Browse: Home / NEWS / Why is the South Florida Rental Market offering such a low supply?

So many of our clients are questioning how the rental market in South Florida be so low on supply and selection.  With the sales market so slow, with so many properties listed for sale, how can owners not be motivated to rent their homes? 

Let's take a look at the current condition of the economy.  2010 featured a year of a vast volume of foreclosures.  Short-sales are not closing or being approved by the lenders for a variety of reasons, many being that lenders benefit more financially when they foreclose versus modify with a short sale.  And with the volume of properties pending short sale and foreclosures that ties up a large volume of homes that would be either available for rent or sale.  The process once a bank forecloses may not be as expedient as one may expect in order to put that inventory on the market.  Or maybe the banks are not quite versed in having decision makers in departments that can accept offers rapidly or even at all.

So that creates the following challenge for our rental market:

• Very low inventory of homes that are available for rental
• Very high demand for previous homeowners becoming renters who have lost their homes
• Buyers that are waiting to buy for reasons they cannot obtain financing or are just delaying buying till they see what the future market brings are now renting
• Rental rates are increasing as the landlords are seeing the demand for their properties
• Bidding wars on 1 bdrm condo rentals are not uncommon for the 1st time in decades or even 1st time ever
• South Florida - with Fort Lauderdale, Pompano, Miami, Boca Raton, Aventura, Miami Beach, South Beach, Palm Beach is a transient area.  So rentals are always quite consistent, even in great sales markets.  There is always a need in South Florida for people to rent, and not because they cannot buy.

What can a potential renter do to assist in their rental search to make it less challenging and reduce potential problems:

• Be aware of Craigslist ads that may be fraudulent.  Currently there are many scams that are occuring in which a thief is acting as a landlord and advertising properties on Craigslist.  Potential renters are sending in deposits to a non-existent property owner.
• Work with a licensed real estate associate or company that has a proben track record in rentals.  Not one that is just working on rentals to survive while the sales market is slow.
• Check the county tax records for the ownership of the potential rental property.  And then check the County Clerk of the Court records to see if the home is in foreclosure.
• Chinese Drywall & Mold Inspection - many properties in south Florida have these challenges.  Work with a reputable agent that is versed on educating potential renters on how to verify the property does not have a Chinese Drywall issue.
• Be sure your security deposit is held in an escrow or trust account and not by the landlord.  It is illegal for a landlord in the state of Florida to co-mingle escrow funds with their own funds or to collect interest from security deposit without disclosing that to their renter and receiving an okay.
• Have your lease reviewed by an attorney if you are not working with a Fla REALTOR.  REALTORS use FAR/BAR leases/contracts created by the Florida Association of Realtors and Florida Bar Association.
• If you are planning to stay longer than a year in your rental think ahead and request options to renew with a maximum increase in your initial offer before you rent.

As the rental market continues to be in demand there will be more and more challenges for a potential renter to be aware of.  Do your research and homework.  It will protect you from a variety of potential problems in your rental process.

In Sunny South Florida even the Iguanas are getting frustrated with all the available homes that are in the ACTIVE inventory. They were loving the waterfront life when the sales markets were thriving (like everyone else) and have been unable to determine when the market is going to rebound again.

We have already solved that challenge in our area.

What more could a property owner ask for than IMMEDIATE INCOME on properties that are not selling?

As a South Florida luxury rental specialist for over two decades we have consistently proved to our owners that they can obtain income on their properties in any cycle of the real estate market.

Luxury Vacation Rentals in South Florida is a niche that has created long-lasting relationships with our clients for many years. Homeowners have found it beneficial to receive short term rental income while their homes are not selling or they are not in use. And a great benefit is they use their home in between rental guests.

Luxury Short Term Rentals in Miami, Fort Lauderdale and the Palm Beaches are available by the week, monthly, or seasonally to so many visitors to South Florida who would rather vacation in a private residence in lieu of a hotel.

Let's take a look at a 3 bedroom Fort Lauderdale waterfront pool home with a mortgage of $3,600 per month, taxes, insurance and maintenance of another $1,800 per month for a total of $5,400 cost to the owner. The property owner visits the home approximately 6 weeks a year. They do not want to remove their furnishings in order to rent the home for an annual rental at $3,500 per month. So their option is to offer the waterfront home in Fort Lauderdale as a weekly vacation rental for $3,200 per week. If the home rents 60% of the time that offers an annual income to the owner of just under $100,000 per year with an overhead of $64,800. The owner is using the home and still netting an income annual until the market recovers and the home will be sold.

The moral of the story ~ don't fret if your home is not selling right now. Use it, rent it, earn income on it until its value returns and it will be beneficial time to sell.

Many visitors to South Florida prefer to stay in a furnished private residence while traveling for business or pleasure. This is great news for homeowners that have furnished properties who seek income while their home is not selling in a slow sales market.  In most instances an owner can earn the same income with one week's rental as they would on a month's rate.  If you own a vacation residence you will still have the option to use it for periods that the home is not rented, making it a fantastic option.

Renting a vacation home requires an owner to set up the house with all necessities including kitchen items, bath items, linens, electronics, etc.  And of most importance, the home must be well-maintained and in 100% working condition and professionally cleaned.   The homes that are minimally decorated rent more often and at higher premiums.  Décor in neutral colors and styles is a plus so the property appeals to a large variety of visitors with different tastes.  "Depersonalizing" the home is a must.  This includes removing personal photographs and accessories.  This also includes removing personal items in bathroom cabinets, bedroom drawers, etc. 

Bedding should include a king in the master and at least 1 additional queen and twin beds which can be versatile in separating or using as 1 king.  Mattresses should be decent quality and in good condition.  Sheets must include 2 sets for weekly turnovers.  Each bed should include:  two pillows per twin and four pillows for queens and king sizes, mattress cover.  An alarm clock is necessary for each room.  The closet should be empty and have available hangers.  Towels should include full set of hand, wash cloth and bath towel and 2 sets per occupant.  So a three bedroom home that sleeps 6 guests should have 12 total sets of towels.  The kitchen should include all necessities except for items you would purchase at the grocery store. 

A vacation home must be well-maintained to include all appliances, air conditioning system, plumbing, electrical, hot water heater, etc. are all in proper working condition.  The home must be freshly painted, flooring buffed/polished, carpets clean and in new condition.  It is imperative that not only stocking the entire home with all necessities, at a good quality will ensure a positive experience for the renter and many repeat rentals.

So many ask what is the difference between a fractional property and a timeshare purchase?

Because there are so many different types of timeshare purchases where the setup could include a set week each year, points program, etc.

Wikipedia defines a timeshare "as a form of ownership or right to the use of a property, or the term used to describe such properties. These properties are typically resort condomimium units, in which multiple parties hold rights to use the property, and each sharer is allotted a period of time (typically one week, and almost always the same time every year) in which they may use the property. Units may be on a part-ownership or lease/"right to use" basis, in which the sharer holds no claim to ownership of the property." 

Many purchasers of timeshare properties have not always found their purchase beneficial, as they do not obtain true management rights over the property, which could lead to high yearly fees/assessments, or the ability for an increase in property value or appreciation.  Timeshare purchasers basically pay for the useage of a condo and cannot foresee future costs or any return on the high investment over the years in these costs or fees.

A fractional residence is an actual purchase of real estate in which the buyer receives title and a deed to the property.  The only difference in the fractional purchase versus an individual purchase is the buyer is only responsible for a percentage of the cost to buy the property.  Many second home and vacation home buyers have found that they only use their property a number of weeks per year, but they are still responsible for 100% of the repairs, maintenance, taxes, insurance, etc.  In a fractional purchase you are buying a vacation home at a fraction of its value.  The only expenses are a share of the total costs and at the same time the ability to enjoy the benefits of a luxury home or condo.  A fractional residence offers the same tax write-offs of single ownership.  It may be deeded or willed to heirs.  And the best part is a fractional owner sees their investment grow as many of these properties have been shown to appreciate at a higher rate on the percentage of the property as compared to a single owner's increase in value.

For example, in a 4,3,2,1 fractional:  This means that there may be 1 owner that buys all 4 shares of the property or 2 owners each buying 50% ownership or 4 owners each buying 25% of the property. 

On a $2,000,000 luxury waterfront vacation home in Fort Lauderdale: 

4 owners:  each would pay $500,000; 

2 owners:  each would pay $1,000,000;  or

1 owner:  would pay $2,000,000. 

1 owner purchases at $2,000,000 and pays 100% of maintenance, insurance, and taxes of $46,800 per year.  They may use the home as much as they choose but practically speaking may do so only an average of 28 days per year.

4 owners purchase the home and each pay $500,000.  They contribute to only 1/4 of the maintenance, insurance and taxes, each of $11,700 per year.  They will enjoy the home a minimum of 13 weeks per year with no maximum useage.

If they choose to sell the home:  The single buyer at $2,000,000 may find it much more challenging to sell during different phases of the real estate market. And if there was a large volume of luxury homes for sale at the time it is listed they may have to reduce the price in order to sell.  Thereby, reducing their opportunity to see a return on their investment.  The fractional buyers each with 25% ownership choose to sell they will find a much less challenging process to find a buyer looking to purchase their share at $500,000 during a time in the real estate cycle that properties are not selling as easily.  And and even much more beneficial time when the market is strong and properties are selling they will see a better increase in their $500,000 investment as they are able to sell their fractional at a much higher price.

Purchasing a fractional luxury residence means access to your dream home for at least 13 weeks per year or more, an appreciation of your investment, the ability to rent (if approved in your individual fractional purchase) and receive income, an ability to sell at all phases in the real estate market, and control of the property management of your property.

Browse: Home / NEWS / Fractional Luxury Vacation Home Ownership

Fractional Luxury Vacation Home Ownership
What is it?Is it something to consider in order to sell your home or purchase a home?

This innovative new trend is one sector of the real estate market that is growing rapidly. It differs from timeshare ownership in which an owner is deeded a specific period per year or points to use. Fractional Luxury Home Ownership offers a buyer the ability to purchase a property by a percentage. The percentage of ownership offers a portion of useage in proportion to amount of cost and overhead. The property is deeded to the owner with an agreed schedule between the owners. It offers buyers the ability to purchase a property as a "second home" and only be responsible for a portion of the purchase price and upkeep.

For example, on a purchase of a $6,000,000 home which includes 100% of the costs for repairs, maintenance, utilities, etc. Studies have shown the average number of days per year that a vacation home is used is approximately one month. With fractional ownership one may purchase 1/8 share of the home for $750,000 and enjoy 45 days useage per year and have the management company handle the repairs, maintenance, and cleaning.

Part of standard home ownership includes dealing with maintenance issues and upkeep. That is a challenge when a 2nd home owner has such a short period of time visiting their property. When you arrive at your fractionally owned property a concierge will remove the homeowners personal items from the owner's closet and place in the directed closets, drawers, cabinets, including placing personal items such as pictures on respective tables. Have your refrigerator stocked with your favorite groceries, refreshments and fresh flowers awaiting on the counter.

Estate Home Fractional Ownership - own 12.5% or 25%

Fractional ownership offers all the benefits of regular real estate property ownership including appreciation, depreciation, interest and expense deductions. The property fractional may be sold, gifted or willed.

Many owners find fractional ownership appreciates better than owning a vacation home individually. Many see an increase of 1.5 to 2 times the amount they would have sold the entire property.

During challenging times in the real estate market what better way to sell a luxury home! Many owners find that by fractionalizing their vacation home they may maintain a share to use at the same time reduce their current overhead required for their 100% of the property. Realtors may market fractional ownership the same way they would list and sell an entire property. An innovative way to enjoy your luxury property while at the same time save time and money on your investment.

No matter if the real estate sales market is at its best or its worst so many sellers have the ability to increase their chances to sell by making one simple change.  Can it be that simple to sell your luxury real estate in Fort Lauderdale or anywhere across the U.S?

It is human nature to obtain a first impression in an instant.  Once that impression is created in someone's mind it is virtually impossible to change.  So many properties are listed for sale and quickly placed in the MLS.  A very important part of the listing must include a preview of the home and a checklist for the homeowner to complete PRIOR to taking professional photos.  This means that this important step must be completed prior to the property being entered for sale in the MLS.  A listing agent should go through a list with the homeowner to insure every area of the home is "Sale-Ready" to go on the market.

International Luxury offers its clients this list to insure their property is in perfect Sale condition:

Exterior:

Pressure wash home & walkways if necessary

Home exterior paint touched up if necessary

Prune trees, de-weed beds and be sure mulch is fresh

Bushes are trimmed and walkways are clear

Grass is cut and maintained.  (cuts should be increased in South Florida in summer rainy months)

Pool is being maintained.  Pool water is clear.  Pool pump is running.  Patio Furniture is in good condition, clean and neatly arranged.

Screens on lanai (if applicable) have no tears.  Screen doors are in working condition.

Decks are pressure washed

Dockage (if applicable) has no planks that need repair, pylons solid and lighting in good/working condition.

Interior:

Garage:  Is neat and organized.  Start boxing up and going through excess items so homeowner can be prepared to move when home is sold.  Have a yard or garage sale to rid of items no longer needed. 

Paint condition throughout home interior:  Light and neutral colors on interior walls may make a difference in brightness, room size and reducing dislike due to a potential buyer's individual taste.  For example, a prospective buyer may hate a bright coral wall which may make a poor impression.  If the wall were white or off-white that reduces that negative feedback.

Kitchen:  Appliances are maintained and in sparkling condition.  Cabinets are organized and cleaned out. (buyers open to see space).  Kitchen flooring has had a heavy duty clean or buff.  If tiled, grout is clean.

Living / Great Room area:  Rooms are decluttered with minimal amounts of furniture.  Personal pictures and knick knacks are packed away.  It is imperative that the personal items are removed to offer the prospective buyer a feel that they are "at home."  Depersonalizing allows the buyer that opportunity. 

Bedrooms:  Bed is neatly made daily for showings.  Remove personal pictures and items.  Declutter room if too much furnishing.  Be sure all lights are turned on and blinds are open for plenty of light for showings.

Bathrooms:  Organize cabinets and drawers.  Take the opportunity to clean out and throw away unnecessary items.  Remove items from counters and put away.  Do not have personal robes, towels, etc. out in view.  Make the room seem open without much excess out or knick knacks on counters.

Dining Room:  Remove table cloths or place mats on dining table.  Remove personal pictures, items and knick knacks and pack away.

Before darker walls lots of accessories and heavy                      After:  off white paint, lighter furniture  furniture

The before and after pics show a brighter and more open space.  That in returns may give the appearance of larger space.  The heavy china cabinet in the before picture was moved as a buffet and top glass shelves were removed.  This balanced the room more and opened it up.

Staging services may be most valuable to assist seller's in getting their home ready to sell and in a more rapid period.  Homes that are staged have a much higher percentage in selling in a shorter period.  It is worth the time and small investment to accomplish this before listing your home for sell and placing the wrong pictures in the MLS.  First impressions are the Most Important impressions in selling your property.

Many are asking if it is now the right time to invest in South Florida real estate.  Is the market at its lowest?  Because of this question and also because of the struggling economy many people are holding off and waiting for a sign to make their investment happen.  We are seeing Fort Lauderdale rentals on the rise due to the displacement of so many homeowners who lost their properties to foreclosure and short sale.  This has affected the available rental inventory in South Florida.  South Florida rentals are becoming challenging to find due to a high demand and a lower and lower supply. 

Will the South Florida housing market remain strong? 

Will the overall trend eventually show an increase over a long-term period? 

Many of these items point to a "Yes" to these questions for Fort Lauderdale Home Sales: 

• Strong Trade & Tourism - Constant trade and commerce links with Latin American countries help to add more weight, and tourism remains strong in South Florida.

• Stock Market - When the stock market is more volatile people put their money into real estate. 

• Baby Boomer Market - 75 million baby boomers entering retirement during the next decade.  The number of homeowners in the 50-75-year-old bracket is projected to increase 65% in the next 20 years.  South Florida's weather and water will always draw these boomers to make it their choice place to retire.

According to the Florida Association of Realtors in their article The upside of Florida real estate: 15 market positives - "Over the long term, Florida stands to benefit from the migration of the aging Baby Boomer generation, roughly 80 million strong. Demographic studies show that the Sunshine State's mild climate and outdoor amenities continue to make Florida a favorite retirement destination."

• Foreign Immigration - Florida's population over the last 50 years has grown due to both foreign and domestic migration.  Since 1970, Florida has grown at over three times the rate of the entire nation.  In the 1980's Florida had a 57% increase in population that were born outside of the US. 

• Retiree Population Strong....The state also has the highest populations of senior citizens in the nation, as Florida ranks among their top choice for retirement. Which leads to our next point.

• Job Market Strong....This influx of retirees leads to more job opportunities in health care placing the state high in job opportunities, with lowest unemployment and fastest job growth rate of the country's ten most populated states.

• A long-term-growth state - Florida shows long term economic and demographic upward trends in population growth.  At the end of 2010 economists forecast that Florida will be the third-most-populated state in the country. Because of this increase in population florida's economy will be affected in the positive as this will assist its economy in growth as well.  And in return a growing population, a long-term growing economy will in turn lend to an increase in real estate market trends.

• Climate & Destination - We cannot forget that South Florida's climate is a draw to people from around the country and around the world.  To add to that benefit Fort Lauderdale's waterways and beaches are a huge attraction.  Fort Lauderdale has been termed "The Venice of America" with its sparkling waterways that mozy by waterfront mansions with yachts in their backyards.

Even though the real estate "experts" want the public to believe that home prices have dropped drastically and we are in a catastrophic state, the Florida real estate market still shows signs of an increasing market when analyzing the trends over a long term period.  In the long run, the general public's belief in our "softening market" may actually be a benefit to the true real estate investor, as we see the speculators, flippers and developers, that drove the market pricing above its true value into unaffordable highs, out of "business"  permanently. 

What better time to buy when you can purchase a higher quality property at an amazing value and lower interest rate.

Andrea Tsakanikas, International Luxury, October 9, 2010.