First time buyer of rental property in miami. Need advice.

6 Replies | Miami, Florida

Hello,

I am here for advice on miami market. I am moving to miami this summer and interested in buying a condo or single family house in Coral gables, pincrest, south miami, downtown or brickell area. I am staying in miami for two years and will move out and rent out the property afterwards. I am mainly looking for all done homes with no need for any type of work due to time constraints.

From what I noticed, there is nothing I can find that will break even or generate positive cash flow if I move out and rent out the place. Is there any advice or recommendation? Should I still buy or just rent for now? should I target condos or single homes? my budget is about a million for a nice place.
Thanks in advance!

@Firas Rabbat as @Carlos Rovira mentioned, the Miami market is very difficult to cash flow... especially when it comes to single family. While you may not generate cash flow, all of the areas you mentioned benefit from significant both current and historical upside appreciation. 

I would argue that it would be a much better investment to purchase something for yourself in one of those areas instead of using your capital to pay rent that ultimately benefits only the landlord. You get 0% ROI for paying rent while purchasing will give you several benefits including asset appreciation, principal pay down, and tax benefits/ depreciation.

Once you move out in a couple of years, you can re-evaluate the property to determine if it makes sense to keep it as a rental (in which case you still get all of the above benefits; however, the tenant is now covering the principal pay down), or sell it and capture the potential gains from the property's appreciation. Regardless of which you decide, I believe that your capital will serve you better investing it into an asset instead of using it to pay rent. Hope this helps!

Everything is overpriced! As I mentioned on a reply from a different post, there's only one place to find great deals but its a Risk, and if there's no risk there's no reward. 

@Firas Rabbat Single Family Homes are tough to cashflow at this point in time. Its a much harder cashflow when you are looking in prime areas and also move in ready with little to no sweat equity or value add. 

You do have an alternative for both Single Fam Homes or Condo in highly desirable areas for Short Term Rental. Single family homes as STR are great since there is limited inventory in any given area, add a pool and or amenities and you will be in the 90 percentile for the area in terms of occupancy. From experience SFH perform generously near shopping centers and culturally attractive areas. These include Little Havana closer to Brickell the better, Gables near Miracle Mile, Downtown, Miami Design District. Also if you're located 10-15 min near the beach it is a BIG +.

Condos it is a different story due to Condo Assoc. although there are buildings that allow it.

One more factor to consider are rapidly increasing rents. We are now experiencing a severe shortage of rental inventory (especially in certain school districts) and that is resulting in bidding wars (yes, on rentals!) and homes renting "over rental asking price" (5-10+%!. Not sure what rent numbers you are using, and, most comperables reflect the past; not present or inflated future. Trust this helps with your number crunching.

@Firas Rabbat I agree with all of the posts above. I would just add that you focus on where you want to live and buy something that you like. Odds are that other people would like to live there too so you shouldn't have an issue buying/renting when it comes time. Also, I personally steer clear of condo investing. I prefer small MF or SFH where you own the entire property and retain control. You may want to explore small MF's, live in one unit and rent out the rest.