Tampa Market Best Investment Properties

[Dillon Cook]

Hey All,

I am still shocked that so many investors are still looking at SFH, condos, and townhomes to invest in right now. Specifically single families tend to cash flow negative right now once you factor in reserves (which everyone should be doing). A couple ways to get around this will not apply to many investors, but you can buy and live-in for one year with a non-investment loan or househack, perhaps find a BRRRR unicorn, or modify a SFH to do room rentals.

I run numbers and speak with investors all the time and I've found that most newer or new-to-Florida investors get tricked by several things.  One, not realizing the property taxes on the listing are inaccurate to what they'll pay.  The only long term rental type I have found that consistently cash flows neutral or positive are Multifamilies.  

I am curious to hear from other agents and experienced investors in the West Central FL markets.  Are folks just not factoring in reserves to their single families now? Are they unaware of insurance and tax reassessments?  Is there a lot of regret from the last year where buyers find out they are negative monthly?

[Josh Green]

Quote from @Dillon Cook:

Hey All,

I am still shocked that so many investors are still looking at SFH, condos, and townhomes to invest in right now. Specifically single families tend to cash flow negative right now once you factor in reserves (which everyone should be doing). A couple ways to get around this will not apply to many investors, but you can buy and live-in for one year with a non-investment loan or househack, perhaps find a BRRRR unicorn, or modify a SFH to do room rentals.

I run numbers and speak with investors all the time and I've found that most newer or new-to-Florida investors get tricked by several things.  One, not realizing the property taxes on the listing are inaccurate to what they'll pay.  The only long term rental type I have found that consistently cash flows neutral or positive are Multifamilies.  

I am curious to hear from other agents and experienced investors in the West Central FL markets.  Are folks just not factoring in reserves to their single families now? Are they unaware of insurance and tax reassessments?  Is there a lot of regret from the last year where buyers find out they are negative monthly?

I think there's a lot of assumptions here in your calculations that might be causing some frustration. With that, generally buying a SFR in a hot and appreciating market that is turnkey with minimum down is going to be tough to get any positive cashflow on day 1. Real estate investing takes more and more creativity than ever to get positive margins in "good" metros and that trend will continue.

Now, there are many many reasons why institutional investors or even newer investors may be buying property that seem to not "cash flow" per your calculations.  

1) They are likely putting more down than you are calculating for yourself.  This is pretty common among seasoned investors and there's been some episodes on BP podcast this past year where you'll hear big investors putting down between 40-60% on properties

2) They have access to better financing terms than you

3) Tax benefits are also almost never calculated or used by newer investors and they are by bigger investors

4) They have access to cheaper rehabs, PMs, etc

5) They may be short or mid-term renting to increase cash flow

At the end of the day it really comes down to the buyer's current cash position, their financing terms, and the opportunities they are willing to take based on their goals.