Should I sell my Fort Lauderdale property & buy in Orlando/Tampa?

Question

Hi,

I own a condo apartment in Fort Lauderdale that I'm considering selling to invest in two small SFH in a cheaper city. It is fully paid and currently rented at 1,700$/month.

I wonder if it's best to keep it and hope for the market to keep rising (it's located in Victoria Park, a good neighborhood) or sell it now and divide the money to buy two SFH for $115-120K each in two different cities in Florida.

I'm looking at Tampa, Orlando and Jacksonville but would be open to other areas.

For example in Tampa I could get a 3 bed./2 bath. house for about $115K and rent it for $1,100 to $1,200. So if I sell I could buy two properties in Tampa and make around $2,400 per month in rental income. But of course I would have to spend twice in property management, maintenance and other fees. Though from my calculation I believe it's still worth it.

I need to do more research for Orlando as I'm not sure if prices are similar.

Questions are:

- Are these markets as interesting as Fort Lauderdale in terms of value appreciation?

- Will I be sure to find long term tenants and limit vacancy? In Fort Lauderdale my condo was almost never vacant in 5 years and the rent kept increasing.

- Will expenses be comparable or even lower? (in terms of HOAs, taxation, etc)

My goal is to make a safe investment, increase my cash on cash return (currently 6,2%) and find the right balance between cash flow from tenants (most important) and value appreciation. Where exactly should I be looking?

Thanks a lot for your answers!

Christopher Hutchins · Answer

@Mylene Bel I  don't currently have any multi-family experience, but hope to own my first by August.

Dave Foster · Answer

@Mylene Bel, Yes, the LLC would have worked as long as it filed tax returns.  But,actually the 1031 exchange is available for foreign investors as well.  That's what makes it so potentially powerful to you.  It is the last opportunity for you to avoid the firpta withholding.  There are a couple of specific criteria that you'll need to pay attention to but it's there for you.

Robert Wilson · Answer

513 E Paris is basically right next door to a major interstate, and as a result that block is never going to turn into an area of major appreciation... and I'm guessing you will have some serious turnover in that spot.

I'm always inclined to advise people to invest close to home and/or consolidate their holdings which will help them build relationships where people will tell them the truth about what is going on in a particular market.

Valentina Naumenko · Answer

@Mylene Bel, you should seek the way to increase your ROI for at least 10%. I checked one of the Tampa properties that yo have mentioned, and it does require some work. Also, it is only 1 bath, not the best choice. Another important aspect is how long the rental property remains on the market. Some of them stay for 2 months.

Maxwell Lee · Answer

Hey Mylene,

Yes you can definitely do better. I don't know Orlando or Tampa that well but I imagine there are good areas with strong rental yield that still can appreciate. I do not think you'll see the type of appreciation you've had, but I also wouldnt expect the South FL market to maintain that pace for much longer. It's possible but high risk. I definitely think ditching the condo fees and moving into two SFH is the way to go. The primary negative is you'd be working in a new market that you don't know as well and also presumably out of town. Good luck!!

Mylene Bel · Answer

Hi @Valentina Naumenko

Thanks for your quick reply!

My cash on cash ROI is 6,2% (I bought the property for $171K in 2011 and I make $10 800 of annual cash flow). I'm pretty sure I could do better.

Since the property is now worth $225K, if I sell I would get about $210K after taxation. And I can add up to $20-25K from my savings if necessary to buy the two properties.

In Tampa I have no specific property in mind but I found out there were nice properties in my price range in Seminole Heights. Is it a good area? For example at this address: 513 E Paris St, Tampa FL 33604. It's on sale for $119K and with an estimated rent on Zillow of $1,242. I can try and find two properties like this.

What do you think?

Mylene Bel · Answer

@Christopher Hutchins yes 2 duplexes could also be a possibility but then I'd have to deal with multiple tenants so it's a bit more risky (but probably offers higher ROI as well). I still haven't made up my mind in the "SFH vs MFH" debate. I see pros and cons for both. Do you have experience with duplexes?

Christopher Hutchins · Answer

Have you considered 2 duplexes? Possibly double your doors?

Mylene Bel · Answer

@Dave Foster thanks for bringing this out, I was actually browsing the web looking for answers about how to avoid the FIRPTA withholding! (I wish I had incorporated a LLC before buying...)

The first exemption would only work if my buyer accepts to sign the affidavit which is not sure at all and I will only find out at the closing. Do you think I can threaten to withdraw from the deal if he doesn't sign or it wouldn't be legal to do so?

The other exemption (1031 exchange) only works for US investors I believe. Since I'm a foreign national it won't apply to me. Or am I wrong?

Thanks for your help!

Dave Foster · Answer

@Mylene Bel, you've probably experienced the pain of FIRPTA withholding.  For those who don't know, FIRPTA is a witholding of 15% of sales price of a property sold by an investor.  It's not a tax per se but a withholding of potential tax and it is a huge chunk that the foreign investor has to give up when they sell pending their own tax return filing.

There are two exemptions - One is if the buyers certify that they will be using the house as their primary residence and if the sales price is less than $300K.  The other exemption is if the investor completes a 1031 exchange.  The ability to not only defer tax but also eliminate the firpta withholding can be a huge deal as you look to grow your portfolio.  There's some complexity to it but it's definitely something you want to consider.

Should I sell my Fort Lauderdale property & buy in Orlando/Tampa?

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