With Terry Story, 28-year veteran Real Estate Agent with Coldwell Banker in Boca Raton, FL
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Vero Beach Offers Quiet Retreat From Busy South Florida
On the docket today Steve and Terry chat about the quiet beach town of Vero Beach, Florida, issues that frequently come up with flipped properties, renter fees versus deposits, and landlord’s insurance. Vero Beach is an hour north of South Florida, and in many ways offers a contrast to the hectic pace and crowds found in the urban/suburban sprawl that stretches from Palm Beach to Miami. Terry describes Vero Beach as a very nice community, quieter and more seasonal than South Florida, and one where nobody lives more than 15 minutes from the beach. Many people from Fort Lauderdale and surrounding towns drive up to Vero Beach for a leisurely retreat from the hustle and bustle.
One difference South Floridians will notice right away is how much easier it is to get access to the beach in Vero Beach. The area also contains abundant natural beauty, from the coast to the Indian River “lagoon” which the Intracoastal Waterway flows through. Other perks include numerous restaurants and golf courses. The luxury community of John Island offers a more exclusive experience for those who can afford it.
Vero Beach Real Estate And Median Home Prices
Terry notes that the median home price in Vero Beach is about $188,000 or $132 per square foot, quite a bit cheaper than what you’ll find further south. There are many single-family homes listing in the 250-350 thousand range. New residential construction has picked up after a long period of inactivity. Like South Florida and other areas in and out of state, the Vero Beach area is no longer seeing foreclosures and short sales. Steve asks whether there’s been growth in median home prices, and Terry confirms that prices are up in Vero Beach as in most of the state to the tune of around 10% annually for the last several years. The relatively low, affordable median home prices offer a clue as to how far they fell during the mortgage crisis. The long and slow recovery from a deep bottom may suggest there is more opportunity for price gains in Vero Beach than in other cities in South Florida.
Buyer Beware When It Comes To Purchasing A Flipped Home
The conversation turns to the hot real estate market and the resurgence of home flipping. Steve asks Terry to talk about some of the potential legal complications of buying a flipped property. She replies that it’s crucial to understand who the actual seller is—is it a bank or an investor, and do they have the legal title yet? This scenario usually follows from a foreclosure. Another murky situation can come up when a homeowner has passed away and left their home to an heir. Sometimes the heir doesn’t have the title before they sell it to an investor or an investor buys such a property but then has to wait a certain period of time before they can legally re-sell it. This may mean that as a purchaser you have to have two appraisals done before you can buy it. The bottom line is that you need to know who the seller is and be on the lookout for issues that can arise with a flipped property.
Steve recalls that during the height of the housing bubble, he saw home flippers buying homes but not closing on them before re-selling them. Terry says she saw some of that back in the mid-2000s but hasn’t seen it lately. What she has seen a lot of recently are investors buying a home, fixing it up, and then having to wait 120 days or so to sell it.
Flipping Houses Not As Easy As It Looks And Many Do It Badly
Flipping houses might seem exciting and easy and better than working a regular job, Steve comments, but the reality is that nothing easy is going to offer a path to success. It’s imperative to treat property flipping like you would any business or investment, which means you need to take care of the legal side of things, know the costs involved in renovating the homes you buy, and understand your market. Terry agrees, adding that she’s seen a lot of would-be investor/flippers taking shortcuts on repairs and remodeling, opting for cheap cosmetic fixes that don’t address the real issues the home has. As a prospective buyer, be attentive to and skeptical of work put into the property by flippers.
Renter Fees Vs Deposits
Steve asks Terry to talk about the difference between the fees and deposits that landlords ask renters to pay before moving in. Terry remarks that an even more confusing phrase you come across is “non-refundable deposit,” which is really just a euphemism for fee. Fees, of course, are never paid back, in contrast to deposits which are refundable. You see fees frequently associated with pets, the idea being that more likely than not a pet will cause some damage or perhaps increase cleanup costs. Landlords don’t like to use the term fee because potential renters see them as a way for the owner to squeeze even more money from them.
Landlord Insurance
Steve wraps up the conversation with a look at the relatively new topic of landlord insurance. He wonders whether investors who’ve bought income property—a residence they intend to rent out—need landlord insurance. Terry admits she’s not super familiar with landlord insurance but does know that it protects property owners from “covered perils” like severe weather, natural disasters, vandalism, and even injuries to tenants that occur at the home. These policies can also provide “income coverage protection” which gives landlords money to pay for alternative housing for their tenants in the event that the property is too damaged to be inhabitable, as from a fire. Landlords would lose less money while fixing a property in that scenario. Finally, there’s “rent default coverage” which offers out-of-pocket money and help with legal fees in the event that a tenant stops paying rent. Terry notes that landlord insurance is roughly 25% more expensive than home owner’s insurance. As with any insurance policy, you hope you never need to use it, but it’s usually a very good idea to protect your assets and income.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent, Terry Story. Terry is a 28-year veteran with Coldwell Banker. And today we’re going to talk about Vero Beach. Welcome to the show, Terry.
Terry Story: Thank you for having me, Steve.
Steve Pomeranz: So, Vero Beach is a town that’s about an hour or so north of South Florida. Tell me a little bit what you know about it.
Terry Story: Sure, it’s actually a really nice community. I’ve been up there. It’s more seasonal, there’s lots of restaurants. It’s a quieter community than what we have here down in South Florida.
They’re got an active Coast Guard community. And so you’ll find a lot of naval retirees retreat there.
Steve Pomeranz: Okay.
Terry Story: Anywhere you live there, Steve, you’re like 15 to 20 minutes away from the beach. So, as a matter of fact, we get a lot of people from, say, the Stuart area, Fort Lauderdale area, who go up there as a retreat to get away from the hustle bustle of our areas.
Steve Pomeranz: Yeah, I mean, things are getting very crowded in South Florida. And to do anything is a bit of a challenge and a fight to get there, to park, to pay. But Vero Beach is very much a quieter, little bit more sleepy community. It’s easy to get access to the beach with free parking.
It’s a beautiful area, they have a wide lagoon, so to speak, there. And the Intracoastal, right?
Terry Story: Yes, the Indian River, they call it the lagoon, but it’s actually, what we could the Intracoastal, it’s the Indian River.
Steve Pomeranz: What’s the median price for a home up there?
Terry Story: The median price is about $188,000, which comes out to about $132 a square foot.
Steve Pomeranz: That’s pretty low.
Terry Story: Yeah, the range, they have a lot of single-family homes 250 to 350 range. They’ve got new construction going on right now, which they haven’t seen in a while. And their market’s like ours. They’re not seeing the short-sales or foreclosures anymore.
Steve Pomeranz: Yeah, what about growth, has the median price been growing?
Terry Story: Absolutely, everything has been growing everywhere in Florida.
Steve Pomeranz: Mm-hm.
Terry Story: Well, the trends are they’ve been going up about 10% year over year. Which is to give you an example-
Steve Pomeranz: Pretty good.
Terry Story: Yeah, it’s really good.
Steve Pomeranz: But if the median house is around 188, they must have been significantly lower before. But there is a high end, a well-known high-end, community up in Vero Beach, as well, on John Island, right?
Terry Story: That’s right, yeah, you’re looking at multi-million-dollar homes. They also have, see, a private golf course community. It’s a community where it’s invitation only. I don’t know a whole lot about it, but I know it exists up there. So, if you’re into golfing and want a nice community, there is that, as well.
Steve Pomeranz: So, the real estate market is pretty hot, in most areas we were talking about that in earlier weeks. People are flipping properties, but sometimes flipping can be a little challenging on a legal basis, tell us about that.
Terry Story: That’s right, what’s important about flipping properties is to recognize or know who this seller really is. For example, banks, REO sales, in some cases, the bank hasn’t yet legally acquired the property.
It’s in foreclosure. So what happens is sometimes the bank will put the home up for sale, secure a buyer, yet they don’t even have legal title to the property. So really what’s important about this is recognizing that there is sometimes when a property is being flipped, who is the rightful owner?
You’ll also see stuff like this, Steve, when somebody has passed away and there’s an heir to the property. It’s a good idea to find out if they have title to the property at that point, another real common problem that we see when a property is flipped. If an investor purchased the home, they haven’t owned it for a certain amount of time yet, you may be required to obtain two appraisals as a purchaser. So you just need to understand and know who the seller is and recognize that there may be some issues if this property has been flipped.
Steve Pomeranz: I remember in the last bowl real estate market in ‘05 and so on that people were buying homes and they weren’t even closing them.
They were selling them before they close them, it’s kind of like they were buying like an option on the house technically. But I mean have you see any of that these days?
Terry Story: Well, I haven’t seen any of that, I do remember seeing it and really the thing that I saw most really had to do with an investor fixing it and having to wait so many days before they could sell it to somebody getting a loan.
Steve Pomeranz: Yeah, yeah.
Terry Story: That seemed to be the number one thing that, I don’t remember what it was. Maybe 120 days. I don’t remember exactly what it was, but you had to wait. Especially with an FHA VA finance involved. They wouldn’t allow it to be flipped like that.
Steve Pomeranz: Yeah, one caveat here, the idea of flipping homes seems really kind of exciting and easy to do. It’s a lot better than working.
Terry Story: [LAUGH] When it works out for you.
Steve Pomeranz: Yes, but remember that like anything, if it becomes easy, it’s probably not going to succeed in your life. So you have to treat it like a business. You have to look at the legal aspects of things, the actual cost of getting the property up to speed. You have to understand the market. You really, really, really have to treat it like a serious business, not as something that you can just do so easily with the promise of getting rich quick.
So let’s remember that, yeah.
Terry Story: Absolutely. And they’re taking a lot of shortcuts, Steve, and will go in fixing a house, and then one project leads to another project, and they run out of their budget. So, you’ll see so many shortcuts with these investors, if they don’t-
Steve Pomeranz: They throw some paint on it, some paneling, I mean-
Terry Story: Yeah, they open up a can of worms, and then they don’t finish their job, they just close up that hole, just be aware.
Steve Pomeranz: Be careful out there. All right, let’s talk about renters here, I think this is important, this is a question that many people have.
You go out renting, and you see that they want you to put some money down, and they call it a fee or they call it a deposit. What is the difference between the two?
Terry Story: I think what’s confusing is they have what they call a non-refundable deposit. Really, that is a fee if you think about it. And where you see this most often, Steve, is with pets. Some landlords will say, “I will allow you to have a pet. But there’s going to be a non-refundable deposit,” which really they should just call it here is a pet fee.
Which is a fee, that means you’re not getting the money back. It’s what a fee is. It’s the cost to have the pet versus a refundable deposit. And when it comes to pets in itself, it could be a charge, a fee, or it can be a refundable deposit, depending if there’s no damage to the property, you’ll generally get your money back. So that’s the main difference.
Steve Pomeranz: Yeah, that pet fee doesn’t sound right. The pet non-refundable deposit doesn’t sound right. I mean if you got a deposit and there’s damage, that’s what the deposit’s for. I think a non-refundable deposit is exactly that, it’s a fee, it’s an extra cost.
Terry Story: Right, they just don’t want to call it a fee, I don’t know why.
Steve Pomeranz: No, they don’t. Well, I think I know why—because they know it’s just adding to the guy’s profit. And is it really fair? I wonder about that.
Terry Story: Yeah, it depends.
Steve Pomeranz: It depends.
Terry Story: Everything depends. [LAUGH]
Steve Pomeranz: All right, so now here’s a question. Do investors, let’s say you want to go out and buy a property and start to rent it out, do you need landlord insurance? This is new.
Terry Story: Yeah, this is something that I never really was aware of.
Apparently, there’s an add-on that you can get called landlord insurance. And landlord insurance covers a variety of stuff. But, in general, it will protect the house, apartment or condo, whatever it is, against covered perils. So, for example, if there’s severe weather, natural disasters, vandalism. It might also cover the owner if someone is injured at the property, like if a tenant trips.
Some landlord insurance policies also provide what they call income coverage protection. So, for example, if the property becomes unlivable due to an event like a fire, the landlord would have to pay a fair market value for rent while that house is being repaired.
Steve Pomeranz: Well, that’s interesting.
Terry Story: Yeah, and then some other policies offer a rent default coverage. So if the tenant doesn’t pay, the landlord would be able to receive out of pocket money and assistance with legal fees.
Steve Pomeranz: Yeah, well, that sounds expensive. [LAUGH]
Terry Story: What I understand is landlord insurance is about 25% more than a home owner’s insurance policy.
Steve Pomeranz: Yeah, yeah, I’m sure it is.
Terry Story: So, I mean it’s like anything else, Steve, it’s insurance.
Steve Pomeranz: You know, last year we went to Boulder to visit some relatives, and we stayed in an Airbnb, and the day before there were three apartments and two of them are burnt. So-
Terry Story: Wow.
Steve Pomeranz: Yeah, so, and our’s kind of smelled, but they got it all fixed up, and we were fine. But, I guess the landlord, she lost all of the rent from that. So, the landlord insurance would have kicked in by then.
Terry Story: Yeah, I mean, I want to look into this because I really don’t know anything about this specific little policy.
Steve Pomeranz: Okay.
Terry Story: And I guess it varies from location to location as to how expensive it is.
Steve Pomeranz: Well, insurance, you hope you never need it, but sometimes you’ve got to get it because you want to protect the rest of your assets and your income and so on. My guest, as always, is Terry Story. Terry is a 28-year veteran with Coldwell Banker, and she can be found at terrystory.com.
Thanks, Terry.
Terry Story: Thanks for having me, Steve.
