If you're a beginning investor interested in becoming a rental property owner in the Sarasota area, you've likely started to prioritize the research you need to make such a venture successful. Considering that you're working with incredibly valuable assets rather than penny stocks, the choices you make at the start are absolutely essential for your future success.
To help you secure a bright start—and a brighter future—as a growing real estate investor in the Sarasota rental market, we'd like to share some time-tested tips with future property owners from the perspective of an experienced Sarasota property management company.
As you begin forging working relationships with other industry experts (like reliable wholesalers, investing clubs, and turnkey renovators), you'll find that what we're about to share will be confirmed by those who have established themselves successfully in real estate. However, if you have yet to start building these kinds of connections, having this advice now can help you avoid some serious potential pitfalls that may make you want to quit investing before you see any returns.
Start With a Winning Rental Property in the Sarasota Area
One of the great real estate 'curses' of our time is the HGTV-popularized fix-and-flip housing shows. These types of exaggerated 'reality' television offerings have set many investors up for failure with notions that any flip can become a financial victory instead of a potential flop.
When you're first getting started as a real estate investor in the Sarasota rental market, it's more advantageous for you to begin with a guaranteed winner of a rental property rather than one that may require considerable 'elbow grease' and an additional cash infusion.
Many first-time property owners get dollar signs in their eyes when looking at the 'possibilities' offered by a below-market foreclosure or distressed property—without considering the workload and expense that lowered price reflects. Without the right research, these kinds of properties can quickly become a sinkhole for your funds with no success—or end—in sight.
Additionally, these kinds of properties can represent a difficulty when it comes to securing your initial funding—especially for investors at the very beginning stages of portfolio development. Dodge lemons like these by running your potential property picks past your trusted Sarasota property management company—and sticking to properties that represent acceptable returns and cash flow potential from the start.
Once your portfolio has some stability, you can consider returning to riskier investment opportunities like these. However, it's always better to build your initial foundation out of reliable single-family homes or multi-family properties that generate a profit before you pick a costly renovation.
Understand That What Renters Want and Need Is Different
When you're building out your dream home (let's say your dream kitchen, for starters), what homeowners want and what renters want are two very different things.
A renter's primary drives are affordability and location; they're looking for rental homes that will meet their needs on this front first. You might think, 'Of course, homeowners care about affordability for our mortgage payments too!' However, the level of investment in a property is completely different when you're a renter compared to a homeowner.
If you decide to equip your kitchen with the latest and greatest Viking appliances, for example, that's an investment in your home that you're making with serious respect for the long haul. If you're going to be using the same appliances for the next thirty or forty years, you may be more willing to spend the premiums it costs to equip yourself with the very best.
However, as a rental property owner, you now have to ask yourself: 'Will my renters be willing to pay those premiums?'
Yes, cooking with Viking appliances will make your kitchen rival that of the greatest of epicureans—and it will also likely drive away the vast majority of your potential renters when they look at the rental rate you have to charge to pay for it. This may be an extreme example, but it's easy to lose control of your budget on unnecessary and unappealing upgrades that will cost you more than the initial purchase.
Before you consider putting 'Entertain Gordon Ramsay in your own chef's kitchen!' on one of your rental property listings, curb potentially costly spending by working with a Sarasota property management company to discover what upgrades renters are actually looking for.
Screen Each Applicant the Same Way, Every Time
This is a big one, and it can prevent you from experiencing a lot of pain, frustration, and expense as a rental property owner in the Sarasota rental market if you get it right.
- Failing to thoroughly screen your applicants because 'They seem like nice people!' is a quick way to place a 'Serial Squatter' in your Sarasota rental homes.
- Failing to apply the same tenant screening practices across each application is a quick way to land in hot water with the FHA, FCRA, and ADA.
- Having to deal with either of the above can quickly get costly for you as the property owner—to the tune of hundreds or even thousands of dollars.
Nail down your screening process from the very beginning—before you start marketing to attract renters—and identify potential weak spots in your lease by going over details with your attorney or trusted property management team.
Keep in mind that when you work with a skilled Sarasota property management company, you can leave the entire tenant screening process in their hands.
Always Keep Learning More About Real Estate
A successful portfolio is always grown through having the right timing, the right contacts, the right funding, and the right investment properties—and all of that depends on the right research. This means it's always a good idea to continue learning more about real estate when you're putting so much capital on the line.
As you start developing more working relationships with industry professionals like full-service property management companies (whether in-state or abroad), real estate groups, other investors, and your attorney, you'll continue to learn more about what goes into developing and maintaining a profitable real estate portfolio.
A great place to go from here is to download our guide to real estate investing to learn more crucial tips about how to begin building a successful portfolio in the Sarasota area.