Buying a foreclosure or distressed property to fix up and eventually put on the rental market could be an adventure for someone with extra cash and lots of patience and handyman skills, but in the end it might take a while to start making any money.
The duplex at 118 Ormond Court was designed and built specifically as an investment property to rent, and it comes complete with renters already in place in both units.
Broker-Associate Cheryl Michel of Daley & Company Real Estate is marketing the duplex for her client, who she said has come to appreciate the details included in the two homes by Sebastian-based ANDO Construction.
“The notable features of this property are its owner’s preparations for long-term use as an income property,” Michel said. “They tiled all of the floors throughout for cleanliness and longevity. The interior was painted with an extra-durable, washable, long-wearing paint for minimal touch-ups at changeover.”
Storm damage can cause trouble, expense and lost income for landlords, especially those who don’t spend their summers in Sebastian and may need to coordinate repairs remotely. Though it’s impossible to build a hurricane-proof home in coastal Florida, the Ormond Court duplex has been built to weather the elements.
“It has a hip roof and is concrete block construction built in 2006 to 140-mile per hour wind code for low insurance costs,” Michel said.
Renters moving from a single-family home into a rental can be faced with the prospect of putting belongings into paid storage for lack of closets or a garage in an apartment or condo, but these duplexes offer plenty of storage space on site and a convenient location.
“Unlike most duplexes in the area, the units each have a single-car garage. In addition, the property is located on a large pie-shaped lot that backs to a small canal in an area of newer properties within minutes of schools and shopping,” Michel said.
Every month a rental stays vacant means mortgage payments covered solely by the owner, so Michel said it’s comforting that she can tell prospective buyers about her listing’s great rental history.
“Importantly, the duplex has been perpetually rented since it was built; it produces a consistent, steady cash flow with a current capitalization rate of 5 percent – based on list price,” she said.
With the brisk annual rental market in the Sebastian area and the unique features of this property, it could be a smart investment with potential for income growth, on top of an increase in property value as the home market in general continues to rebound.
“There appears to be plenty of room to increase rents from the existing $850 per month to $900 or $950. At full list price, this would produce a cap rate of 6.3 percent – significantly above any CD at the bank!” Michel said. “ It’s a solid, producing investment property suitable for investors looking to add a low-maintenance consistent cash producer to their portfolio, or for owners who wish to live in one side and offset their mortgage by renting the other.“
With increased rents to what the market will bear, Michel calculated what a prospective buyer and investor might expect from his or her investment.
“In this scenario (based on full list price, 20% down, interest at 4.25% for 30 years), a mortgage payment including taxes and insurance would be $1,343. With a renter in the other side at $950, the owner’s payment would be $393/month,” she said.
“That’s pretty cheap living! And today’s rate on a 5/1 Adjustable Rate Mortgage is only 3.18 percent – which would bring the payment to $1,218 and the owner’s balance to only $268/month,” Michel added.
Michel said it’s a good time to get involved in the investment property market and that the opportunities for purchasing existing rental homes or duplexes that are in good shape and easily rentable are dwindling.
“We are beginning to see more investors dipping a toe back into the marketplace, and 1031 exchanges cropping up again. These are all welcome signs of confidence in an expanding market, and recognition that the low interest rates, plus high demand for rentals, equate to better returns for investors.”
The Ormond Court duplex is close to shopping and to Pelican Island Elementary School and Sebastian River High School. City parks and the public tennis complex are just a few blocks away and the beach is an easy drive over the Wabasso Causeway. Sebastian’s dining and night life are even closer, just a hop over to Indian River Drive.
