Investing in Sarasota Florida Real Estate – lucrative and rewarding
Investing in Sarasota Florida Real Estate -lucrative and rewarding – only if done right.
“My problem lies in reconciling my gross habits with my net income.” Errol Flynn (1909 – 1959)
Let’s start with a definition of ‘Investment Property’ first: “A real estate property that has been purchased with the intention of earning a return on the investment (purchase), either through rent (income), the future resale of the property (appreciation), or both. An investment property can be a long-term endeavor, such as an apartment building, or an intended short-term investment in the case of flipping (where a property is bought, remodeled or renovated, and sold at a profit).” investopedia.com
The Sunshine State has (and will) always be a magnet for sunshine seekers. When life gets tough further north people start thinking about options – other options – different options – maybe better options. Some people simply buy a place in Florida and stay for good; some buy a vacation home and travel back and forth; some people buy a home, use it for a certain time frame and rent it out during the remaining time. Yes, and there are investors who have no intention to personally use the property, or only for a brief period. They are strictly focused on price, income, expenses, appreciation, and return on investment after resale of the property. However, there is a nice side effect: in order to manage the investment properly, most investors like to come down to Florida once in a while. How awful!
Why investing in Sarasota, Florida? Sarasota is one of the most attractive markets in North America
with almost 300 days of sunshine, a sub-tropical climate and temperatures averaging year-round 80°F/27°C. Florida is also an international hub thanks to excellent infrastructures, international airports serving South and Central America, Europe and the rest of North America. Dynamic cities and leading industries attract businessmen, young families, retirees and tourists from all over the world. Florida is also the second largest tourist area in the world. The state’s tourist attractions, such as Busch Gardens, Kennedy Space Center, Sea World, Universal Studios and Disney World, and the famous white beaches attracted almost 87 million visitors in 2011.
People from all over the world come because there are fun activities for everyone to enjoy. Simply relaxing at the beach, jogging, water-sporting, golfing, horseback riding, playing tennis…the sky is the limit. Many towns in Florida offer vibrant entertainment and some of the world’s finest shopping and international eateries. If Florida was an independent country, it would have the 20th largest economy in the world. Growth has been especially strong in business services, tourism, trade, transportation, aerospace, education, healthcare, construction and, of course, real estate.
The housing market in Florida and especially in Sarasota in on the upswing. Real Estate remains a good investment in Sarasota. Home prices are on the rise again. Will we see prices like in 2008 when a rusty garden shed sold for $400,000? Probably not. The new generation of homeowners/buyers has (hopefully?) learned the lesson, and if following generations want to repeat the learning process – well, that is up to them.
For those looking to buy a Florida property investment, the most attractive qualities is its unique tourist-driven rental market and tourists are flocking to Florida like never before. For investors who want to invest in short-term rentals, Florida is ideal because of the many tourists who prefer to stay in a house or condominium
There is a substantial long-term rental market in the Sunshine State as well. Baby-boomers are retiring in huge numbers, and a few want to live in a warmer climate like Florida. Some Boomers got hit pretty hard by the recession, and a significant number does not even have the financial means to buy a property in the Sunshine State anymore. If they want to feel the sun’s warm rays on their bellies they have to rent a place – at least for the cold winter months.
So, what are the options a serious investor is facing? Real estate can create returns in only three ways, rental income, tax deduction and appreciation of the property. In order to meet your goal you need to get all your ducks in a row first. You have to make decisions – and they should be done with a lot of thought. The key term to long-term success when investing in real estate is the location. The chosen area will later determine the type of person who will be renting or buying the property. You want to buy the right property in the right neighborhood on the right street, and this requires local knowledge.
Tourists from Europe like gated communities with pools and tennis courts. They have watched far too many Hollywood thrillers on TV, and now they believe that there is a bad guy waiting for them behind every garbage can. They want security while they are gone, therefore a gated community or a nice condo/resort complex is their choice. They prefer to be close to the beach and shopping, of course. They like to spend their hard-earned money for designer clothes at the mall. They won’t pay top dollars for rent if their rental property was out in the boonies.
It is a different story if you plan to rent to long-term renters (working families, etc.). They want to be close to schools or to the workplace. Stores need to be in a convenient location because they spent already half of their daily life in an office cubicle with no sun.
Since your investment model requires that you rent out the property while you wait for the expected increase in value, you will need professional property management to keep the property occupied and problem-free, which will cost you money again. Return on Investment (ROI) is one of the magic formulas measuring the success of the investment. The price of the property, the incurred costs, the rental income (and eventually the sales price) are important parameters. Costs, however, come from many sources. There is the initial purchase cost, annual property taxes, insurance, HOA fees, CDD fees, upkeep/repairs, and renovations.