Soooo much out of State and Country investors

8 Replies

Why is there so much out of State investors buying properties here.. Is there any other areas to invest in?  Locals are getting rammed because these companies and investors are bidding these properties up to a 30-40k  spread. The only assumption is so they can add to their rental portfolio because the spread is too thin to make money from a flip.  No flipper is going to make money with only a 30-40k spread to work with... Its just frustrating.   Im trying to understand who is telling the world to put their money in Jacksonville.  Also who do you guys use to look at the property before you buy since you guys are not located in Jacksonville... 

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Real estate investing is the new cool thing to do. Everybody I know wants to become a real estate investor. To a point it is logical. Compared to other investing tools such as stocks or saving, cd-s, etc. real estate is more stable and/or profitable. The same way we realized it's a good tool, others did, too. Many of them will succeed, many people will get burned. The reason they drive prices up is because just as you said, they have more money and any return that is over a savings account, will do just fine. For some international investors, it doesn't even need to make a profit. As long as it beats the inflation in their own country, they are golden. As for you or me, we just need to adapt to the new reality... 

It's a combination of several factors. Although prices are up at the moment which means returns are nothing special - the numbers you can get here are still good compared to other places. 

Florida has no income tax, so a small profit made in Florida is still better than a small profit made in another state which is subject to tax. Also our current president's recent changes to tax law have disproportionately affected states with high property taxes, which makes owning property in lower-tax areas more appealing (property taxes in Jax are somewhat mid-range.)  

Although prices are high enough to limit returns, buying property here is still relatively cheap. I had several clients from states like California where buying property in their home state was prohibitively expensive, but they could afford a decent property here. $500k won't buy you much in San Fran but is a pretty healthy budget in Jax.

One smaller factor is that Duval county doesn't charge impact fees on new construction (and is the only county in Florida that does not) which is great for developers but not so great when there's no money for maintaining our schools.

https://www.jacksonville.com/news/20190423/duval-voters-to-decide-on-proposed-sales-tax-referendum-to-pay-for-replacing-repairing-renovating-schools

Also this isn't Florida or Jacksonville specific, but in times when the stock market is particularly volatile real estate investing becomes more appealing even with lower returns.

Personally as an investor I find all this out-of-town investing a bit annoying (increased competition and increased prices) and am concerned that these properties potentially aren't well maintained. On the other hand, investors often are the only ones putting money into renovating these properties which gradually improves neighborhoods over time. I'm not willing to buy anything in a C or D area, so if an out-of-town investor is, more power to them.

Originally posted by @Sarah Shockley :

It's a combination of several factors. Although prices are up at the moment which means returns are nothing special - the numbers you can get here are still good compared to other places. 

Florida has no income tax, so a small profit made in Florida is still better than a small profit made in another state which is subject to tax. Also our current president's recent changes to tax law have disproportionately affected states with high property taxes, which makes owning property in lower-tax areas more appealing (property taxes in Jax are somewhat mid-range.)  

Although prices are high enough to limit returns, buying property here is still relatively cheap. I had several clients from states like California where buying property in their home state was prohibitively expensive, but they could afford a decent property here. $500k won't buy you much in San Fran but is a pretty healthy budget in Jax.

One smaller factor is that Duval county doesn't charge impact fees on new construction (and is the only county in Florida that does not) which is great for developers but not so great when there's no money for maintaining our schools.

https://www.jacksonville.com/news/20190423/duval-voters-to-decide-on-proposed-sales-tax-referendum-to-pay-for-replacing-repairing-renovating-schools

Also this isn't Florida or Jacksonville specific, but in times when the stock market is particularly volatile real estate investing becomes more appealing even with lower returns.

Personally as an investor I find all this out-of-town investing a bit annoying (increased competition and increased prices) and am concerned that these properties potentially aren't well maintained. On the other hand, investors often are the only ones putting money into renovating these properties which gradually improves neighborhoods over time. I'm not willing to buy anything in a C or D area, so if an out-of-town investor is, more power to them.

Thank you Sarah,  i never really thought about all these factors.  Im a flipper myself and i invest in B/C areas.. Haven't been able to find a good flip in 2 months.  Im tempting to go to the D areas. Compare to six months ago where I could easily find a property in a B area.   Things are changing drastically and we both share the same frustration. Decreased inventory is a huge factor also.  I hope luck is on both our side in the future. 

I also find the high prices and lack of inventory discouraging, but on the other hand it does encourage me to "think outside the box" to some extent.  In the past my husband Jon and I have bought properties in A and B locations that require extensive renovation to hold as long-term rentals, but now we are looking into doing new construction in a few areas that are more "up-and-coming." Gotta change with the times and find strategies that work for the market we have. We'll see how it goes!

It's a follow the leader approach. Once all the big hedge funds came down a few years ago and started soaking up as much inventory as they could, all the mom-and-pop investors followed. You might have a bunch of disciplined investors trying to make offers with reasonable spreads, but realistically all it takes is one frustrated, over-zealous investor to bid over ask to take a good deal off the market. That's going to be common in all the big metros. 

I'm glad this came up. As someone looking to get started in the next 12 months, I feel very intimidated by the idea that the market is saturated with investors here. The few investors I've spoken were not expanding into other counties though; they have enough business in Jax. Any expanding into Nassau or Clay?

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