Mike Geenen has owned rental properties for 27 years and made a nice income, but recently he's been pummeled financially. Although he owns five rental properties without mortgages, he says he is barely making a profit.
"I had to use credit cards to pay my property tax," said the angry 55-year-old Sarasota resident. Geenen is one of a number of landlords feeling the pain of skyrocketing insurance and taxes. They say they also are facing declining rents and numerous vacancies. Members of two local landlord associations say they all know colleagues who have filed for bankruptcy or are losing properties to foreclosure.
Geenen said he is lucky he was able to sell a house last year and use the $300,000 proceeds to bail himself out of debt. A good illustration of his dilemma is the two-bedroom, two-bath rental house he owns near Sarasota Memorial Hospital. In 2002, property taxes on the house were $2,200; four years later they had jumped to $6,702 — an increase of 204 percent. Insurance on the house went from $200 a year to $736, an increase of 268 percent.
He had to lower the rent from $825 to $750 just to keep a tenant. "It came up vacant for three months so I ended up renting it for $750 a month. Once I dropped it to $750, I was able to fill it in a couple of days," Geenen said.
After paying taxes and insurance, he's making a little over $2,472 a year on the house but that doesn't include maintenance costs, or occasional vacancies when he can't collect rent, which can easily eat up his profit. "You should be making $8,000-9,000 a year on a house like that," said Geenen.
And although this year taxes on the house dropped $900, to $5,800, it didn't help much, he said. "These are so high, they need to be cut in half to help me," said Geenen. "I'm just so frustrated. It's so amazing to me that the government can put you out of business."
About 35 percent or 40 percent of residential properties in the two-county area don't have a homestead exemption and many of the owners are in distress, said Alvin Holmes, 67, of Sarasota, president of landlord associations in both Manatee and Sarasota, and operator of the Internet Web site www.landlordsonline. com.
About 5,000 landlords are on the association's mailing list, said Gerri Holmes, Alvin's wife and business partner and secretary of the two landlords' associations. Most are small businesspeople, owning an average of 10 properties, she said.
The Holmes' manage two duplexes that are losing money — a two-bedroom, two-bath duplex in the 5900 block of First Street East in Bradenton and a two-bedroom, one-bath duplex in the 1400 block of 17th Street in Sarasota.
In the past six years, taxes on the Bradenton property rose from $1,088 to $2,319, an increase of 113 percent. In the past five years, taxes on the Sarasota property went from $1,435 to $2,786, a 94 percent increase.
Insurance on the Bradenton property went up from $490 to $1,445, an increase of 194 percent. Insurance on the Sarasota property went from $995 to $3085, an increase of 210 percent. The mortgage on the Bradenton house costs $1,356 per month and on the Sarasota property, $1,630 per month.
The Bradenton duplex rents for $700 per unit, while the Sarasota duplex rents for $850 per unit. And that doesn't include any clean-up, maintenance or cost of vacancies when they occur.
"I know about nine landlords who are basically losing their businesses," said Alvin Holmes. "A good share are retired, they invested money in property to bring an income in through rentals."
David English owns almost a dozen properties in Bradenton. "I've been in the business 40 years so I've seen a lot of things come and go but it's never been like it is now," he said.
"Property values have declined dramatically so renting properties is less now," he explained. "Not as many people are working as before. Construction has virtually stopped on the residential side so a lot of people have gone elsewhere to find jobs which means we have fewer people and haven't been able to do so well."
Businesspeople can still make a living from rentals but only if they bought property some time ago and have no mortgages, said English. Newcomers find they can't sustain their businesses, he said.
Construction employment statistics for the Sarasota-Bradenton-Venice metropolitan area show the number of jobs began to decline in March of 2007.
"These tradesmen were such good payers," said Holmes. "You could get your rent every month like clockwork." B.W. Powell is 87 and has owned rental property in Sarasota for 50 years. Most of his rental properties are between U.S. 301 and 18th Street.
Half of his 51 properties are vacant, he said.
A legislative fix?
Landlords are unhappy about the Legislature's plan that would cap assessments of nonhomesteaded property at 10 percent. "We have no faith now in our state politicians because they keep giving more to the homeowners, which is okay, they need to be protected," said Holmes. "But what happens is homeowners pay less and the government raises the taxes for businesses."
Relief is coming, said Kenneth Wilkinson, the author of the Save Our Homes Amendment, property appraiser for Lee County, and a member of the state Tax and Budget Reform Commission studying long-term changes to the state's tax structure. It is considering a proposal by former state Senate President John McKay that calls for plugging loopholes in how the sales tax is collected that would generate $9 billion. Wilkinson supports the idea for a long-term solution.
"If you're a landlord on a duplex, we're talking about being exempt if we get our way," said Wilkinson. "It would cut their property tax bill on average 45 percent. That applies to everybody."
1400 BLOCK 17TH ST., SARASOTA, DUPLEX, 2 BED/1 BATH
5900 BLOCK 1ST ST., BRADENTON, DUPLEX, 2 BED/2 BATH
2002 2003 2004 2005 2006 2007 ASSESSED VALUE MORTGAGE/MONTH RENT/UNITTAX $1,435 $1,452 $1,396 $1,683 $2,162 $2,786 INSURANCE n/a $995 $1,319 $1,319 $2,907 $3,085
TAX $1,200 $1,437 $1,687 $1,934 $2,105 $2,319 INSURANCE $490 $510 $751 $795 $1,600 $1,445
In the past six years, taxes on the Bradenton property rose from $1,088 to $2,319, an increase of 113 percent.In the past five years, taxes on the Sarasota property went from $1,435 to $2,786, a 94 percent increase.