Are you looking to get in on the Florida real estate investment market? It might be a great idea, especially considering Florida's booming housing market.
Even as housing prices have declined slightly from a summer 2022 peak, the market has remained consistently strong. Real estate investors with enough cash to purchase one or more properties can earn significant profits on rental income and more.
Of course, there’s a difference between buying property in Florida and mastering the real estate investment market in the Sunshine State. Read on for a handful of essential tips and tricks to help you invest in real estate in Florida.
Consider Waterfront Properties and Proximity to Amenities
For starters, always consider whether a Florida property is relatively close to a beach, has canal access, or walking distance to other attractions before purchasing it or signing on the dotted line for a loan. Especially if you are in the market for a short-term vacation rental that you can list on Airbnb and VRBO.
Properties near pristine waterfront views, vibrant Downtown areas, and thriving restaurant scenes, such as Brickell or Miami Beach, are generally higher in value and in high demand by renters. We are also seeing neighborhoods like Edgewater, Wynwood, and Little Havana increase in popularity because of its proximity to the arts and entertainment district, downtown area, and beaches.
Lakefront properties and properties with canal access and a boat slip are also in very high demand in Florida, especially in the luxury price range. Which may be a better option for a long-term rental strategy targeted towards tenants permanently moving to Florida such as retirees.
Overall, investors should consider the amenities and attractions nearby to ensure it aligns with their investment strategy and ticks the boxes of their ideal tenant. The investment adage "location, location, location" is especially true regarding properties in Florida but there is also this notion of “living where you vacation” that plays a big role in the decision making of choosing where to live for newcomers seeking the idyllic Florida lifestyle. Which is why factoring in proximity to the water and city center is important for any Florida real estate investor trying to take advantage of recent Florida migration patterns.
Consider Weather Hazards and Long-Term Property Value
Investing in Florida real estate can be an excellent opportunity. Still, it's essential to consider potential weather hazards and long-term property value. Hurricane season in Florida typically runs from June to November, and it's crucial to be aware of the potential impact on your investment.
One factor to consider is the cost of insurance coverage. Waterfront properties, which are often more desirable, are likely to have higher insurance coverage requirements due to their increased vulnerability to hurricane damage and flooding. As a result, insurance costs can eat into your bottom line significantly.
When investing in a property in Florida, it's also advisable to look for properties that are hurricane-proof or to invest in making them so. This includes ensuring that the roof is new and in good condition and installing impact windows, among other measures.
Ultimately, whether a property is worth the risk is up to you as the investor. Still, factoring potential property damage and long-term insurance costs is crucial when making an informed investment decision about Florida real estate.
Vacation Rentals Could Be a Big Market
Retirees and vacationers majorly impact Florida’s housing market. Because of this, you should heavily consider whether you want to purchase and run long-term or short-term vacation rental properties.
The short-term rental market in parts of Florida, particularly Miami, has experienced a surge in demand. This has led to a significant increase in short-term rental inventory hitting the market. This trend offers an excellent opportunity for real estate investors to tap into this lucrative market.
With short-term rentals, you can tap into the booming snowbird market in Florida that runs from October to April, when Northerners come down to the Sunshine State to escape the cold weather.
Additionally, beachfront properties are always popular among vacationers, making them an ideal investment for short-term rentals. The beachfront homes in South Florida are among the most sought-after vacation rentals in the nation. Owning a short-term rental property here can translate to very consistent bookings across the summer months and the snowbird season in the winter.
Buying Land Is a Real Possibility
Completed assets in South Florida, such as single-family homes and multifamily homes, are still priced very high, which is especially true for completed waterfront homes.
Waterfront land is one solution to this issue. Instead of paying a premium for a completed asset, investors are increasingly purchasing waterfront land and building custom homes themselves. With the right design and construction team, these investors can create their dream homes with all the desired amenities.
However, developable land in highly sought-after areas like Miami or Naples have limited availability. The limited availability of developable land in these areas means that investors must act fast to secure the property they want. For this reason, most land deals are cash deals.
However, there are private financing options for land investors that allows to them to fund their land deals as quickly as cash, while they wait for approval on a construction loan.
Investors should keep in mind that purchasing land for development and building custom homes requires extensive planning and can be more time-consuming than buying a completed asset. However, the rewards can be significant for those willing to invest time and effort.
Financing Options for Real Estate Investors
When it comes to investing in real estate, several financing options are available for investors to consider. Each financing option has unique advantages and disadvantages, and weighing these options carefully before making a final decision is essential.
Here are some of the best financing options for real estate investors:
- No-Income Verification DSCR Loans: A No-Income DSCR loan is a loan designed for rental investors to qualify for a mortgage using the property’s cash flow. A No-Income DSCR loan is a great option for rental property owners that are self-employed or foreign nationals and have trouble verifying all their personal income. While there is no personal income verification required for DSCR loan, most DSCR lenders will require a 640 credit score and 20% down payment.
- Vacant Land Loans: A vacant land loan can be used to purchase or refinance residential or commercial vacant land. Vacant land loans are short-term loans that offer interest-only monthly payments, and do not require income verification or established credit history. This is a popular option among developers and custom home builders that require gap financing while they wait for a construction loan approval. Vacant land loans are short-term which means you must have an exit strategy in place to pay off the loan once it reaches maturity.
- Cash-Out Loans: If you have substantial equity in an existing property, you might consider a cash-out loan that provides you with a lump sum of cash at closing. The cash proceeds received at closing can then be used to purchase a new property. The cash-out amount you receive will depend on your current mortgage balance and the current value of the property.
- Bridge Loan: A bridge loan is a short-term loan that can be used to purchase and refinance investment properties. Bridge loans are asset-based loans, meaning that the lender will focus on the quality of the asset. A bridge loan is a great option for real estate investors who require a fast closing due to contractual obligations, pending sale of an existing asset, or requires more time to get approved for permanent financing.
As you can see, there are several options Florida real estate investors can explore when it comes to financing. Your best bet is to work with a lender that can explore all your options with you and help you select the one that aligns best with your investment strategy.
Know the Best Cities for Real Estate Investments
Perhaps most importantly, you need to know the best cities for investing in real estate in Florida. There are many prime markets for real estate investors like you, but a handful of cities stand head and shoulders above the rest.
Here are the top Florida cities for new real estate investments:
Miami is a world-renowned city and a hotbed for tourists and investment activity. Home prices in Miami have increased over the last several years, reaching a very long-term growth trend.
Median home prices are high at $589,900, but if you have the cash to make these purchases, you can bet that you'll be able to sell set homes for a profit shortly. This is doubly true, given the quality and quantity of beachside condominiums and homes available.
Naples is a top destination for real estate investors due to its high rental rates and strong appreciation potential. In 2022, the average rental rate for a two-bedroom apartment in Naples was $2,319 monthly, while the median home price was $840,000. Additionally, Real estate appreciation is projected to be 5.6% in 2023.
These favorable metrics indicate that Naples, with its sprawling golf courses and high-end shopping destinations, is a promising market for real estate investment.
Sarasota, with proximity to beautiful beaches like Siesta Key and Lido Beach, is a prime location for real estate investing.
Sarasota had an average rental rate of $1,876 and a median home price of $381,000 in 2022. Additionally, the city is experiencing steady real estate appreciation, with an estimated increase of 6.7% in 2022 and 5.2% in 2023.
Fort Lauderdale, with its upscale restaurants, bars, boutiques, and hotels, not to mention the Broward County beaches, is a vibrant South Florida city.
It has an average rental rate of $2,065 and a median home price of $451,000. Fort Lauderdale has also experienced steady real estate appreciation, with a 10.7% increase in home values in 2022 and a projected 6.8% increase for 2023.
With its beautiful beaches, vibrant nightlife, and growing job market, Fort Lauderdale could be a promising option for those looking to invest in Florida real estate.
Orlando is a prime market. Not only is Orlando a center of commerce and tourism for the Sunshine State, but it’s also seen a tremendous home price increase of 21.5% over 2022.
For long-term profitability, there’s also good news: it’s one of the top 15 cities in the US for projected population growth. The median home price in Orlando is $395,000, and the average rental rate is $1713. Consider purchasing single-family homes or apartments here to take full advantage of the situation.
Contact Vaster Today
As you can see, investing in real estate in Florida means choosing your properties wisely, jumping at opportunities when they arise, and taking advantage of the sunshine state's unique value proposition.
It’s easier than ever to jump on those opportunities with Vaster.
Our knowledgeable, experienced loan officers can help you get the financing you need for prime Florida real estate.
Contact us today to see how we can help you achieve your portfolio goals.
Real Estate Investing In Florida: All The Tips And Tricks | California Business Journal
2021 Fair Market Rent in Florida | RentData.org
Jacksonville-area home prices rise 0.6% in May, with houses for sale in high demand | The Florida Times-Union