FAQs For Real Estate Investors
We enjoy working with real estate investors because they are often able to remove their emotions from the transaction and focus on matters such as value, leverage, property condition and rate of return. Many of our clients are admittedly “addicted to real estate” which means that we see them repeatedly and are able to establish efficiencies and anticipate their needs. Our firm represents real estate investors in a variety of matters, including purchase and sale contracts, closings and title insurance, leases, evictions, financing, and foreclosure.
Below, please find frequently asked questions and answers designed for real estate investors:
Q. I own a few residential rental units and have had to purchase them in my individual name as my lender would not provide financing for a corporation or LLC. How else might I limit my liability?
A. To limit your liability, we recommend that you perform annual inspections of your properties to ensure they provide a safe environment for your tenants and their guests. By way of example, you should check regularly that all smoke detectors are in working order; that all windows and doors open, close and lock easily; that there are no tripping hazards such as tree roots breaking through walkways or driveways; that all handrails are secure; that the home has sufficient exterior lighting and/or motion detectors and that they are in good working order, and that nontempered glass doors have gel stickers at eye level. If your rentals are in an area that attracts retirees, you might consider installing grab bars in the bathtub or shower.
Q. How long does it typically take to evict a tenant for nonpayment of rent?
A. This depends on the tenant and whether defenses are raised, but typically takes 1-3 months.
Q. My tenant is in the hospital and behind on rent. I feel bad about sending a three-day notice. Do I have other options?
A. If the tenant is behind in paying rent and you want to evict him or her, then no, not really. A proper three-day notice is a condition for filing a suit for eviction.
Q. I have five rental properties. May I place all of their security deposits in my out-of-state credit union?
A. No. Per Section 83.49, F.S., a landlord is required to hold security deposits or advance rental payments in a Florida banking institution or post a surety bond by a state-licensed surety.
Q. Can I require that my tenants set up an ACH deposit into my account for their rent?
A. This is not prohibited by Chapter 83, Part II, F.S.
Q. Does the Florida Association of Realtors provide a form lease for commercial properties like it does for residential properties?
A. No, because commercial use varies greatly and includes, among other things, office, retail, food and beverage, and warehouse. Also, commercial leases can cover standalone buildings, mixed-use buildings, condominiums and shopping plazas. The terms therein are more widely negotiated and lease finalization often takes several weeks.
Q. I own a commercial property that is leased, and the tenant is in default and has refused to vacate the property. Can I enter the property and remove the tenant?
A. No, it is called self-help entry by a landlord and is prohibited per Florida Statute Section 83.05(2). This is the case even if the lease provides a provision allowing the landlord self-help entry.
Q. I just sold an investment property up north and would like to do a Section 1031 exchange with a Florida beach rental. What are the requirements?
A. There are rules to qualify for a Section 1031 exchange. One rule is that the properties being exchanged must be of a certain type. IRC Section 1031(a)(1) states in part that “In general no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment.” In their first iteration, 1031 exchange cases were required to be “simultaneous transfers of ownership.” However, after the 1979 case Starker v. United States was decided, it was deemed that property owners were allowed to exchange properties in the near future instead of immediately, and that this was basically the same as transferring the property simultaneously.
If you want to claim the 1031 recognition, you must follow these guidelines:
- Specify the property for exchange prior to the closing
- Within just 45 days of the closing, you must specify the replacement property
- You have within 180 days of the closing to acquire the replacement property
- You must hire a Qualified Intermediary to the oversee the exchange and hold the proceeds from the sale
The tax benefits derived from a Section 1031 Exchange may be lost if the requirements are not properly met. Please speak with one of our attorneys if you are interested in learning more about this option.