Applying the 1% Rule in Florida
I’ve been doing some brief research into the markets of Jacksonville, Tampa, and Orlando. From what I see most of these areas a lot of people say are very good investment areas. Just by doing a quick look though it doesn’t seem that the 1% rule applies very well in these areas. Is it a good idea to stay looking here or move on? Also anyone familiar with the area is there a reason the rents are so low compared to the purchasing prices?
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The areas mentioned are growing areas and are becoming expensive to buy in. The 1% rule is a good tool for a quick valuation but there are a number of other factors you should incorporate into your underwriting. Also, where are you reviewing deals from? Loopnet and nationwide brokers? These sources usually have some of the highest valuations since they have a much more extensive buyers list. A small broker in Central Florida does not have the buyers list of a national commercial brokerage (you can usually get a higher price if you have more potential buyers (out-of state)).