ball so no idea if that's really gonna happen, but that's certainly the plan.

I have a couple of questions as well, somewhat disorganised, but I hope you can cope with it:

- condo (in a posh neighborhood) or SFR (in a golf course)?
- can I trust a prop mgmt company handling a new property?
- should I have a real estate atty to cover my *ss?

Chances are that details are missing so feel free to ask if you think it helps to create a comment on my post or answer any of my questions.

Thanks for all your inputs.

86

[HpRyder]

Quote:

Originally Posted by 80_six I'm sitting in europe and this would be managed by a property management company.86

Do you really think a PM will manage to your benefit? If you can find a competent one, they certainly will charge you an arm, a leg and a couple of fingers to manage a single unit. Typically they'll use rental advertising for your unit, to get prospects to buy from them or rent a unit from another larger account. This means yours will probably be the last unit filled. But they'll be charging you for the ads. They will charge you for everything, and I mean everything, they do to your unit and for you. Any tenant repairs will be with their people at their prices, done at least once, if at all. You had best do further research on absentee landlording. It is definitely not for a novice.

Quote:

Originally Posted by 80_six After reading some horror stories of long distance landlording the revelation came quickly that probably the best way avoiding most of the troubles would be a new or newer property.86

Wrong. The best way is to manage it your self. The worst way is to have someone you don't know anything about do it. Typically you will be paying a flat fee for each new tenant and a rent percentage while the unit is rented. Do you think they care if you have rapid tenant turn over? No, it means more money to them, especially since you pay any and all repair bills, legal fees and late penalties.

Quote:

Originally Posted by 80_six I consider this as a long term investment, meaning that in some day (20+ yrs) I'd be able to retire there and enjoy all the benefits of the .86

I don't think you will own the property long, nor will you be able to stand the frustration in dealing with an incompetent uncommunicative PM against who you have no effective recourse. To effectively manage the PM, you will have to know and keep current on all laws affecting renting. Do you have the time and resourses to do this? Do you think a PM keeps up on the laws? Even local landlords are typically not up to date and are supprised by what new laws require.

Quote:

Originally Posted by 80_six I have a couple of questions as well, - condo (in a posh neighborhood) or SFR (in a golf course)?.86

Owning a condo subjects you to any new covenants & conditions the active owners pass. Even though it may not be to you benefit. Unless you hire an attorney to attend meetings you will have no representation at these monthly meetings. Thus you will not be able to protest association fee increases, special assessments etc. Nor will you be able to handle owners harassment against your renters. The upside is you don't have to worry about outside maintenance.

With the SFR your PM will have complete control and you'll be at their mercy. You'll have little or no control and have to pay all the bills.

Quote:

Originally Posted by 80_six - can I trust a prop mgmt company handling a new property?.86

Sure you can trust them to handle it to their benefit not yours.

Quote:

Originally Posted by 80_six - should I have a real estate atty to cover my *ss?.86

You had better believe you'll need a really good real estate attorney. You had better consult him before you even start.

A good site for research on absentee landlording is bbs2 dot mrlandlord dot com

Again, absentee landlording is hard, fraught with obstacles, but can be done. It involves almost as much work as doing it your self. Good luck

[80_six]

Cannot thank you enough for your honest remarks! I had a funny feeling about the whole thing...
Although I've ordered the books for landlording mentioned in several other topics, I needed a quick review of my idea in the mean while before I get too attached to it. And I wasn't sure I'd get straight answers out of them for such a specific situation.

The way I see I've got basically two options: either I buy something for my own benefit without renting out, paying the mortgage, fees and insurances etc.

Or just forget about the whole thing.

[travelover]

Quote:

Originally Posted by 80_six ............. The way I see I've got basically two options: either I buy something for my own benefit without renting out, paying the mortgage, fees and insurances etc. Or just forget about the whole thing.

Why not just rent when you want to go to Florida? That way you can stay in different places and the ultimate costs will be lower.

[Nords]

Quote:

Originally Posted by 80_six The way I see I've got basically two options: either I buy something for my own benefit without renting out, paying the mortgage, fees and insurances etc. Or just forget about the whole thing.

Like Travelover says, there's no reason to buy when you can rent anywhere you want for as long as you want-- all the other absentee landlords who've been suckered into buying Florida properties advertise them on VRBO.com.

[80_six]

Quote:

Originally Posted by travelover Why not just rent when you want to go to Florida?

Wanted to take advantage of the current prices - figured, since I'd love to retire to FL, might as well just buy something now and make some money out of it until the time's up.

Old property was out of question right from the beginning. I didn't want to start with full scale tlc and/or go through all the trouble when not properly repaired.

Of course I wasn't expecting that PMs are unreliable.

[Fantasm]

80_six,

I own 5 houses in South East Florida (Vero Beach) that are investment properties (paid in cash).
my advice is to NOT buy a single house for $200k. the market fell really badly in Florida and you can get quite decent houses for under $100K each.
Getting multiple houses will reduce your liability and more than likely increase your actual profit.
If you can stretch your investment to $240K, then I suggest buying 3 houses @ $80K each.
These will rent for around $950/month, meaning you will bring in around $2,850/month of revenue from that $240K - more than you would bring in from a single houses rent that was purchased at $240K.

The 5 houses I have, I bought them at $80K each. They used to sell for $220K each.
My father invested and resold a ton (17~) of these during the boom, and one of the houses I own, was actually ONE OF HIS that he resold for $220K. The owner got foreclosed on, and I bought it from the bank at $80K!!!!!
The rents used to be $1400/month each. These are 3 bedroom, 2 bathroom houses with 1600~ square feet.

At the moment, they have appreciated to around $115K if I were to sell them now (as standard sales, non-bank owned). People are paying more for houses which are not REO's (bank owned).
If you buy them from the bank though, you can still get them for $80K.

I don't plan to sell mine any time soon, even with their newly increased value, as the monthly income is good enough not to want to -- plus I don't know what I would do with all the cash anyways. After property taxes & home owners insurance, I am bringing in about 8%-9% yearly returns on the current rents -- which will only go up, and so will my yearly returns!

Really good time to get in now... if for nothing because its a safe bet, you CANNOT build these houses for the price you buy them for. The insurance companies won't even insure them for under $130K because they say it would cost that much to rebuild. So IMO, my money is safe, I cannot LOSE money on it and since all of them are rented (and there is no shortage of renters), then I will also make profit no matter what.

The way to do it is not pay for brand new stuff if/when the house needs it. If you bought the house and its missing a fridge or an oven, don't buy it brand new! In South Florida there are a ton of places that sell very reduced but in great, like new condition appliances. Also, any wall painting, etc can be done by the very aggressively priced contractors in the area.
South Florida's economy was heavily based on home building / contractors -- so there are plenty of people to go around that NEED the work and will do great work, for low prices.

So you have good, cheap labor - good, cheap appliances - good, cheap housing - and a grip of renters.
What more do you need?

I am using a small real estate agency (brother&sister) to find renters. They get paid 1 months rent at the end of 12 months renters term as their commission (not upfront).
My dad helps me manage the actual houses if anything is needed -- I've only ever needed stuff done when I first bought the house (and he inspected it for me pre-purchase), and when a tenant moved out (though we usually pick good tenants and the most is possibly re-painting and carpet cleaning).

So, the hard part for you will be finding the real estate agency who you can trust to do good by you in picking the houses, and also help you with the initial preparation and any needed clean up after tenant move out.

[traineeinvestor]

I have overseas investment properties. The only reason it works is that I have friends and family in the location who can keep an eye on things for me. Absent that kind of support, I would only invest directly overseas if I could do it on a scale which gave the local property manager a strong economic incentive to align his/her interests with my own. With a single residential property (or even 2-3), they won't care that much and, as others have pointed out, their short term interests and lack of meaningful economic benefit will mean that you are likely to pay too much and get too little attention.

I have looked at own use second homes in a few locations and have always come to the conclusion that they are not worth the effort. The amount that I would invest in the property could usually be invested elsewhere and the gains on the alternative investment would generally fund a rental holiday of at least the same amount of time that I would spend in the second home without the headaches of ownership AND I woud not be bound to go to the same place every year (unless I really wanted to).

For some people (depending on citizenship, residency and the laws of the places involved), buying a second home can result in being deemed to be resident in more than one place - which can be a real pain when it comes to paying taxes.

[Ed_The_Gypsy]

Rent.

[Karloff]

As a South Floridian, I couldn't agree more with what has already been said here. But just to add my two cents... we own a 2/2 condo in a semi-fancy area by the beach in Broward County. Place was $400K in 2008, and is now worth $228K. Still over-priced, in my opinion. I wouldn't be surprised if it goes down another 10%. And you don't want to know all the horror stories I hear about long-distance landlords, tenant-related repairs, property tax hikes, and condo fees...

Definitely rent.

[Lisa99]

I also recommend against it.

While living in Texas we bought three rentals. All three are newer houses (<10 years old) and are in the higher end of the rental market with rents in the $1800 - $2500 range. We also have a property manager who does everything; leasing, maintenance...all we have to do is pay the mortgages and deposit the rental proceeds from the management company.

Sounds like a sweet deal and it was until we moved out of state.

When we lived in the same town as the PM we'd get a call before the handyman would go out to let us know that a repair had been requested. Nine times out of 10 we were able to get the issue resolved in a less expensive way than what the PM wanted to do.

Now that we're halfway across the country we have no ability to verify or audit what's going on and not surprisingly there are fees almost every month on our settlement statement for 'repairs and maintenance'.

We're now regularly losing money on all three houses so as each lease expires we're selling because it makes no sense to hold them and hope that they'll appreciate over time in this market.

My advice for what it's worth - invest your 'buy a rent house' money in whatever you think is appropriate (as long as it isn't out of country real estate) and rent when you get to Florida!

[DangerMouse]

We have a rental property in Hawaii and have had no issue with renting it. However, we rent at the higher end of the market, so we get the appropriate tenant who is actually a military Dr on assignment getting a monthly rental stipdend I believe.

We do intend to live in this condo eventually, however we totally aware of the pitfalls of renting. I think you have to divorce yourself from any emotions, it's just a thing and you can't get upset if it gets scratched.

Problem with buying at the bottom end of the market is I would assume you will get tenants who rent at the bottom end of the market.

[wrigley]

Quote:

Originally Posted by DangerMouse We have a rental property in Hawaii and have had no issue with renting it. However, we rent at the higher end of the market, so we get the appropriate tenant who is actually a military Dr on assignment getting a monthly rental stipdend I believe. We do intend to live in this condo eventually, however we totally aware of the pitfalls of renting. I think you have to divorce yourself from any emotions, it's just a thing and you can't get upset if it gets scratched. Problem with buying at the bottom end of the market is I would assume you will get tenants who rent at the bottom end of the market.

EVERYONE in the military that is authorized to live off of the military installation receives monthly housing allowance.

Mike

[wrigley]

My wife and I were stationed in Guantanamo Bay, Cuba from 1989 until 1993 and rented out a home in Virginia Beach, Va the entire time. Actually, from 1993 until present day we still rent out the home but live in Florida now. The property management company that you choose will make or break your experience!

Mike

[kcowan]

Real estate speculation is not for amateurs anymore.

Rent (rant)!

[tryan]

I own rental property in 3 states ... the furthest is a vacation rental and 2.5 hours away. Just far enough to feel like a vacation when we go ... but close enough to get there before the pipes freeze (power outage, furnace failure ...). I use a local property manager between rentals for: cleaning, linens, lawn mowing and trash pickup. But manage the rentals myself thru Homeaway and VRBO. We don't make any profit month-to-month; but the 28k I cleared last year carried the place for us (this year looks to be about the same ... lots of repeat customers).

Story time ... (stop me if I told this one before) a co-worker had a rental condo near Kilington VT; he worked in NYC. Had it with a property manager who was suposed to rent the unit short term (weekly/weekends). Every weekend of peak ski season he'ld call the manager to see if the condo rented ... "Not yet" he'ld be told. So finally - after too many "not yets" - he drove to the unit with his skis. Only to find the unit rented ! To add insult to injury it had been rented for weeks (to the same skiiers). This "manager" was pocketing the rents. He recovered NOTHING. Fired the manager and sold the unit.

[80_six]

Quote:

Originally Posted by tryan So finally - after too many "not yets" - he drove to the unit with his skis. Only to find the unit rented ! To add insult to injury it had been rented for weeks (to the same skiiers). This "manager" was pocketing the rents.

is there any way to avoid this kind of pitfall? maybe if a real estate attorney will be in charge of things?

btw. thanks very much for all the posts!

[tryan]

Quote:

is there any way to avoid this kind of pitfall? maybe if a real estate attorney will be in charge of things?

The only thing I know to do it screen hard on the manager position. Use some one who is well known to the area; check references. Ask for a rent ledger from a unit they currently manage. Look at the repair costs for that unit - and, of course: vacancy and management fees. Then don't expect anything different. If a group broke the TV and the glass on the wood stove ... expect they don't screen the tenants.

Homeaway and VRBO have really removed the rental piece from management. After calling half a dozen managers and hearing they want 20-30% of the rents collected, I knew there was a better way. Not to mention most run the units like hotels ... never saying "no" regardless of the length of stay or age of the tenants. Add to this that the manager needs to know when you're coming "so we don't rent it out" .. and they can run the thing like they own it!

[LeBlanc]

Just two cents from one who currently owns two properties in the US while living abroad due to military requirements.

I've made rental properties a major part of my FIRE plan. I have purchased undervalued properties in well developed and well taken care of areas. By purchasing at .50 cents on the dollar during the past couple of years (and still buying today), I continue to make positive cash flow on my properties as I've been able to put 20% down on the them during purchase.

I probably would not have been so inclined to do this had family not lived in the close vicinity of the properties I buy.

You have to make sure the math works for you. For example, my PITI is around $550 for my mortgages but the going rental rates are between $900 - $1000 and scheduled to rise over the next few years. As far as I'm concerned, it's a no brainer. Sure, many will argue about the times that you don't have renters or the headaches of repairs and such, well, it's not for everybody and I always keep upwards of $20K in savings to cover such costs. I still continue to max my Roth and will begin maxing my TSP (401K) again after I've purchased a couple more properties.

I use a property manager that was recommended by my real estate agent and the relationship is good. I continue to buy properties with the same agent and continue to use the management company. Again...I believe it is much easier to do with family or trusted friends in the area to help.