Getting Florida Mortgage Help: Owners Become Lanlords

Scott Ayers is about to become a landlord, whether he wants to or not.

Wryly referring to an “unintended consequence of the current [Florida real estate market],” Ayers has decided to rent his Gateway home after trying to sell it for about six months.

Ayers isn’t the only owner opting to let other people help him meet his home loan. As the real estate market goes through what Larry Simons, a Florida mortgage broker at Home Hunters USA in Fort Myers, calls a “challenged” period, many owners are waiting it out.

“If you don’t have to sell your house right now, then don’t sell it — and try to rent it while you wait for the market to correct itself,” says Simons. “Over time the rental money you get should help you keep it going until you can sell it. If you aren’t in a hurry to sell or aren’t in a hurry to buy is when you get the best bargain.”

Some of those bargains are currently going to renters.

“It really is a renter’s market,” says Betsy Morgan, director of property management for Prudential Tropical Realtors in Trinity. She’s also on the state and national boards of the National Association of Residential Property Managers.

Morgan, whose company serves the Tampa housing market, says they wanted to grow the property management division, “and we have about 800 rentals at the moment. We set targets as a company and we’ve met them a lot faster than we thought we would.

“Two things happened,” she continues. “Some owners have determined it’s better to rent and wait out the market. Other people bought property as an investment to begin with, but that was before the market softened and they found it was hard to sell these houses.”

Whether an owner works through a company like those run by Morgan or Simons or opts to go it alone like Ayers, they need to understand what it is to be a landlord as they allow other to assist with their Florida mortgage bills.

“I’m lucky, because my wife is an attorney and she’s worked with a couple of large Realtors in town,” says Ayers. “She knew what kind of legal obligations we have to meet to rent out the house.”

Morgan says there are common misconceptions when clients consider renting their property.

“Part of our role is to educate investors who are not experienced in that side of the market,” Morgan explains. “Some people assume the tenant is responsible for all the work and maintenance on a house and that’s not the case. There are some very specific landlord-tenant laws in Florida.”

Lease length is also an important issue.

Cindy Wallace, property manager of 1st Choice Property Management in Cape Coral, says most leases are for at least a year, “and you have to understand what you are committing to as a landlord. Sometimes we can find a tenant willing to rent the property while it remains for sale and we can show it occasionally and it has a move-out clause. But that doesn’t happen very often.”

For her part, Morgan says a lease should never be more than a year, “because you don’t know how long the [Florida housing market] will be slow. And, you have to have a provision to raise the rent if you need to. Some people are really happy if they get somebody to sign a five-year lease, but that can be a bad thing if rents go up in the market or it gets easier to sell the property.”

Barbara Ford, who has a new home in the San Marino section of Miromar Lakes, will try to rent it out for a year. And, she hopes it will include an option to buy. “We built this place as more than just a model home,” she says. “The builder put lots of extras in there and it’s really a nice place. We were very surprised when the market slowed. We just didn’t see it coming. That’s when we decided to keep it off the market for a while.”

Many Realtors are still selling homes, albeit at prices lower than a year or two ago. Would-be landlords have to make those same adjustments.

“The first thing we tell somebody is that they have to be realistic about what they can get for the house if they lease it,” says Simons. “You aren’t going to make your [Florida mortgage loan] on a half-million-dollar house with what you get for leasing it. Just as you have to price the house reasonably to sell it, you have to do the same then with a lease.”

Simons says one good way to go is a lease-purchase option, which means the owner takes a small down payment, maybe 5 percent, “which is low, but you do get a person in the house and you have the prospect of selling it to them, even if it’s down the road. You can normally get a higher rent and that rent would then be a credit at the closing to apply to a down payment.”