Welcome to the Sunshine State!
Florida, like California, has a history of being both the land of investment aspirations and the land where investor nightmares are often realized.
On multiple occasions in the past, a potent mix of retirees, snowbirds, job seekers, and investors from other countries has caused property prices to swing to ridiculously high highs and stomach-churning low lows. In several Florida housing communities, home prices more than doubled in the few years leading up to 2022, but following that year, they’ve plateaued out.
It should not come as a surprise that real estate prices in practically all local Florida markets have once again increased at a rapid pace in the years since Florida’s economy started growing at a rapid pace again. Does this imply that investors may confidently re-enter the warm waters of Florida’s market, knowing that they will see a satisfactory return on their efforts?
Rate of growth in Florida
Also, with a few major exceptions, the current rate of growth is much faster than the rate that was seen about six months ago. The fact that growth is speeding up is a good sign that people will still want to buy homes for a long time.
On the other hand, job rates aren’t the main challenge of the investment markets in Florida. An important factor is the steady flow of senior citizens into the state. However, their presence only shows up indirectly in the employment numbers, like a rise in the number of assistants working in medical offices and checkout clerks at Publix. The flow of money from South American countries is another factor. Most of the money from South American countries goes to the Miami area, but this can change based on the political situation in other countries. On top of that, there’s saving before retirement, which is the hardest to figure out because it involves people who think they might as well buy a house now and rent it out until they move. When home prices continue to go up, this last trait often becomes more noticeable.
Buying by market in Florida
First, think about housing areas where home prices are already much higher than they should be. This is how things are going with our first group. Check out how much home costs have gone up compared to the “income” price. In Miami, this percentage is 39%. The income price is not an exact measurement, but when true prices are more than 20% higher than the income price, a market is thought to be overpriced.
In certain markets, the chance that a boom will be followed by a crash is much higher. Your best plan is to have a short time horizon, unless you are making a long-term investment and don’t mind waiting out a bust. If so, you might want to think about keeping a longer time span. Both fixing up houses to sell them quickly and investing in apartment buildings, which are much less likely to suffer from the effects of a slowdown, are good ideas. Single-family rentals are also a choice in Cape Coral and Orlando, where the comparison of home pricing to yearly rents is still below twenty. However, your rent shouldn’t be more than about 25% higher than the average monthly rent, because that’s where the most renters live. During a recession, not many people will be ready to pay such a high rent.
The second group is made up of housing markets that don’t yet have prices that are considered too high. However, home prices in these areas are rising quickly. For example, home prices in Panama City went up 15% in the past year. In these areas, you can make money by investing in properties that have been fixed up, apartment buildings, single-family rentals, and single-family homes that have been divided into several units. However, you will need to move quickly, which is not how you want to make decisions about investments. A great way to stay in control of how much you spend is to rent out your property at a rate that is no more than 25% higher than the average monthly rent.
The third group is made up of markets where home prices are going up steadily, but not too quickly. This shows that there is a healthy desire for housing. In Sebastian, Crestview and Naples, the price of a house compared to its monthly rent is well above 20. This could mean that you should stay away from single-family renters unless they can be split up into many units. Other than that, every type of investment chance is a good one. These are probably the best long-term investments for conservative investors, except for Naples, which has high prices and an economy that is always changing. Naples is not like this.
There are many more things to think about besides these general statistics when making a choice. However, knowing the specific economic conditions of a market will help you make smart investments.