Who's Up for Seconds? (Homes, that is!) Opportunities abound in the Florida second-home market. Here’s how to get your share.
For nearly 25 years, Rick Clegg has been serving second-home buyers in Jupiter, just north of West Palm Beach. His realty firm offers vacation rentals, gives out-of-town visitors a taste of the area’s “get-away” lifestyle and helps them buy the right property.
“We also have an ancillary business, Jupiter Outdoor Center, that rents kayaks and provides outdoor adventure experiences,” says Clegg, broker-owner of Weichert Realtors®, Sherlock Home Finders. “It gives a whole new dimension to the service we provide, allowing visitors to experience the transforming power of nature.”
On the Gulf Coast, Doris Hellermann, a sales associate with Pelican Realty in Cedar Key, has spent more than 25 years selling second homes to buyers through the ups and downs of the national economy. “Second-home buyers and investors have discretionary income, so changes in mortgage rates have a relatively small impact,” she says. “They also tend to be sophisticated people with strong technical skills. You have to know how to connect with them on the Internet as well as in person.”
Throughout the state, real estate professionals are building their business by catering to second-home buyers. And although there are fewer investors today than there were a year ago, there are still plenty of opportunities—provided you know how to market your services. A Changing Market
Since the 1950s, Florida has been one of the most popular states for second-home purchases—a trend that’s intensified in recent years. “Snowbirds” from the Northeast and Midwest, weekend visitors from the southern states and international buyers from Canada, Europe and Latin America recognize the lifestyle and financial benefits of owning properties in Florida.
A 2005 study by the National Association of Realtors® (NAR) indicated that 15 percent of recent buyers owned two or more homes, either for vacation use or for investment. A follow-up NAR study in January 2006 provided a closer look at the nation’s second-home buyers.
Reviewing that study with a focus on the Florida market, Paul C. Bishop, manager of real estate research at NAR in Washington, D.C., found the median age of Florida second-home buyers was 59, the same as the national average. But while only 21 percent of U.S. buyers purchased a vacation residence in a building with five or more units, the Florida figure was 47 percent. “The state’s condo boom reflects what people are buying and owning,” says Bishop.
And while 65 percent of U.S. buyers said they considered their vacation home a good investment, for Florida buyers the figure was 85 percent. “This suggests that people are purchasing homes in Florida partly for the lifestyle and partly because they think it’s a good financial investment,” Bishop says.
However, Bishop expects that higher interest rates and the recent run-up in Florida home prices will continue to slow the investment side of the market. “Over the near term, vacation-home sales will hold up better than investment property purchases,” he says. “As interest rates creep up, there will be a smaller pool of opportunities for investors to buy properties that make financial sense.”
Around the state, sales professionals report a similar story: continuing interest among vacationers but a drop-off among investors. “If the past six months are any indication of the future, the coming year will see maybe half the number of sales we saw last year,” says Hellermann. “Prices seem to have topped out for the moment, sending many investors scurrying back to the stock market. I think we’ll have more second-home buyers for whom investment potential is secondary.” Focus on Boomers
From a statewide perspective, there’s no question that second-home demand will continue to grow from the aging baby boom generation, according to Brenda Genant, vice president of Florida sales at Coldwell Banker The Condo Store, a specialty division in Atlanta that helps developers market their new products. “From everything we’ve seen in our research, demand will grow,” she says. “Buyers in the northern states want to buy now and retire in another four or five years.”
Genant says that individual investors with a long-term perspective are still interested in Florida. But with much more inventory on the market, they can bargain more aggressively in search of the best deal. “Sellers have to have the unit looking perfect and priced exactly right,” she says.
One of the messages that sales associates can convey to investors is that the recent stabilization in prices presents a buying opportunity, says Genant. Just like buying stocks, investors can get a better deal on a second-home purchase when prices aren’t rising through the roof. Buyers won’t be able to resell or flip their units quickly, but the longer-term prospects remain strong, she says.
As for reaching second-home buyers, Genant says its essential for sales associates to find traditional and creative ways to build that relationship. “You have to be active in using the Internet and other avenues to reach out to them.” Identify Your Market
To succeed in the second-home market, you need to identify the primary sources of out-of-town buyers. As Hellermann says, “It does no good to market to someone who’s not buying.”
That could mean focusing on the state’s traditional feeder markets, like the northeastern United States for South Florida and the Midwest for the Gulf Coast. But there have been some significant shifts in the past year.
In the Panhandle, for instance, second-home demand from Louisiana, Alabama, Mississippi and Texas is down in the aftermath of Hurricane Katrina, according to Richard Eimers, a sales associate with The Eimers Group in Destin. “We’ve lost maybe 20 to 25 percent of our market, because these people have other things on their minds,” he says. But Eimers reports more buyers from Georgia, Tennessee, Ohio and even the Northeast.
Jim O’Connell, a sales associate with RE/MAX Partners in Fort Lauderdale, says European buyers are increasingly important in the South Florida market. “Domestic investors have been gone from our market for quite some time,” he says. “You have to look internationally for second-home buyers taking advantage of the strong euro and pound sterling.”
O’Connell says those buyers need to be educated about the differences between buying in Florida and in popular second-home European locations. For instance, there are guaranteed-rental-return plans in Europe that don’t exist in the United States, as well as legal issues pertaining to ownership. “We travel to Europe at least once a year and speak to clients, as well as estate agents who can serve as referral sources,” he says. “Having the appropriate Realtor designations helps in establishing those relationships.” Use the Internet
For many Florida sales professionals, the Internet is the primary marketing tool for reaching second-home buyers. Scott Reid, a first-year sales associate with Reid Resort Realty Inc. in Orlando, says almost 100 percent of his second-home leads, including many investors, come from the Internet. “One thing that’s helped is responding quickly to those e-mails,” Reid says.
Eimers wants to be sure potential buyers can find his site quickly. “I use a pay-per-click service, so if you use a major search engine and type in ‘Destin real estate,’ my site will be in the top three,” he says.
Once a potential buyer (or seller) has landed on his site, Eimers offers a variety of features to engage visitors and increase the site’s “stickiness.” In addition to finding a searchable property database, Eimers’ Web visitors can control a 24-hour live beach camera or see nautical activity through a live harbor camera. “I want to give visitors a good sense of the lifestyle offered by our market,” he says.
Marc Rasmussen, a sales associate with RE/MAX Properties in Sarasota, agrees that a Web site should promote the area’s lifestyle—especially since today’s buyers tend to be focused on personal use of the property.
“Second-home buyers love the Sarasota area because of the pretty beaches, great boating, fine dining establishments, golf courses and the [area’s] arts and culture,” he says. “When they visit my Web site, they can get background information on the area, prices of the homes and condos for sale, and [they can] search for properties that are actively for sale as my site is updated daily with new listings.” Build a Referral Market
To reach second-home buyers and investors, Lowell and Sally Senitz, a broker and a sales associate, respectively, with Investors Real Estate Inc. in Bonita Springs, rely on word of mouth and a large, professional referral network rather than advertising their services.
“We’re friendly people, so wherever we go, we mention the properties we have available,” says Sally Senitz. “We’ve also built relationships with reputable mortgage brokers, 1031-exchange specialists, insurance agents and other professionals who support the buyer. That’s definitely helped our business to grow quickly.”
To serve prospective buyers, the Senitzes spend several hours a day researching the Naples market and then preparing customized reports that identify properties most suited to their customers’ goals. “Our clients are very successful people, but they can’t focus on the real estate market and keep their business enterprises going, too,” says Lowell Senitz. “They need a professional with integrity who has experience in the investment field.”
After 12 years in the business, Todd Nordstrom, a sales associate with Esslinger Wooten Maxwell in Miami Beach, now works exclusively by referral. And maintaining those bonds with past and present clients and customers is a top priority.
After Hurricane Wilma last October, Nordstrom’s team checked on clients’ second-home properties, cleaned out their refrigerators and called the owners with updated information. “I want to give our clients something to talk about with their friends,” he says. “I want them to talk about our service.”
Every year, Nordstrom hosts a client party, inviting owners to bring their friends from places such as New York, Atlanta and Washington. “Most of our clients are end users, and it gives us a chance to say, ‘Thank you’ to our owners, while also meeting their friends,” he says.
Interview the Prospect
Because every second-home buyer has a different set of goals, it’s important for a sales professional to get to know them online or by phone. “You want to spend time with [out-of-town buyers] on the phone before they arrive, so you can show them the right properties,” Nordstrom says.
Rasmussen says a sales professional needs to gauge the buyer’s level of interest in and commitment to the local market. One of the first questions he asks buyers is “Are you looking in other parts of the state?” The answer tells him whether this is a serious prospect or not.
“It’s frustrating to show properties over several visits only to find that they later purchased in another town,” he says. “I’ve also learned that if they’ve never been to Sarasota before, the sales process will be more difficult. They first have to be sold on the area and then find the property that suits their needs. This can take a long time.”
Another key question to ask is whether or not the buyer plans to rent the property. Reid says many buyers in his southwestern Orlando market plan to visit the theme parks two or three times a year and rent their property at other times. “You have to find out their goals for the second home,” he says. “Everyone is different—some want to vacation here; others want an investment that produces cash flow or appreciation.”
If the buyer is considering using the second home as a rental, you should explain the various product options in the market. Nordstrom notes that some condominiums and cities don’t allow short-term rentals, while others are much more flexible. Another option is the condominium hotel, which is typically fully furnished and offers complete hotel services, but is designed for short-term stays. Consider Property Management
Many second-home buyers like the idea of having their own place in Florida, but don’t want to maintain it year-round. To solve that problem, many enterprising sales associates offer property management and leasing services, through either their own companies or a referral relationship.
Clegg, who’s been offering vacation rentals and property management services since 1982, says it’s a natural fit for second-home buyers. “These tenants turn into second-home buyers and investors,” he says. “With our experience, we can offer unique incentives such as guaranteed rental income or a free property management service. This gives us a competitive advantage in the market.”
Clegg says second-home buyers often ask about who will take care of the property during hurricane season and whether it’s possible to open the property for family members or guests when the owners aren’t present. “We turn those concerns into selling features, as property management is an important link for us,” he says.
But Clegg says you can’t do vacation rentals or property management on a casual basis. “If you’re going to include this in your business, you need to separate it from the sales side and use employees for property management. After all, do you want [a sales associate] who’s on the way to list a new $1 million home [making] a detour to an apartment to fix a leaky toilet?”
The second-home market can be a lucrative niche. And, in many ways, marketing to second-home buyers means focusing on the locations from which your area’s buyers come and building your plan around that.