Fort Lauderdale Real Estate | Real Estate Articles

The Return of the Investment Property

The headline reads 1,000,000 homes will go into foreclosure this year, sincerely it’s horribly sad. Unless of course you’re a landlord, sitting with a vacancy, because it that case it reads a little different.

The headline then reads, US Economy Creates 1,000,000 New Tenants.

The perfect storm has brought back the viability of rental property, even to the Fort Lauderdale Real Estate market where two years ago it simply made no sense.

Let me first start with a Fort Lauderdale Condominium that I own. Two years ago it would have sold for about $650,000, the maintenance was about $750, and the taxes approximately $10,000 annually. The condo at that time would rent for about $2900 per month. For this conversation I am not including vacancy or an insurance provision, maybe just to make myself feel a little better !

Assuming a cash investment the condo would cash flow as follows –Annual Rent 34,800, Annual Maintenance -9000, Annual Taxes – 10,000 Annual revenue =15,000 The annual return on the $650,000 investment a miniscule 2.3% before depreciation, simply not enough to make sense especially when mortgage rates were 6.5%

Now let’s look at that same condo in 2010. Approximate selling price $375,000 (sorry I’m not selling). The maintenance has risen to $850 monthly; taxes have dropped to $7500 annually, and the rent has dropped to $2700. Assuming a cash investment the condo would cash flow as follows – Annual Rent 32,400, Annual Maintenance – 10,200, Annual Taxes - $7500, Annual Revenue $14,700. The annual return on the $375,000 investment is now 3.9%, better than the dividend on a GE stock. Still nothing to write home about, however, two issues arise.

The first is this is a luxury condominium not meant to be the perfect rental investment. I will show an example of what is going in true Fort Lauderdale rental properties. Secondly, based on the beach area location, we expect this part of the Fort Lauderdale Real Estate market to show prices increases. Year to date prices in this area are up 1.1% - Ok that means a 5.0% return …uhmmm that is sounding a little better. Especially if you plan to someday use the property for yourself in the future and the goal is just to get in on this depressed market.
 
Now let’s look at a property that is meant to be a rental and see the real reason we titled this article the “Return of the Investment Property”.

The Listing reads: (we did not write the listing )

“Great location, deep into Victoria Park. Legal triplex, that includes a 3 bedroom townhouse. 2nd floor of townhouse needs renovation. However, the first floor with patio is in very good condition. Townhouse has own laundry. # 2 has a stackable. Deck area nicely landscaped, very private. Rents are: Unit 1 $750,unit #2,1000, unit #3 $850. #2 vacant. If the 2nd floor of the townhouse was restored, rent would probably be $1500, maybe more. Dogs on premises don’t walk property. Thank you. $340,000 “

Annual Rent 37000 Annual Taxes 7297 Annual Maintenance Est. 6000
Total Cash Flow 23,707. Let’s assume a full purchase price of $340,000 which is what the property is listed for. This will hopefully leave the money to do the repairs needed. Now we are looking at a return of almost 7%.

No two properties are the same, but when we start to see 7% percent returns, in a market that many feel is starting to heat up, and when there are few places to earn similar returns, rental property is starting to look attractive again.

It may be the right to time to be looking at property in your market, and that’s just the time to call your local Realtor.

If Fort Lauderdale Real Estate is of interest to you www.FortLauderdaleGroup.com provides access to all local listings, and the team at Eric Miller and Associates of Keller Williams, Fort Lauderdale are always here to answer questions.

Eric Miller is an award winning Florida Realtor, salesperson and broker. His website Fort Lauderdale Real Estate provides the most complete buyer, seller and investor information for the Fort Lauderdale Real Estate Market.

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Eric Miller REALTOR®
Keller Williams Realty Professionals
3696 N Federal Highway, Fort Lauderdale, FL 33308
Direct: (954) 383-8170
Fax: (954) 630-7050
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