Wednesday, August 28, 2013

Single Family versus Condo

UPDATE 3/15:  View my analysis of this topic on my website.

I received a couple more calls from out of town buyers, asking about condos as investment property.  There's so much evidence that single family homes are a better choice for Sarasota real estate investors than condos, I thought I would lay out a simple analysis.

Fees:  No HOA in non deed-restricted single family neighborhoods.  You do not need to buy in a gated community for investment.  Condo association fees average $300 monthly and are predicted to increase with insurance and regulatory changes.   Advantage:  Single family home.

Management:  You will need a management company whether you choose single family home or condo.

Application:  Prospective tenants need to pay an average $100 application fee for condos.  No application fee necessary for single family homes.  Advantage:  Single family home.

Demand:  Condos do not usually permit tenants to have pets.  Tenants in single family homes can park multiple cars, boats, or RV's in non-deed restricted neighborhoods.  For these reasons and more, prospective tenants seek single family homes over condos.  Advantage:  Single family home.

Maintenance:  Tenants pay for lawn and pool maintenance for a single family home.  The management company you hire makes sure tenants are maintaining the home through regular visits.  You as the owner are still responsible for HVAC and appliances in either condo or single family home.  Advantage:  Single family home.

Insurance:  Single family home insurance costs for entry level up to $200K are $2500 to $3500 per year.  In addition to $300 per month avg condo fee, estimate another $100 to $150 per month for condo owner's insurance, required by most condo associations.  Advantage: Single family home.

Mortgage:  Higher interest rates for condo versus single family as investment property.  Condo associations must also comply with lender guidelines.  For these reasons and more, it's easier to sell single family as a resale in the future.  Advantage:  Single family home.

Warren Buffett is buying only single family homes in FL to hold and lease to tenants.  He's not buying a home he can eventually live in.  He's a billionaire, so why not emulate his business model?

Entry level single family homes don't have stucco facades with manicured lawns.  Entry level single family homes may not have glass mosiac backsplashes or stainless applilances.  Entry level single family homes may not have 18 inch tile or walk in closets.

Tenants for entry level homes aren't looking for these features.  They want a clean, neutral home in the best possible location.  

Best Sarasota Real Estate Deals

I just updated my website with a fresh crop of Sarasota's best real estate deals.

Here's the direct link:  www.davidbarrhomes.com/best_deals

In the latest hand picked listings, you'll find single family homes ranging from Nokomis to Longboat Key.

The properties I select have a strong track record of selling quickly.  My expertise in helping buyers submit competitive offers for bank owned property will help you take advantage of the best deals in a strengthening real estate market.

Monday, August 19, 2013

Sarasota Real Estate Investors: Protect Your Interests

I just had a phone call with a listing agent regarding a showing for a condo that was tenant occupied.

The tenant seemed to be setting the rules of when and how to show the property.  According to the listing agent, there was a "cat with an attitude" and the tenant was adamant that the listing agent provide access to all showings.

Of course, the predictable "can you show it later?" question came up.  Ugggh.  It's really unfortunate that the seller put a lot of work into renovating this particular unit, and it's difficult to show.

My advice to Sarasota property investors is to include a clause in your lease, making it crystal clear to tenants that they must allow showings and have the property ready to show with 24 hour notice.  Pets should be caged or put in a bathroom.

Restricting showings on your investment property hurts it's value and results in longer time on the market.

Reasons Why Listing Agents are Not Good Buyer's Agents

I recently had interviews with potential home buyers, and one of their questions was why hire a buyer's agent when they can work with a "local expert" agent who lists homes in a particular geographic area?

My primary answer is that these "local experts" may not have the critical experience of working with buyers in other geographic areas.  A experienced buyer's agent will show buyers different areas they may not have considered that meet their criteria, and contrast the nuances of these neighborhoods to give a home buyer the best range of options.

Listing agents who don't work with many buyers don't seem to understand buyer's needs.  For instance, today I'm scheduling 11 showing appointments for a buyer who needs to maximize their time.  Listing agents need to utilize the technology of the "Show Button" in our MLS.  If the property is a vacant REO, why do I need to call someone in Kansas City to schedule an appointment?  Put the lockbox instructions in the Showingtime program and make it easier to show your property.  If you need to be contacted directly by the buyer's agent, please put those instructions in the MLS, rather than "call office" that I just encountered on a particular listing.

And no, I cannot show your listing "some other time".  Listing agents should understand that many buyers often come in for a short visit and need to see as many properties as possible.  They don't have the luxury of time to see a property two or three days later.

Conversely, buyer's agents DO make excellent listing agents.  We understand competing neighborhoods, how to make it easy as possible to show a listing, as well as stage it for a buyer.

Tuesday, August 13, 2013

Busy Sarasota Real Estate Market

What's happening now in the Sarasota real estate market?

As little as 6 to 8 months ago, cash buyers were flooding the market, snapping up single family homes and condos in the $100K range.  Most of those types of properties were seeing multiple offers and bidding wars.

Now, this type of activity seems to have moved up market, but with a different type of buyer.

I've been showing single family properties in the mid $200's to low $300's to a couple of different buyers over the past month.  We are encountering multiple offer situations, and properties going under contract quickly.  Buyers in this price range seem to be looking for a primary residence, who have sold other property in an improving real estate market.

My advice to home buyers in this price range is essentially the same as I've given in the past.  Make sure you are ready with your financial information (proof of funds document for cash purchases or mortgage pre-qual letter for mortgage), and prepare to pay as close to list price as you are comfortable with.

We are definitely entering the early stages of a seller's market:  low inventory and high demand.

Saturday, August 10, 2013

Investment Property in Sarasota FL

Investor interest in Sarasota real estate remains high.

So why not follow the leaders?  Hedge funds, most notably Warren Buffet, are buying single family homes to hold, produce cash flow, and sell later when the property appreciates.  Why?  Condos are a dime a dozen, have increasing carrying costs (association fees), and do not appreciate as rapidly as single family homes.  Depending on the area, condos also compete with shiny apartment complexes with fitness facilities and resort-like pools.  It's harder to park a boat or a 2nd or third car at a condo, or have pets as a tenant.

I've been saying all along, single family homes are the best bet for finding a quality tenant quickly and holding for appreciation.

Appreciation is highest for single family homes as close to water (beach, bay, or intracoastal waterway) as possible.  It does not matter at all if the home has stainless appliances, a tile mosiac backsplash, travertine floors or a walk-in closet.  What does matter is the home you choose for your investment is clean, staged in neutral colors, structurally sound, and is covered by a comprehensive home warranty.  The most important criteria in choosing your real estate investment is location, location, location.

A true investor takes emotion out of the equation.  You don't have to want to live in the property yourself.

Vacation condos on Siesta or Longboat Key have strong seasonal demand.  Despite management fees, increasing association fees, and vacancy during the off season, these condos usually do pay for themselves, and appreciate well over time.  However, they are not the best choice for producing the regular cash flow most investors are looking for.

Conflict of Interest?

Is it a conflict of interest if you work with a buyer's agent, and you then make an offer on a home listed by another agent with the same real estate brokerage?

According to FL law, the answer is no.  In practice, the answer is maybe, especially in the luxury sphere.

Many real estate firms pride themselves on  getting "both sides" of the real estate sale, meaning different agents from the same brokerage represent the buyer and the seller in a transaction.  Some brokerages post their listings on their websites first.  Nothing illegal with this at all.  But does this serve the prime interests of a buyer, or the brokerage?

My philosophy is that a buyer who hires me to be their buyer's agent deserves an equal opportunity to view all properties that meet their criteria, not just those of my brokerage first.

Read more about buying real estate in the Sarasota area on my website:

www.davidbarrhomes.com/buyers

www.davidbarrhomes.com/buying_process

www.davidbarrhomes.com/home_inspection

www.davidbarrhomes.com/investors