Buying a home for investment

Asked by Larry Rivers, Cape Coral, FL Tue Jun 8, 2010

If you are buying a home for investment purposes what is the best chance of breaking even or creating some income. Would you suggest a single family home, condo or other and would you suggest long term rentals or short term rentals. What are the advantages of your suggestion and why wouldn't you go with a options you don't like.

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9
Brian Arendes, Agent, Cape Coral, FL
Fri Jun 18, 2010
Definitely SFR! In the Cape, you'd want to be on city water and sewer, it will be easier to rent out and you'll get more for the rental. This means you'd be restricted to properties in South Cape Coral, which is where all the action is anyway. Plus, North Cape is more remotely located, more driving time to shops and restaurants, thus less appealing to renters. Plus, North Cape will ultimately begin water and sewer expansion, so you'd be looking at $15,000 plus+++ in assessments eventually.

As far as short-term versus long-term renters, short-term vacationers will generally pay more, but may not be as reliable of an income source as the long-terms. Either way, get background checks and deposits!

Warmest regards,

Brian Arendes
http://www.for4closures.com
brian.arendes@floridamoves.com
"Florida Homes"-Free iPhone App
2 votes
Kurt Gearing, Agent, Fort Myers, FL
Fri Jun 18, 2010
Definately go for long term rentals. One deposit to return. One clean up after a year.

Definately a single family home. One would not have to deal with HOA fees or Increases in HOA fees when there is a lack of members making HOA payments for what ever reason and the big one being the number of foreclosures.

Did you go to our website I tried to spell out the advantages of using a self directed IRA. Only certain companies will allow you to do self directed IRA. So if yours does not you just move your IRA to one that does. Main advantages are the IRA buys the Rental home, all costs are paid from the IRA and all income goes right back to IRA. Plus you only pay taxes on the gain when you cash in the IRA.

One could get loans to purchase but loans are getting harder and more restricted or one could purchase with cash. But then any expenses are out of your pocket.

Got to run as we are having an afternoon thunderstorm. Here is website page I referred to: http://www.gearingforsuccess.info
0 votes
Mark Washburn, Agent, Cape Coral, FL
Wed Jun 9, 2010
There are a variety rental investment options in Southwest Florida that can break-even or potentially provide a positive return on investment.

The annual rental vs. vacation rental option has been a a topic that investors have wrestled with for many years. Due to various municipal and HOA restrictions, short term rental investments are generally better suited for destination communities like Fort Myers Beach or Sanibel.

For Cape Coral, my pick for rental property most likely to return an ROI is a duplex unit. Here is a resource to view duplex and other income properties in Cape Coral: http://www.greaterftmyers.com/idx/search.html?submit=true&am…

For Fort Myers, my pick would be a condo in a newer development with lower condo fees. Colonnade at the Forum is an an example of a community that fits this profile. Here is a resource to view active listings at the Colonnade at the Forum: http://www.greaterftmyers.com/colonnade-at-forum.php

Good luck with your search!
Web Reference:  http://www.gulfreturns.com/
0 votes
Kurt Gearing, Agent, Fort Myers, FL
Tue Jun 8, 2010
Larry,

I would go with a single family pool home. One can purchase them in Cape Coral for $125,000 or less. I would look for homes with city water and sewer and assessments paid. One can not build a pool home for this price. Long term rentals would be more desirable. Short term involves, advertising, managing, clean up, collection of deposits. With concrete block, stucco siding there is not a whole lot of outside maintance other than painting it once every 8 years or so. I would stick to light colors.

We currently have a rental property, (non pool home) rented for $850 a month. We are seeing about a 7% return on our investment. Certainly better than money market, IRA's and Stock market. Have you thought about purchasing with a self-directed IRA. All expenses and income would go to your IRA. Read about it in our website.

A condo in a development have association fee and regulations. There may be rental restrictions such as one rental every 6 months. Or one rental every 30 days. Rarely do you find condo associations that will allow weekly rentals except for condos on Sanibel or Fort Myers Beach.
0 votes
Megan Eister, Agent, Fort Myers, FL
Tue Jun 8, 2010
Hi Larry,

In Cape Coral, for a single family home, I like off water POOL homes. There is a strong demand for a pool home on an annual rental basis. I also believe many pool homes on the market are still priced below replacement costs, so there is probably appreciation.

I also like Condos in Fort Myers. With a Condo, your short term rentals must be in compliance with the association's guidelines for lease limits. Annual rentals in Fort Myers in some of the newer Condo Developments are a desireable rental product. Especially, if you purchase a unit as a short sale or a foreclosure in a community that offers reasonable HOA fees. I also think Condos are typically easier to manage, since the association takes care of the exterior. Condos are 100% depriciable, too.

Seasonal/Vacation rentals require more management and should be in great condition, or you won't have repeat bookings. True, they bring in higher rents. I am not against seasonal/vacation properties. In my opinion, annual rentals are easier to manage. Especially, if you plan on doing property management on your own.

In summary, I like Cape Coral off water pool homes and Fort Myers Condos in newer developments that offer lower HOA fees for annual rentals. If you would like to see some income scenarios, email directly at info@floridawestshorerealty.com with your goals.
0 votes
Don Tepper, Agent, Burke, VA
Tue Jun 8, 2010
First, determine your objective. And while it may be clear in your mind, it's not clear from the question. For example, you ask about buying a home for investment. There are 3 possible goals: (1) Cash Flow, (2) Instant Equity; and (3) Appreciation.

The three are not mutually exclusive, but you may find it difficult to get a good balance of all three.

Let's consider each:

Cash Flow: This is mandatory. And so your statement about "best chance of breaking even" worries me. First, don't take chances. Know your numbers going in. Second, don't ask about your "best chance of breaking even." There's no cash flow in breaking even. So, regardless of how much emphasis you put on points 2 and 3, your question must be "How do I find a property that will have a positive cash flow?"

Answer: You work the numbers, keeping your monthly outlay low and maximizing your income. You keep your monthly outlay low buy buying right--not overpaying--and having financing or an arrangement that keeps your costs low. In fact, you might not even have to--or want to--buy. You might be able to rent on an annual (or even multi-year) basis, then sublease on a weekly basis. You'd want to check all appropriate regulations and make sure the lease you write permits this. But that way, you could get a nice positive cash flow simply by being an intermediary and marketing the property you're renting. Again: Check all appropriate regulations. And that's just an example of one of the ways you could do it without buying. Another way: Lease-option. You'd do the leasing end the same as described above, but with the option you could take advantage of any appreciation.

Instant Equity: You buy at a below-market price. You still need positive cash flow, but now you're building in some paper profits from the beginning.

Appreciation: This is a gamble. Unless you plan on holding for 15-20 years or more, don't assume there will be appreciation. And even then there may not be. Folks who bought in Detroit or other areas of the Rust Belt 20 years ago often haven't seen any appreciation. Appreciation is the frosting on the cake. Now, by choosing the right property in the right area you can increase your chances of appreciation. But I know plenty of investors who are making lots of money on properties that aren't appreciating at all. They'll buy an urban rowhouse for $30,000, then rent it out for $650 a month. They don't care if its value goes up a penny.

Look: I know you were hoping for an answer like: Buy a 3/2 rambler, then convert it to a short-term rental. But that's really not the way to look at it--not if you're really looking for an investment.

Hope that helps.
0 votes
Tony Vadala, Agent, Fort Myers, FL
Tue Jun 8, 2010
Larry,

I could go on and on about the best way to invest. I have posted many investor tips on my site. After you read them you will be able to make a rash descision on which way to go.
http://www.sellcapecoralflorida.com
http://www.capecoralforeclosurelist.com

Tony Vadala
0 votes
LLoyd Nichols, Agent, Fort Myers, FL
Tue Jun 8, 2010
For rental investment purposes: Seasonal rentals usually bring in more income than yearly rentals, but a yearly rental may be more stable. If you go the seasonal route, you will wish to purchase a property with good amenities in a desirable location, i.e., near the beach or on a golf course, etc. As far as single family home versus condo, there are pros and cons. With a condo, there are usually community amenities such as pool, fitness center, tennis. However, there is a also a condo fee for these amenities which is not the case with a single family home. A single family home with a pool is also a good option for rental investment. Just a few thoughts. For specific investment properties that may interest you, please feel free to drop me an emal or call and I'll email you the properties.

Lloyd Nichols
Sandals Realty
Realtorlloydn@aol.com
239-849-3064
0 votes
Bill Eckler, Agent, Venice, FL
Tue Jun 8, 2010
Hi Larry,

Purchasing property as an investment should include consideration of the following:

1. Price of property and deposit size

2. Desirability of the area...do snowbirds find it attractive?

3. Rentability, does the home meet the needs of a common renter: safety, amenities, convenience, etc.

4. Expense associated with ownership: HOA fees, taxes, maintenance, insurance etc.
0 votes
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