curtisc

I own a oceanfront condo in Daytona and am considering renting it out. This seems to be an excellent way to make additional income. Does anyone have any thoughts or suggestions?

LoveItaly

Hi curtisc, having had a lot of rentals over the years here is the very first thing I would do. Talk to your accountant regarding the tax consequences. Than, if you do not live close by do some investigating and find a good property management company to handle the rental for you. They should be able to tell you the amount of rent you can expect and how much demand there would be for your condo.

Or, you could decide to rent it to just friends and friends of friends. You still need to talk to you accountant however. And if you do not live close by and do not have a property management company handle the rental than you need to figure out what you will do when you get the Saturday night phone call that the toilet is not working etc. (Those kind of calls always come on a Saturday night or Sunday morning, LOL). If you do not hire a property management co. than you need to get the states up to date rental agreements as anyone that rents from you should have one, even if family or friends. It saves a lot of misunderstandings and legal problems.

Also, you probably would want to remove anything in the condo that would be very upsetting to you if it is stolen or broken etc.

Some people that rent vacation homes have at least one closet they keep their personal items in with a real good locking system (installed by a locksmith).

If you don't use a propery management company than you should take the time to find a good General Contractor, plumber, electrician etc. that will accept a phone call from you for emergency repairs and that will be willing to bill you or take your CC info over the phone.

I have never rented a second home but my experience with doing this comes from having so many rentals over the years, having a property management business and having friends that have rented their second homes out for periods of time.

Best wishes to you with this venture.

LoveItaly

P.S. Don't forget to discuss this with your Insurance Agent/Company either. Also, make sure your Condo rules do not prohibit your doing this.

curtisc

Thank you LoveItaly ! You provided me with several well thoughtout ideas! When you mention tax consequences are you generally refering to the extra income bumping me to a higher tax bracket? A property management company is a definite must! thanks.

Sunnyboy

Regarding tax consequences you won't necessarilly be "bumped into a higher tax bracket". Many people who rent out their condo's don't make any profit or don't have a positive cash flow, in fact most of my friends who rent condos barely break even and some incur operating losses (not always a bad thing if you can offset the losses against other business income. You also should be aware that if you make your condo a rental property IRS regulations limit the amount of time you can actually use the property yourself and still deduct the related expenses and depreciation on the condo (this is where you need the services of a good tax advisor to help you).

We considered renting a property we own but realized we didn't want to be saddled with all the maintenace problems and having to replace furniture, fabrics and fixtures that are abused by the tenants (I've heard way too many horror stories about renters to convince me I don't want to become a landlord). Of course, there are those who see these types of problems in a completely different light than I do and they are very happy with their decision to be in the condo renting business. Only you know how comfortable you will be dealing with those types of issues.

Another variable is if you do long or short term rentals, in other words, are you planning to rent your condo to one individual or family for the "year" or the "season" or were you thinking of renting it to vacationers on a weekly basis. Weekly vacationers are a different types of tenant than "long termers", with their own unique needs. If you are not doing long term rentals it is doubtful you will have year round rental income. I'd venture to guess demand for condo rentals in Daytona is pretty high in winter but slackens off in summer. If you are doing short term rentals you should check with some local property managers to determine the average occupancy rate for similar condos in your particular area. You can then discuss the occupancy rate (and expected rentals) with your accountant or tax advisor to find out where your break even point is.

Do as much due dilligence as you can and work with your accountant to project the realistic income and expenses you can expect from renting. That should help you decide if it make sense for you to rent out your condo.