best cash flowing areas in sw fl

12 Replies

Hello all,

In the next few months i am coming into some cash and have been trailing through towns and cities in FL to try and work out which locations would provide the best cashflowing properties in areas that have low crime and half decent schools. I only want to buy newer properties say 2003 and newer. one of the places i have been looking at is Cape Coral estero etc. It would be nice to hear where people are investing currently. For instance should i be looking at larger cities like Tampa or Fort Lauderdale.

Any advise would be appreciated to point in the right direction. Many thanks and go Hawks!

Andy

I invest in Lehigh Acres near Cape Coral.  It is a C area but you can still get about 1.5% - 2% ratio of rent income to total value of investment.  3/2 Duplex with garage rents for about $750-850 each.

Hi Andy,

I live in Cape Coral and am a Realtor here as well.  There's a huge demand for rentals here, especially now that we're in season.  I get calls in my office all the time for both seasonal and annual rentals and there's just not a lot out there.  I could easily rent my own 3/2 pool home in a B neighborhood for $1500/month on an annual basis.  Cape has seen double digit value increases over the last three years, but is still a great value.  There are good opportunities for rental homes under $150K. Good schools, low crime, great boating community with the canals and gulf access, and it's being discovered by Europeans, Canadians and the northern folks like me.  Go Pats!  (sorry, had to throw that one in there).

Peter

Hi Guys, Thanks for you response. Peter is it still an option to buy REO that are under market and also i did hear that NE was probably the least desirable area?. Would you cash flow more with a boat access property, the same or less if i was to purchase a 3 or 4 bed sfr?. which area are rent the quickest. Is being close to fort myers going to sway prospective tenants?

Kamil I already own a property in Lehigh but i bought it quite a while ago and things have changed alot down there since. I think i know of the duplexes you speak of. I suppose the good thing about those is  your less likely to have the a/c stolen along with the water equipment!?. What type of tenants do you get in those types of properties and how much are you spending on maintenance rough;y per year?. I had one rough year when renting mine as the water equipment was stolen twice. now i have it installed it all in the garage so it is far less likely to be stolen. I bought in a more remote part of lehigh so you live and learn i suppose althouygh i know it goes on a lot !. However all in all its been an excellent investment.   

PS just some info on the good and bad experiences of owning in the duplexes would be great to hear about...

thanks again in advance to both of for your time. 

PS Peter if you have any opinions about duplexes it would be great to have your thought too. 

Andy

Hi Andy,

It depends on your budget and long term plans for the property. If it's a home you might want to live in yourself someday and being on water (fresh or salt water canal) is important to you then you'll spend more upfront and you'll also have the potential to earn more on shorter period rents from seasonal renters, though this is a more management intensive plan.  

Alternatively, you could spend half the money on a nice cookie cutter 3/2 in a good area off-water and rent it annually and have a healthy ROI, and hopefully solid appreciation down the road. I guess it all depends on what you have to spend, your mid-long term goals, management plan, and other factors.

To respond to your other questions: I think there are nice neighborhoods in the NE, but there are some run-down neighborhoods too.  I just searched duplexes for sale in Cape Coral and there are 41 currently on the market. I have only worked with one client who was looking for a duplex.  You'd have to analyze each one to see if it makes sense.  There are fewer foreclosures on the market now and I really don't come across any great deals; they're often priced in line with non-distressed homes.  I think some of the best deals are found on the mls if a potential buyer takes the time to analyze the numbers and neighborhood.  Again, strong demand for rentals here and good values on the purchase side, you just have to look for them.

Peter

Yes, Peter is right on the money with the foreclosures, that they are priced in line with non-distressed. In addition to still finding the best deals on the MLS; even though the numbers are not as good as even last year.

When buying, you have to stay within the Westminster area (West of Gunnery Rd) because the rent values are higher.  Anything East of Gunnery rents for about $100 to $200 less.

As far as negative vs positive.  I haven't had anything stolen thus far, but there is quite a bit of repair cost that I incur with the A/C and the septic systems.  In reference to the septic tank, it is EXTREMELY important to keep in mind that it has a life cycle of about 10 years, aspacially if there is only one servicing both units.  Wares and tears faster, than as if there were separate ones for each unit.  After that the tank has to be re-placed at a cost of approx $6-$9K.  Because of it, I try to stay away from anything older than 2007.

When screening tenants, it's a bit different from regular screening.  I still make sure that income is x3 the rent, but other than that it's a lot about meeting the applicant and getting to know their situation.

I aim at 15%+ cash on cash return.  And even though I don't buy with appriciation in mind, it is highly likely that these duplexes will go up in value since they are priced well below construction cost.

 Below are 2014 numbers on 5 of my duplexes.  First number is my maintenance and repair cost and the second number is the expense ratio.  Very Important!! I manage my own properties, so you would have to add the Property Management % to the expense ratio. A lot of times I buy these duplexes with tenants in place, therefore in duplex #2,4,5 where the Repair cost is higher, that is because during turnover I had to do more intensive renovation to the unit (tiles etc)

Maintenance/Repair           Expense Ratio

1)  $2,600                               35%

2)  $5,100                               50%

3)  $1,000                               20%

4)  $3,500                              40%

5)  $5,000                              50%

Peter, i currently live in seattle and have about 500K equity in the house i currently live in(minus taxes realtor fees and moving expenses etc). a bit of history...I have 2 duplexes in buffalo one in lehigh and one in england. I'm a Brit but been in the states for the last 10 years. Currently an aerospace engineer and im a 5 handicap at golf!. Im thinking of selling up(put house on market in april) and heading down to live in SW florida for how long im not sure. the current plan is to spend the majority of the cash on C class and one on A which i will live in while im there. Basically i have not fully worked out what i;m exactly going to do. i would be great to keep in contact with you both if i do end up heading to that area.
Peter could you send me a sample of the dupelxes in cape coral. I'm not in a position right now place offers. also if you could send me one canal property that with a little tlc could be rented out as a seasonal that would be great. thanks
Kamil,
I really appreciate you taking the time to send my some numbers(so each property cost on average $271 per month for maintance and repair). So these septic tanks are not on duplexes younger than 2007 or are you saying they just have a few years to go before needing to be replaced?. i do have more questions but i will stop here!. Thanks again to both of you.

They all have septic tanks.  Like you said they just have some more time.

Hi Andy,

I'm pleased you're still talking to me after my Pats beat your Hawks yesterday, great game!

I sent you a colleague request, and I'll be happy to send you some duplexes and canal homes here in Cape Coral.  

Also, I hope you're married.  With $500K equity in your primary residence you and your spouse will save on the capital gains hit, but it's only up to $250K if you're single.  So if you're not married, go get married fast :)

Regards,

Peter

Peter I was engaged about a year ago but not any more which is why I mentioned above less taxes! I assume it's going to be around a 25k hit! Unless I can pull off the 1031 and have the taxes deferred.  I will look out for your property links, thanks. 

Hi Kamil!

I appreciate your piece on Lehigh Acres. I am currently in escrow on a duplex in the Westminster areas like you mentioned. It is my first real estate investment . I am curious to know what type of homeowner insurance you have or recommend. In particular to help out with ac and septic units. Thanks

@Carlos Preciado Lehigh runs from just east of 75 quite a ways east. There are a few upper end areas near the interstate.  I recently had a vacancy in Lehigh and it was difficult (in my opinion) to find a decent quality tenant. I would definitely screen everyone (no matter where) using credit and criminal background checks. I had quite a few approach me with evictions and not enough income. I am going to dispose of the single unit I have in Lehigh and replace it with another unit either in the Cape, Bonita-Estero, or Naples. FYI it is a 3/2/1, tiled throughout, central air, well and septic, with fenced back yard. I get $835 per month. If you have trouble finding a qualified tenant you could use an agent (pay them a one time fee). 

thank you for the tip John. I will be inheriting tenants that are already paying 850 and 750 for a 3/2/1 with fenced yard. I plan to interview PM companies and definitely plan  to re-screen tenants and renew leasing contract along with increasing rent to the one side that is renting at 750. Thanks again

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