Build to rent in Ocala vs Cape Coral?

Question

Hi all, I came across build to rent SFH opportunities in Ocala and Cape Coral Florida. Would like to get insights into which might be a better investment. It’s for a long term buy and hold. I am a out of state investor and planning to be on Florida’s appreciation (population growth) with decent cash flow. Below are the details.

1. Ocala(Silver Spring Shores), property price $179k 3bed 2bath with monthly rent estimate $1350. B- Neighborhood, cash on cash 5%, advance $15k.

2. Cape Coral, property price $275k 4bed 2 bath with monthly rent 1950. B+ Neighborhood, cash on cash 4.5%, advance $5k.

Both markets seems to be strong rental markets. Any tips or techniques to filter down to one is really appreciate. What other factors do I need to consider?

Stetson Miller · Answer

@Amritha Puliadi Premnath Definitely not with a loan at 4.5%, it would even be pretty rare to see that with a loan at 3.5%. I will say though that it's very easy to beat the build to rent programs, who have realistic numbers in the 2-3% ROI range at best.

Amritha Puliadi Premnath · Answer

Thanks @Clay Lehman, helpful to know that the rental market is strong currently in Shores area . Is it possible to get a property(not new built) that can cash flow at above 10%(with 25% down 4.5% interest) in the area? I am hearing its hard to get one because of the demand ?

Amritha Puliadi Premnath · Answer

@Stetson Miller Thanks for your response! I have been in other markets for few months trying to buy a decent cash flowing units and it is really difficult to get good deal and the numbers to work and felt it was much easier to get a new build compared to move in ready. In the current market is it possible to get a Single family unit(not new built) above 10% cash on cash, rent ready. If so I would be really interested. Please let me know.

Stetson Miller · Answer

Hi @Amritha Puliadi Premnath,

I would be happy to speak specifically about the Cape Coral market! To start off, I would definitely advise against any build to rent plan, unless you absolutely have no time to devote to the investment, and need someone managing the entire process for you. When purchasing through these programs, you're often stuck with their vendors, including a lender, title company, and management, all of which are likely to be average at best. You immediately lose the capability of putting together a solid team, where every component of your team is the absolute best option in that area.

New construction purchases aren't a bad idea in this area, but again, unless you really love the idea of new construction, and wouldn't feel comfortable purchasing existing, then there's certainly better options available from both cashflow and appreciation perspectives. Since you did include info the ROI info to compare the two, I would imagine that at least has a small influence on your purchase decision apart from appreciation potential alone.

With that in mind, Lehigh Acres is another nearby city that I can highly recommend, in which new construction purchases are still a great option. Here, you'll still retain the high appreciation potential (likely to level out in the 5-8% range), with significantly better cashflow (expect 6-7%+ realistically, the build to rent numbers are likely highly inflated).

Let me know if you have any other questions I can answer regarding the area!

Clay Lehman · Answer

@Amritha Puliadi Premnath - good afternoon!!  I can’t speak to Naples market but I would be happy to discuss the Ocala market with you.  Definitely experiencing strong appreciation and rent increases throughout the market.  I have one rental in shores and another under construction.  The one I just finished rented in one day at $1,400 (3/2/1 1,200 sq ft).  That was rented through Resolute Property Management (full disclosure that is my PM company).  Let me know if you would like to connect to discuss further.