Florida Real Estate Q&A Discussion Forum

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Michelle Reid
  • Rental Property Investor
  • MA
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Best market & strategy for appreciate now cash flow later

Michelle Reid
  • Rental Property Investor
  • MA
Posted Jan 15 2022, 10:08

My husband and I live in MA.  We are looking for LTR in FL.  

We have owned a multi-family in the past and got to experience ALL the pros and cons of being a landlord.  We've seen rents DEcrease, 2+ months vacancies and the joy of getting sued and selling in 2010.  So we are really trying to minimize the pain this time by getting as much info as possible.

We are looking for income in retirement.  Retirement would be about 5-8 years down the road.  We do not NEED cash flow now but would like to avoid negative cash flow over $200/month.

Our budget is around $250 - 300k.

We are trying to decide on a market.  We have narrowed down to Cape Coral, Tampa, Kissimee, Lakeland (general areas).  The theory is to find the next up and coming market with a discount to future value.  Or is that false logic?  

What market and strategy would you suggest?  Buy a LTR in a less competetive market and scale in a year or two?  Buy in a competitive market and scale?   I know appreciation is not guaranteed.

We prefer the markets with industry rather than solely tourism for the LTR appeal.

Thanks for reading!

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Kristin Kiddy
  • Real Estate Agent
  • Ormond Beach, FL
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Kristin Kiddy
  • Real Estate Agent
  • Ormond Beach, FL
Replied Jan 15 2022, 19:47

Tampa is already here as a market and prices reflect that. If you are looking at Kissimee... are you thinking STR? I would look at Orlando proper if you are set on LTR. Or perhaps some of the areas West of Orlando like Apopka (I've heard good things). If you want to look at up and coming areas I would consider Sanford, Deland, etc. They are bedroom communities to Orlando. You didn't mention any east coast cities, but I have to plug my area.. Daytona/Port Orange/Ormond Beach. Your budget will be a little challenging no matter where you go if you are looking at cities and populated areas. I know for my area, you can still find some decent single family options that don't require a lot of renovation for between 300k and 350k.

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Michelle Reid
  • Rental Property Investor
  • MA
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Michelle Reid
  • Rental Property Investor
  • MA
Replied Jan 16 2022, 07:56

@Kristin Kiddy thanks for the info.  We are thinking LTR since we are OOS, I believe that's a better place to start and build the team without so many moving parts.  I will check out the Daytona area.  What do you like about the area?  Is it a tourist area or is industry moving in to add jobs?

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Replied Jan 16 2022, 08:15

I am currently also looking into the various markets in FL. I personally am from SoFla and know certain areas very well, and I can't say the same for the rest of the state. The thing about Florida, as some other states can also relate to, is that every sub-geographic area will completely change the feel/vibe/cost, etc, which in turn will change the demographic/income ratio/quality/value, etc. 

For the price point in which you are bringing to the table, I would search the outskirt towns of Tampa (booming sister-city to Miami/Ft Lauderdale), Jacksonville (currently going through massive overhaul), Tallahassee (state capital with a large state college, great for college focused rentals), Gainesville (University of Florida, large medical employer, and lots of natural geographic attractions such as springs), and I would swap Lakeland for Ocala (Lakeland is notorious for sinkholes which insurance will not cover, and Ocala is currently a big focus for development and tech moving in such as Amazon). 

Tampa proper, Orlando, Miami/Ft Lauderdale are three of the largest markets in the US currently - with rental rates that are keeping up with insane growth rates - but it will be hard to find something that will not require months and months of searching and being beaten out by cash investors with higher than appraised offers. And you will most likely have to do some updates/renos to get it in prime rental status, so more 

That being said, I am from SoFla and currently own a fix-in-flip condo where the HOA fees keep going up. Luckily I purchased off market just before the boom and have rode the inflation up, so my cashflow after we move on will still be well positive. We too are looking to purchase our next rental next year, and what I am mentioned is a rough breakdown of our findings so far for FL. If you were to ask me what smaller town will go through the largest growth in a decade or so from now, I will say Ocala.

But as all things RE, do your due diligence. Review the growth statistics of the cities mentioned, look at the development incentives the cities are offering to developers, review the average income/job growth rates, and pair that up with rental rates/increases. 

Hope my coffee-fueled ramblings helped!

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Nick Velez
  • Lender
  • Florida
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Nick Velez
  • Lender
  • Florida
Replied Jan 16 2022, 08:54

Gainesville is an awesome place to invest! 
Rents are high and if you go with the individual student leases route, your potential for cash flow increases dramatically.   Prices have appreciated here significantly the past year, but should still fall within your budget.  I personally live here and have for the past few years.  
Feel free to message me if you have any questions about the area! 

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Replied Jan 16 2022, 09:10
Originally posted by @Chris Adams:

I am currently also looking into the various markets in FL. I personally am from SoFla and know certain areas very well, and I can't say the same for the rest of the state. The thing about Florida, as some other states can also relate to, is that every sub-geographic area will completely change the feel/vibe/cost, etc, which in turn will change the demographic/income ratio/quality/value, etc. 

For the price point in which you are bringing to the table, I would search the outskirt towns of Tampa (booming sister-city to Miami/Ft Lauderdale), Jacksonville (currently going through massive overhaul), Tallahassee (state capital with a large state college, great for college focused rentals), Gainesville (University of Florida, large medical employer, and lots of natural geographic attractions such as springs), and I would swap Lakeland for Ocala (Lakeland is notorious for sinkholes which insurance will not cover, and Ocala is currently a big focus for development and tech moving in such as Amazon). 

Tampa proper, Orlando, Miami/Ft Lauderdale are three of the largest markets in the US currently - with rental rates that are keeping up with insane growth rates - but it will be hard to find something that will not require months and months of searching and being beaten out by cash investors with higher than appraised offers. And you will most likely have to do some updates/renos to get it in prime rental status, so more 

That being said, I am from SoFla and currently own a fix-in-flip condo where the HOA fees keep going up. Luckily I purchased off market just before the boom and have rode the inflation up, so my cashflow after we move on will still be well positive. We too are looking to purchase our next rental next year, and what I am mentioned is a rough breakdown of our findings so far for FL. If you were to ask me what smaller town will go through the largest growth in a decade or so from now, I will say Ocala.

But as all things RE, do your due diligence. Review the growth statistics of the cities mentioned, look at the development incentives the cities are offering to developers, review the average income/job growth rates, and pair that up with rental rates/increases. 

Hope my coffee-fueled ramblings helped!

===Thanks for the post. What are some reasons you think Ocala will have growth over the next decade or so? Can you outline your thinking please?

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Mary K.
  • Investor
  • Ocala, Fl
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Mary K.
  • Investor
  • Ocala, Fl
Replied Jan 16 2022, 11:19

@Sendil Thangavelu there have been a number of posts lately about Ocala and this subject, if you do a search. Here is a recent one you might find helpful. I live in Ocala and the growth here is unreal. https://www.biggerpockets.com/...

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Patrick Bavaro
  • Fort Lauderdale, FL
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Patrick Bavaro
  • Fort Lauderdale, FL
Replied Jan 16 2022, 19:24

@Michelle Reid I think that all the cities you’ve narrowed It down to have a high potential for a great deal. I suppose It depends on what you are wanting to accomplish. Cash flow? Appreciation? Both? If you’re like me and you want both, I think the key is finding the market that has the highest chance of upside and growth. That market for me right now is Cape Coral boasting an impressive 7% YoY growth! I am currently working on a new build in the city with an all in cost of about $265k, 10% down and rents estimated at $2300/mo. Post construction appraisals for this model (a 4/3) are $377k. The only downside? Time. You’re looking at a year or potentially longer from start to finish with any new build in the city because of how much demand there is (a good thing). Here’s a nice article on Cape Coral that helped me.

https://www.capecoral.net/government/publications/docs/Corporate_Guide.pdf

Good luck!

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Replied Jan 17 2022, 06:47

@Sendil Thangavelu

Before the pandemic, Ocala was known for being an older horse-country for locals and well-to-do retirees from other states looking for an affordable location to ranch their horses and cattle. 

But now, geography is a huge drawing factor to Ocala. It is about halfway from Atlanta to Miami. One of the largest growing job markets is Logistics and Transportation, as we have seen and felt the weakness of during the pandemic. Large warehouses are going up like crazy, one of which has been leased out to Amazon. Marion county has been doing immense improvements to its corridors to allow for the influx of trucking that is currently here and what they project to increase. This is attractive for truckers because they can still do overtheroad style trucking from Atlanta to Miami, and be back home every night to their families and in their own beds. The city literally sits nestled between a cross of some major highways that get you to Tampa, Orlando, Jacksonville, Miami, Atlanta, etc in a few hours. 

With that, new home construction is booming. I cannot remember the exact number, but you can reach out to any realtor in the area and ask - I believe Clay Lehman (BiggerPockets user) is a broker in the area who can provide more info. 

In my humble opinion, yes the major growth I see might be speculative, but I do not see Amazon pulling away from the area, and with that is localized job security. Because of the link between Tampa port - Miami port - Orlando hub alone makes Ocala a better search than areas such as Kissimee or Lakeland. 

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Replied Jan 17 2022, 06:50

Passive Real Estate Investing had a good podcast on some of the home styles going up in the area. Disclaimer - the guest he brings on sounds a lot like a salesman to his business model, but he does make a lot of good points.

https://www.passiverealestatei...

Hope all this info helped!

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Michelle Reid
  • Rental Property Investor
  • MA
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Michelle Reid
  • Rental Property Investor
  • MA
Replied Jan 17 2022, 07:03

@Chris Adams great caffeine-induced info!  Thank you.  It also sounds like Ocala may be a section 8 option as well based on the types of industry.  That is an option we'd like to have as well.

@Patrick Bavaro how does the financing work during the build?  Are you making mortgage payments for the entire year?

Is anyone concerned about saturation with all the new building?  Or FL being less attractive if Covid ever ends?  I know the tax-free status and climate will remain a draw for investors and families.

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Mary K.
  • Investor
  • Ocala, Fl
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Mary K.
  • Investor
  • Ocala, Fl
Replied Jan 17 2022, 07:57

What @Chris Adams said is spot on about the growth, new employers in town and ideal location. Also, we are inland and less exposed to hurricanes, sea level rise, the new flood insurance premium increases, and other "coastal and south Florida" issues. To your point @Michelle Reid , I do worry about over saturation, having been here during the 2003-2007 housing construction boom (and 2008 bust where prices crashed hard). A realtor friend of mine had clients flying in and buying $250K houses for $50K each in the years following the crash. But everyone says the boom today is nothing like last time. I think Clay touches on this issue in a cautious way in his post (the link is above). But I'd like to hear more of what Clay has to say about the likelihood of over building new construction, and if he sees a glut of rentals coming at some point. 

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Michelle Reid
  • Rental Property Investor
  • MA
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Michelle Reid
  • Rental Property Investor
  • MA
Replied Jan 17 2022, 08:16

@Mary K. All good points that concern me.  Thanks for the input.  I agree now is different from 2008.  That was a perfect storm of overbuying along with a crash followed by a recession.  I would hope the next cycle will not be that extreme.

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Patrick Bavaro
  • Fort Lauderdale, FL
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Patrick Bavaro
  • Fort Lauderdale, FL
Replied Jan 17 2022, 11:37

@Michelle Reid Nope, just interest only (3.5%) based off the draw period I am in. Right now, I am in the first draw which is about $36k for permitting and paying $100/mo. As time goes on, the drawn amount will increase therefore also increasing my monthly payment. Once the loan is done, it will automatically convert to a tradition PITI. As for Florida, I think Florida will always be a place of growth for real estate because of no income tax and warm weather. While I do feel COVID has played a role in all of this, I think investors and home buyers are moving to Florida for other reasons to include inflation, ridiculous tax rates, and more. This is just my opinion of course.

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Kunal Mishra
  • Flipper/Rehabber
  • Jersey City, NJ
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Kunal Mishra
  • Flipper/Rehabber
  • Jersey City, NJ
Replied Jan 17 2022, 14:25
Originally posted by @Chris Adams:

I am currently also looking into the various markets in FL. I personally am from SoFla and know certain areas very well, and I can't say the same for the rest of the state. The thing about Florida, as some other states can also relate to, is that every sub-geographic area will completely change the feel/vibe/cost, etc, which in turn will change the demographic/income ratio/quality/value, etc. 

For the price point in which you are bringing to the table, I would search the outskirt towns of Tampa (booming sister-city to Miami/Ft Lauderdale), Jacksonville (currently going through massive overhaul), Tallahassee (state capital with a large state college, great for college focused rentals), Gainesville (University of Florida, large medical employer, and lots of natural geographic attractions such as springs), and I would swap Lakeland for Ocala (Lakeland is notorious for sinkholes which insurance will not cover, and Ocala is currently a big focus for development and tech moving in such as Amazon). 

Tampa proper, Orlando, Miami/Ft Lauderdale are three of the largest markets in the US currently - with rental rates that are keeping up with insane growth rates - but it will be hard to find something that will not require months and months of searching and being beaten out by cash investors with higher than appraised offers. And you will most likely have to do some updates/renos to get it in prime rental status, so more 

That being said, I am from SoFla and currently own a fix-in-flip condo where the HOA fees keep going up. Luckily I purchased off market just before the boom and have rode the inflation up, so my cashflow after we move on will still be well positive. We too are looking to purchase our next rental next year, and what I am mentioned is a rough breakdown of our findings so far for FL. If you were to ask me what smaller town will go through the largest growth in a decade or so from now, I will say Ocala.

But as all things RE, do your due diligence. Review the growth statistics of the cities mentioned, look at the development incentives the cities are offering to developers, review the average income/job growth rates, and pair that up with rental rates/increases. 

Hope my coffee-fueled ramblings helped!
 

Hello Chris, curious about whats happening in Jacksonville . Why suddenly I read so much Jacksonville is popping up as a favorite in FL. 

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Replied Jan 18 2022, 06:29

@Kunal Mishra I unfortunately am not as versed in Jacksonville as I am in Ocala, but I do have some friends that have moved there years ago. When they did, my wife and I too visited to see if it was somewhere we would want to move to as well. My anecdote is that it definitely was a big city that has seen some better days...

To me it was "Florida's Detroit City" - as in there was evidence of a lot of activity and growth years ago that had seen heavy heavy decline over the years. But from about a decade ago (the 2008 crash I would estimate) until now, a lot of development and flipping is occurring - hence my analogy to Detroit. There are parts of Jacksonville that have seen the hand of new developers, and there are parts that have yet to be lifted from blight. But, that is what you are hearing/seeing is what I like to call turbulence. There are way more "easy money" opportunities to find in Jacksonville than in locations like Tampa/Miami. To compare to Ocala, I would say that Jacksonville is ramping up much faster than Ocala. If you have money to burn now, to do a good BRRR strategy, then I would look into Jacksonville. If you want to go the buy and hold route, then it depends on the two. Although, like anything else, I would get a good realtor/broker on the ground who knows the area well to help you find the good opportunity.

And on a very side tangent - everything I said above goes for commercial as well. When I visited a couple years ago, there were whole city blocks being advertised for sale near the downtown/historic areas. Ripe for a good developer. And I had even read an article that the mayor or city commissioner (can't remember who exactly) was turning to the owner of the football team to help turn the city around.

Jacksonville is geographically located in Florida where they have beaches, great marine/fishing lifestyle, they get three seasons (ish), are only a few hours drive away from Orlando and Atlanta and St Augustine. The football scene is big in the city and most people are rooting for their Jacksonville Jaguars. There are also great affordable new developments blowing up around the west-side? of the city, where it is calmer than the east-side? downtown area. The city boasts a zoo, museums, and great eats. It really is at the delicate sweet spot of still affordable, and up and coming. I would say that Jacksonville in a decade from now will start looking like a mini-Tampa of a decade ago.