Originally created Sunday, September 18, 2005
Landlord material?
Rental property can be lucrative investment
By PATRICE B. KING, The Times-Union
If you are like most people in life, trying to figure out a way to get ahead financially, look into the business of real estate.
“Rental property is a good way for middle-class people to accumulate wealth,” said Steve Calta, a Watson Realty Corporation Realtor, who also owns rental property.
The overall Jacksonville market is one that tends to appreciate according to several Realtors. What makes Jacksonville such a unique market is that there are so many areas that are good for purchasing homes for long term rentals and reselling.
High appreciation and low interest rates have made it both easy and lucrative to invest in real estate according to Tina Fader, a Vanguard GMAC Realtor and rental property owner.
“If the house is not good enough for me to live in, I would not put anyone in it,” said Sherri Glisson, also a Watson Realty Corporation Realtor.
There are very few poor areas in Jacksonville and its surrounding areas according to Calta.
Using the money that you have to work for you is one of the major points that Marjorie Smith, a RE/MAX Specialists Realtor and rental property owner, makes clear to both potential and established investors.
Smith speaks of being open to investing in many areas. She said the best area to purchase in is the area that works best for the investor.
Things a person should look for when looking for property is the cost of the property, what it can be rented or sold for and how much you need to put into the property.
Southside, the Beaches, the Intracoastal Waterway, East Arlington, Northside, OakLeaf Plantation and St. Johns County all are quite popular areas for home building, rentals and reselling. The north and west sides of town are popular in rentals, reselling and flipping, where you purchase a home, fix it up and sell it.
Calta wants his property to be within a 30-minute drive of his home. This allows him, if needed, to get in his car and go look at the property.
“Be careful of flipping homes,” Smith warned. “Make sure you understand how much work the house needs.”
Flipping homes is an added expense and it takes away from the profit margin that is made on the property.
“You make your money when you buy the property,” Smith said. “The money is not made when you sell.”
Smith said this is the one thing she warns all new potential and established investors.
An often overlooked aspect is being a landlord. Some investors only see rental property as an opportunity to make money. There is a major responsibility in being a landlord. The work often is rewarding.
A thorough screening of potential tenants will assist in the preparation of being a landlord. This allows you to see what their past rental experience is like, how their credit looks and what, if anything, is on their criminal background. How you approach your potential tenants is a reflection of what type of landlord you want to be.
Fader, whose first investment property purchase was 28 years ago while she was in college, said that with high appreciation and low-interest rates many homeowners are able to put their original home into rental service.
“Many homeowners are able to refinance or take a home-equity loan to facilitate the purchase of a new home without selling their current home,” Fader said.
Another aspect to rental-property ownership is the opportunity to save money. Fader’s most recent purchase was a townhouse. This townhouse has two of her college-age children living in it and paying rent. According to her, they are paying less than they would for an apartment. The money-making opportunity is that in three years she will sell the unit, splitting the profits with her children. On top of saving money on rent, she will be able to assist her children in purchasing their first rental property.
“In many situations, parents can make out a lot better financially than paying the costs of college dorms,” Fader said.
One of the resounding factors of advice given is that potential investors should work with a reputable and knowledgeable Realtor. This Realtor should understand and know the market beyond the knowledge that a new investor would. A Realtor often has the inside scoop on what is going on in the market and when. A Realtor also can match the investor’s needs and wants to what is available. The Realtor also can help you find property that might not stay on the market long because of being a great deal.
It also is recommended that potential investors own their own home first. This allows the future landlord to have an understanding of how the real estate market truly works.
The last token of advice given is to be careful of new subdivisions, condos and townhouses. Many builders have clauses in their contracts that place stipulations on resale. They may only allow so many investors or place a time limit on how long you must own before you can sell. Take the time to read the contract thoroughly and ask questions.
