Best of times, worst of times in rental market
For real estate agents, rental income is rising. For investors, losses on rentals are common.
By Bill Coats, Times Staff Writer
Published June 3, 2007
TAMPA - Sabrina Westenbarger isn't frustrated by the housing slump. Last year, as the New Tampa real estate agent sensed that home buyers were disappearing, she branched into managing rental properties. Demand surged enough to bring her college-aged daughters aboard.
"Every day, " says daughter Christina DuBose, "we have more people calling."
Nearby, real estate investor Rob Duncan sensed the same trend. In January, Duncan launched Rent New Tampa Inc., a Web-intensive service that rents and manages houses and townhouses in the area.
"I'm going to capture a market opportunity here, " Duncan says.
And in Pasco County, Betsy Morgan has seen accounts double in the past two years in her Prudential Tropical Realty office in Trinity.
All are profiting in the hangover following the homebuilding boom. All are signing up clients who need to rent their houses, townhouses and condos because they cannot sell them in an overbuilt housing market.
"Now there are more than just intentional investors, " says Morgan, who has worked in residential property management for 23 years. "They're what I call the accidental landlords. They're not always the happiest or most knowledgeable of landlords."
Yet, they collectively own a flood of homes for rent.
Over the past three years as the number of owner-occupied dwellings around Tampa Bay increased 5 percent, the dwellings with tenants, or needing them, rose 32 percent. In Hillsborough County, that included an increase of nearly 30, 000 properties whose owners live elsewhere.
Rents have sagged even as sales prices have held relatively steady.
"You can get a $260, 000 house for $1, 200 a month, " said Westenbarger.
Her daughter and some college friends shared $1, 200 rent not long ago for a townhouse. For that rent now, marvels DuBose, "You can get a house in a nice, nice neighborhood."
"Rents are trending down, " said Lincoln Crone, president of St. Petersburg's Alliance Property Management. "I think that's more of a temporary situation. ... There's a lot of competition for tenants now."
That has made property management the hot growth niche in an otherwise shrinking real estate industry.
"I am hearing from many Realtors that their rental business is doing very well, " said Ann Guiberson, president of the Pinellas Realtor Organization. "It's one of the things keeping their real estate companies busy and prosperous."
Two weeks ago, the Florida Association of Residential Property Managers held its annual convention at Duck Key. Attendance was nearly two-thirds higher than the year before.
"One-fourth of the people had never before attended, " said Morgan, who ended a term as chairwoman of the association's advisory board. "They wanted education."
So did Duncan, who brought his new wife and kids to New Tampa in 2004, in search of a lifestyle change. Flush with cash from selling their two homes in Silicon Valley, Duncan ditched his career as a semiconductor engineer and plunged into real estate.
Crone said people are entering the field from varied walks of life: home repairmen, leasing agents, and, of course, real estate agents like Duncan and Westenbarger. As of last week, Westenbarger and her daughters were managing 15 homes with tenants, and were trying to find tenants for an additional 30 clients.
Her clients fall into either of two groups: people who bought houses they can no longer afford, or investors who bought houses to sell, but can't find buyers.
Many are like Kevin Schmook, 40, of Land O'Lakes, who seized on a popular investment tactic: make a $10, 000 down payment on a house, then sell it for a $30, 000 to $50, 000 profit a couple of years later.
Schmook and his wife, Angela, both in the sales and marketing fields, profited hugely in 2004, when they sold their home and bought a larger one. So the next year, they invested $200, 000 in a townhouse in Wesley Chapel. Early last year, they added a $320, 000 house.
Now, the Schmooks are losing money on both and seeking a tenant for the townhouse.
Managing properties isn't for the faint-hearted. The clientele is somber, to put it mildly.
"A lot of owners, by the time they've waited six months and made the decision to rent, are already in financial distress, " said Jeanne Gavish, former president of the Hernando County Association of Realtors, who tried renting and soon returned to sales.
"You're trying to rent it just to stop the bleeding, " said Gary Schraut, owner of a Coldwell Banker real estate brokerage in Brooksville, who discouraged investors during the boom and avoids handling rentals now.
"They want to cover their costs, but you have to tell them, 'The market's going to determine your rent, ' " said New Tampa's Duncan. "They'll rent at a loss of $600 to $700 a month and try to figure out what to do."
Meanwhile, their insurance costs and taxes are spurting up, unimpeded by any caps.
The double-whammy of rising costs and sinking rents, said St. Petersburg's Crone, "is starting to approach what I see as a crisis on the horizon."
Despite serving distressed owners, managers have to be careful and informed. Tenants have myriad legal rights. Prospective tenants are protected from discrimination. Property managers must avoid sloppy contractors and must understand building codes.
Trinity's Morgan views it as a job for only full-time skilled professionals. From her leadership perch in the state association, she foresees regulators pushing the industry to step up its property-management training.
Late this year, predicted Carlos Fuentes, president of the Greater Tampa Association of Realtors, "You will definitely begin to see a turnaround."
Fuentes said current home sales, while depressed, still surpass anything prior to 2003.
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