It’s never been easy to be a landlord.
I thought I was ready for the challenge when I purchased a new rental home in Port St. Lucie, Florida in 2005. After three years of high taxes and insurance, declining prices, and foreclosures, I thought I’d seen it all. Nothing could have prepared me for what I faced when my most recent tenant moved out in August of 2008 as the financial crisis worsened.
I thought I was up to the task when my tenants asked if they could terminate their lease in August of 2008 on my Port St. Lucie rental home. After all, I’d always been able to find new tenants before without the help or expense of a realtor. Worst case I thought I would miss out on two months rent. I couldn’t have been more wrong about that.
I was determined to stay positive and to get this home back on the South Florida rental market as soon as possible. Before I met the tenants on August 29th for the handover, I had already purchased two on line advertisements, priced the monthly rent at the average of my competition, and the calls were already starting to come in.
My spirits were even higher when I saw that the tenants were leaving the property in excellent condition. It was extremely helpful that I have the best girlfriend on the planet who was able to re-paint this home from top to bottom in only 3 days. Within only two days of re-taking possession of the home, we were already showing it to prospective new tenants.
My confidence in my own ability to rent this home quickly, faded almost immediately. The South Florida real estate market was already in turmoil suffering from both low home prices and low rents. That was made significantly worse in the fall of 2008 as many financial institutions teetered on the brink of collapse. Despite that fact that the calls continued to come in, it didn’t take long for weeks to stretch out into months.
There is a happy ending to this story but it is not a quick one. The home finally rented to a great family who started a new lease on February 1, 2009 – It took me five months of continuous daily marketing to finally get this home rented. Those five months without a tenant cost me thousands of dollars in lost rent and in extra utility bills.
As a Florida landlord who continually wants to do things better, I pay very close attention to the marketing methods I use and how effective they are. But instead of talking about what forms of rental advertising work the best, I’d like to share with you statistics that I collected over these five months of trying to rent the home – information that provides the real truth about just how miserable the South Florida real estate market really is.
There were a total of 106 leads that came in through either phone or email where someone expressed an interest in renting the home. That’s about one lead per day for 3 out of every 4 days. Out of those 106 leads, 59 of them vaporized for no apparent reason, so let’s focus on the remaining 47.
About 36% of the remaining prospects didn’t want to pay the two months of security deposit I was asking for. Many stated that they had not been required to pay any security where they were currently renting. This was very predominant in St. Lucie County. Callers from Dade and Broward County were used to the two month requirement as were those who called to inquire from outside of Florida. Smart Florida landlords know that security deposits are an essential requirement and that even with two months security there is still a good chance of losing money if a tenant drags out the eviction process.
A staggering 23% stated that either their own home was in foreclosure, going to short sale, or that they were renting a home that was being foreclosed on. An additional 17% reported either filing for bankruptcy, losing their job, or both. These numbers are frightening and point to the worst economic downturn that we have ever witnessed during our lifetimes. This also led me to question whether the foreclosure rate on homes is a lot higher than the 1% to 2% range that I read about in the Florida media.
The numbers are also disappointing with regards to the poor job Florida landlords are doing as this economy worsens. About 8% reported that their current landlord was not making necessary repairs on the homes they were renting and several homes were no longer safe to live in due to the presence of mold.
Last but not least, for you big government types out there, I want you to know that two callers asked me to falsify the actual amount of rent that I was charging so that both the tenant and I could overcharge the federal government for Section 8 housing. It is a felony to do this. Those were short conversations that ended with me hanging up.
Here is the most shocking information about the poor condition of today’s Florida real estate market. Out of those 106 phone calls or emails that came in over the five months, only 13 turned into actual showings. Those are terrible numbers – less than an average of three showings per month. And this means that you should expect that only 1 out of every 10 people that you speak with will want to come see the home in person for a showing.
Finally the competition I faced trying to rent this home was staggering. I was competing with at least 100 similar homes on the Florida Multiple Listing Service and another 100 homes available in the newspaper or online during the five month period.
Now that you know all the facts about the current South Florida real estate rental market be very careful if you are thinking about sticking your toe into these turbulent waters. The crisis in the Florida real estate market is far from over.
Michael Letcher is a Fortune 500 executive and a licensed CPA. His on-line buyers guide can help you find low cost South Florida homeowners insurance for your home. Get all the secrets to affordable Florida insurance in his free newsletter at =>