From Sarasota to Tampa Bay, the real estate market in Florida is vast to say the least. It’s also extremely lucrative, provided certain risks are guarded against.
This is the reason today’s post has been put together. It’s far too tempting for some people to read the latest news, and possibly discover a real estate scoop or bargain, and act upon impulse. Sometimes these decisions can come back to haunt investors, particularly if they have been used to trends in completely different areas of the country like Phoenix or New York.
Bearing this in mind, if you are set to embark on a real estate investment project, whether this is commercial, retail or residential, it’s time to prepare yourself accordingly. We have enlisted the help of Shaun Benderson, who knows the market inside-out and has read about every possible mistake in the real estate book. Let’s see what he has found out through his distinguished career.
A lack of tenants
You invest significant amounts of money in a property, so it stands to reason that one of the biggest risks is that this money is not paid back. Suffice to say, if you don’t have any tenants, this is exactly what is going to happen.
The result of this means that you are obviously going to have to cover all of the costs, without having any form of income from the property. In other words, you will be making a loss.
To mitigate this, it’s all about the initial groundwork. You need to ensure that both the area, and the type of property, is in high-demand. This basically comes to choosing an area with decent occupancy rates. Fortunately, most areas of Florida (particularly Sarasota) have this.
Having bad tenants
Something even worse than not having tenants, is actually having bad tenants. Sure, some might argue that at least you will be receiving an income, but if the tenants are particularly bad this might not be the case. Not only that, there have been some horror stories of the damage bad tenants can do to a property, so this is worth considering as well.
In a bid to avoid this, make sure you conduct the relevant checks before accepting a tenant. This includes receiving recommendations from past landlords.
One risk that is probably more apparent to inexperienced landlords are unexpected expenses. For most new investors on the scene, real estate investment is seemingly a simple equation. There’s a mortgage payment, which is hopefully dwarfed by the rental one.
Unfortunately, there are more costs to consider. You have to think about everything from renovation and maintenance, right the way to insurance. These costs can vary considerably depending on the type of property you are renting. It means that you really need to research the area you are buying in lots of detail, and ensure that there are not going to be any “hidden” costs which are going to blight your margins and ultimately make the project uneconomical.