Florida Treasure Coast Real Estate Resource

When it comes to finding a tenant in the competitive Stuart, Florida rental market, flexibility in what you allow can expand your pool of prospective tenants and minimize vacancies. Here are some things to consider when seeking a tenant for your rental property:

Lease Terms

-You may want to allow a shorter lease term or offer an early termination clause (you can charge a higher rent or require a cancellation fee). This works well for corporate transferees and relocating families who plan on purchasing a home. They also can be good tenants as their move is often subsidized or they have cash from the sale of their home.

-Offer a step-up lease for a desirable tenant who is unsure of the rent. A step-up lease starts at a lower rent and increases after a six month period. You may want to include verbiage that the tenant can cancel the lease without penalty at the end of six-months if he is unwilling to pay the rent increase.

-Be flexible about allowing small pets (with an additional pet fee or deposit).

-Allow the tenant to pay the security deposit over a period of several months.

About Credit Challenged Prospects

Due to the loss of a home and other issues arising from this economy, many prospective tenants will have damaged credit. You may want to be flexible on credit standards as many of these people have money and will need a home; it makes sense to try and find a way to work with them.

-Do not let a tenant with a poor credit history spread out his security deposit over several months.

-Be sure to perform a detailed background check.

-Set the ground rules going in. For example:

• The rent is due in full at the first of the month.
  
• The late fee goes into effect on the 4th.
  
• The eviction process starts on the 8th.
  
• If they vacate by the 15th, leaving the unit undamaged and broom-clean, their security will be returned, otherwise you will file suit.

I have been listing rental properties here in the Stuart area since 2003 with few problems. But I have had several evictions over the past year, largely due to the recession. That said, as a landlord it is important that you perform your due diligence and enforce tenant rules.

Becoming an Accidental Landlord

"Accidental Landlord" is a catch phrase that applies to many home sellers who cannot afford to sell or are unwilling to sell their home under present market conditions. In simple terms it means holding onto your property by moving out of it and becoming a landlord. If your house has very little or negative equity, renting out the house while property values rise may be an option and in some cases can help prevent foreclosure.

Seek Professional Help

I am not talking about seeing a psychiatrist (your friends may suggest this), but if you are about to become an accidental landlord you must understand the process including how to screen prospective tenants, prepare a lease and tenants' rights with regard to repairs, collections, and evictions. This may seem overwhelming at first but professional help is available. A Realtor experienced in procuring tenants coupled with a competent property manager and real estate attorney can minimize the stress of renting out your property. This is especially important if you are out of town or plan to relocate.

Talk to Your Accountant

Often rent that a property will generate will not cover the total monthly "nut" or expense of owning the house, but this negative cash flow may provide you with a valuable tax deduction. Also, as the value of your home rises (along with the rent), cash flow can go from negative to positive. Be sure to talk to your accountant to discuss the benefits of owning an income producing property.

Renting out your home is a great way to protect your investment while the market recovers. Having a team of rental professionals in place can help minimize problems along the way.

The home was in one of Palm City's better neighborhoods, a leafy gated community with a variety of home styles. My clients were seeking a pool home under $250,000 and we had looked at several, all at the top of their price range. I suggested a short sale or foreclosure as an option, but they did not want to take on a renovation. When I spotted this Freddie Mac foreclosure I knew it could be just right for them.

As we pulled up to the home I warned them about what could be lurking inside: missing appliances, fixtures ripped from the walls or even owner inflicted vandalism. We entered the house and my concerns evaporated as I realized the house was largley in tact. Sure, the appliances were gone and the water heater was missing, otherwise it appeared to need only patching and painting. It had 20" tile laid on the diagonal and plantation shutters throughout the entire house.

Outside was a screened pool and a large private backyard. But the pool was green and the deck covered in mold. I assured them that it would clean up easily and judging by the water depth from recent heavy rains it looked like it was holding water. Upon closer inspection we discovered that the pool pump was missing and the owner had severed the air conditioner lines in a failed attempt to remove it.

But at $169,000 this was obviously a good deal and the couple decided to make an offer. I urged them to go in at full price or slightly above as banks will dismiss low offers. I also discovered there were already two offers in ahead of us, so I suggested we go in with an offer of around $172,000. To my surprise they offered $174,000, which the bank accepted the next day.

It gets better. My buyers were planning on wrapping the repairs into a 203K mortgage when I received a call from the listing agent telling me Freddie Mac would be contributing $6,000 towards closing costs, fixing the pool, A/C, and water heater and throwing in a two year home owners warranty for good measure.

So we are on our way to a successful closing. Barring any unforeseen inspection or financing issues, these transplanted Northerners will be enjoying their Florida dream home in just a few weeks.

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Contact Eric Slifkin for information about Fannie Mae or Freddie Mac foreclosures and special financing programs.