Turning Brickell condos into a rental cash source tricky
For years, local and international investors have been turning to Brickell condos as a safe place to put their money and make a profit by renting units. But the exact process of turning a condo from an empty space into a source of revenue includes a number of factors, each of which can be dealt with uniquely based on personal preference.
“The first thing you need to look at is what your condo documents allow,” said William G. Hardin, director of Florida International University’s Tibor & Sheila Hollo School of Real Estate.
“Typically we assume that all units can be rented, but in certain high-end buildings, rentals are not okay.”
Still in others, he said, while renting is allowed, tenants would have to be approved.
“Basically the first thing is [to find out if] there are limitations in the building where the unit is located,” Dr. Hardin said. “You need to review the documents and bylaws of the homeowner association.”
“The second thing is figuring out how much involvement you want to have. Do you want to manage or do you want to offload that to someone else?”
Renters need to decide whether they want to be directly involved in the leasing process or whether they want to get an agent or broker involved, he said.
“If there’s a broker involved, fees are typically one month’s rent on a 12-month lease. That’s typical commission, so there is a fee or cost associated. Of course, [renters] can delegate to an agent more or less of the activity… Of course, all those activities reduce the net cash flow that you get from the rental.”
Sometimes, however, the location of the owners plays a big role when deciding whether to self-manage.
“It’s pretty hard to do all of these activities if you don’t live in Miami because you’re competing with people who can make a quick decision, who are available,” Dr. Hardin said. “So if you’re in a different country then it’s harder to lease or manage an asset. That’s just the way it is.”
“Then, of course, you have to determine what the market rent is, which is relatively straightforward. If you went into any building you can pull asking rents, then the MLS database, then that can give you an idea of what you can truly rent for.”
According to the residential president of the Miami Association of Realtors, Carlos Gutierrez, costs such as the mortgage, association fees, taxes and possible additional insurance need to be taken into account.
Additionally, renters “have to make sure the association allows [rentals].”
“Sometime they allow one per year, sometime every three months… The most lucrative is one per month… With short-term rentals you can charge the most but they are the most work in terms of managing, cleaning and getting it ready to put back on the market.”
One important factor to look for, Mr. Gutierrez said, is a dog-friendly building.
“Dog-friendly buildings open themselves up to people looking to rent. Building that are not dog-friendly turn away [possible tenants].”
Once a renter has received permission from the association, the next step, Mr. Gutierrez said, is to have a realtor do an analysis and reach a consensus on rental price.
All in all, a lot of costs need to be taken care of before any revenue can be made.
“You have the mortgage principal and interest,” said Mr. Gutierrez. “If you own the property, the taxes to own it; if you rent it, you have income tax. You have the condo association dues. In some situations, not all, supplemental insurance… Some repairs are covered by the building, some by the owners. If the oven breaks or the AC freezes or the tiles crack, you have to set aside funds to hire someone to fix it.”
“[Brickell is] a pretty big destination for [renting],” he said. “A lot of jobs for young professionals are moving in there, so that’s basically the draw [and] a lot of activity and nightlife. Maybe they aren’t ready to buy so they’re going to rent, but it’s extremely popular.”