Passive investment in real estate can provide some of the most lucrative and stable revenue streams, however there’s plenty to consider before you even begin to look at potential properties to invest in. In this guide we’ll take a dive into what you need to know to get you started if you’re looking to invest in beach rentals, especially for properties in the Forida area, and more specifically in Bonita Beach. We’ll highlight both the benefits and the considerations, and if you find that you’d like to learn more, we can help you with that too.
What is passive real estate invetment?
At its simplest, passive real estate investing entails owning property without actively managing it. This can take the form of buying a property and waiting for that property to appreciate in value or renting out the property with the help of a property manager.
In contrast, active real estate investing happens when the investor owns and manages the property. Active investments entail more operational responsibilities than passive investment, such as taking care of property repairs and lease agreements. Though there is more control and oversight in active real estate, it requires considerably more effort.
Benefits of Investing in Passive Real Estate
Investing in real estate is a tried and tested form of passive income and is an excellent for those who have the means to sit on assets and are interested in long-term wealth creation. The main benefits of passive real estate investing are:
- Outsourced work liberates your time
Investment in passive real estate works for those who don’t want the headache of day-to-day maintenance or dealing with tenants. After your initial investment and standard property expenses like taxes, a third party, normally a property manager, will look after the running of the property, leaving you to pick up monthly checks.
Of course, you could make more from your investment if you actively took part in the running a rental, such as being the direct landlord. Not using a property manager would certainly save you a considerable amount in property management fees, usually 8-12% of the monthly rental rate. However, would this cost be viable when you have another job to do or other interests that you need to pursue? This becomes even more of an issue if you are able to expand your portfolio and own more than one property.
- Security and further wealth generation
Investing in property with increasing value can be leveraged for other loans to expand your portfolio and create even more wealth. As your portfolio grows so does the amount of passive income generated.
However, another benefit is the more diverse your portfolio the better protected you are from income loss. More properties means, you’re not putting all of your eggs in one basket. Should one particular property perform poorly in terms of being rented out, or suffer some mishap such as serious damage, you’ll be able to recover and maybe still profit. Of course, this depends on the breadth of your portfolio and the severity of any difficulty you encounter.
Passive real estate is worth investing in if you are in the right financial situation. This type of investment is better for those who have already secured some finances and savings and have disposable funds. This is generally a good rule for any type of investment.
Things to consider before buying a rental
Vacation rentals have become more popular and accessible than ever. With more listing sites rising and the surge in hotel alternatives, more and more renters and travelers now consider vacation rentals a viable alternative to hotels.
Residential Property Market: When buying a residential real estate property, such as a beach house in Bonita Beach you’ll be renting to individuals, families, or groups – be it a principal or secondary home. Residential properties typically have lower starting costs and are easier to obtain a bank loan than commercial ones.
Assessing Property Value: Apart from the size and whether it’s a luxury home, the value of your beach rental, will be determined by location and amenities. Is the property near a downtown or city center, does it have direct access to the water, is it close to a range of activities? A Bonita Beach property right on the edge of the water, with its own dock that’s close to outdoor activities, has fantastic tastic views, and good access to shopping, entertainment and, dining options can command some of the highest rental rates in the area.
Neighborhood: The neighborhood determines what kind of tenants you’ll attract and your vacancy rates. For example, a beach house rental would likely have more families, vacationers, and couples.
On the other hand, if you buy a rental near a university, students are likely to be your main applicants and pool of tenants. One way to keep vacancy time to a mimumium is to offer students good rates in exchange for renting throughout the year and not just during semesters. This may appeal to students, who have little intention of leaving the property during the holidays. Alternatively, you can rent out your property on a short term basis while students are away, although this can be a tricky process and made much easier with the help of a property manager.
Insurance Costs: This yearly fee can take a sizeable amount of your profits. Based on your budget, consider your coverage and decide if you want to pay a smaller monthly premium but be faced with a higher deductible if you make a claim. You will also need to consider your location carefully. For example, if you’re looking any beach rental or coastal property such as a Bonita Beach rental, you’ll want to get flood insurance. This type of insurance is not normally covered in a standard homeowners and renters insurance and will need to be bought separately or as part of an insurance package.
Property Financing: Most investors will need to borrow money to purchase their investment property. Find a mortgage lender, negotiate your terms, and make your down payment. You’ll need to choose between fixed-rate and adjustment-rate mortgages and the duration of your mortgage. Smaller down payments are usually accompanied by higher interest rates. A standard down payment is about 20% of the total contract price, however it’s possible to get packages with a much smaller downpayment cost.
Work with a property manager
We’ve already had a quick look at the general benefits of passively investing and hiring a property manager for your rental. Here’s a deeper dive into what a property manager can do for you:
- Increase property exposure: Property management teams help increase awareness of the property’s availability. Using social media platforms, listing websites like Air BnB, and other outlets will improve your digital footprint generating more quality leads, who the property manager can then vet as a good tenant.
- Emergency action and support: Emergencies often happen when we least expect it and having a full-service property management team gives you someone present with a network of professionals they can call upon if something goes wrong.
- Maximum profitability: Rather than charge the same rate throughout the year, it’s best to use a varied pricing model that charges competitive rates during the off-peak and premium rates during times of increased demand. Working with an experienced local team familiar with these trends helps you identify the right pricing to maximize returns.
- Routine maintenance and cleaning: Tenants can be very particular, especially if you charge a premium rate. This means everything needs to be on point, from sanitation and cleaning, to ensuring that all appliances and fixtures are in good working condition. Rental property managers take care that nothing is overlooked and you provide the best possible experience for your guests.
- Better customer service: Go the extra mile by hiring experienced professionals to interact with and service your clients/ renters. There are always inquiries from potential to current renters. If you’re otherwise engaged, getting back to concerns might take some time, leading to poor service. A property management team will handle all communications and update you on the results.
Investing in Bonita Beach rentals
Bonita Beach, located in Bonita Springs, has a population of about 58,000 and is located in Lee County, centrally located between Fort Myers and Naples, a smaller beach community in both size and population. Part of Bonita Springs, residents and guests have access to great shopping, dining, and healthcare. It’s a mere 10 to 15-minute drive to Southwest Florida Regional Airport, making it a great place to live permanently or as the location of a second home. Bonita Beach hits that suburban sweet spot that offers commercial necessities but still carries a wonderful sense of a tight knit, fun loving community.
Note though that if you’re buying in a neighborhood in Bonita Beach that’s part of an HOA, you’ll have to meet rules and regulation of that HOA, in regards to renting out your property. There are different regulations depending on the HOA concerned, so you’ll need to ensure that the HOA you’re joining will allow you to operate your rental in the way you want. The best way forward is to be upfront, and inform an HOA that the property is to be used for passive investment purposes.
Bonita Beach Real Estate Market
It cannot be ignored that Hurricane Ian was a tragedy that cost many people their homes, and their livelihood. However, the state, local government bodies, NGOs and the citizens themselves have mounted a determined campaign restore Bonita Springs and Bonita Beach.
In Decemnber 15 2022, Governor De Santis announced that $35.2M from a disaster fund as well as $25M from state funding would be used to begin housing repairs throughout the state. The $25M from state funding will be used to purchase material for repairs and the $35.2M would be utilized by vetted NGOs to facilitate critical repairs to homes.
Other forms of government help has come from Fema, the Federal Emergency Management Agency who have devoted resources for individuals and businesses as well as work with local government agencies and independent organisations to provide assistance.
For those who had been looking to move into the area before the hurricane hit, it may be the case, that property has become cheaper. However, do bear in mind that such an event means that there is also a housing shortage so while house prices dropped immediately after the hurricane, it may just as quickly rebound. If you were looking to invest in the area before the hurricane, the best course of action would be to consult with a real estate professional to fully understand your options.
While no one would have wished for the tragedy to occur, it is still the case that in this time of rebulding, there are opportunities for those who wish to invest area. Investment now could see a quick and substantial return on investment as the area rebuilds and house prices begin to rise.
CHOOSE SOUTHWEST FLORIDA’S TRUSTED REAL ESTATE EXPERT
If you’re looking to own a rental property, choose to work with the Lanners Group, LLC. This team of seasonal rental specialists offer some of the best Florida rentals in the market. This diverse team offers full-featured services, including vacation and short-term rental property management.
The team is headed by Jack Lanners who has over two decades of experience in the real estate industry and is committed to making your real estate journey as stress-free and successful as possible. With personalized service, this real estate expert will find you the best beach house rental property.
Jack Lanners has licensed and insured property managers that will provide you with expert advice, and insights on local housing, to help you achieve your property goals. Invest in real estate and let us worry about the rest. Call us at 239.253.5446 or send an email here.