Cape Coral, Fort Myers FL Cash Flow Rental

[Emily Wu]

Hi All,

I am starting to look at the Cape Coral, Fort Myers FL area. I am an out of state investor. I want to invest in multifamily properties for buy/hold. Can anyone provide me a little bit more insight as to which area out to the two has more potential for cash flow and how is the real estate market now for the two areas compared to last year/last couple of years? 

Thanks!

Emily

[Trevor Fleck]

@Will F. OOS investor here building 7 SFHs in NW Cape Coral - 6 of the 7 on freshwater canal lots. No one has a crystal ball for sure and it's easy to sound smart when the market goes up and up. That said, a few pieces of information to chew on from my own experiences and information I've gathered:

Back in early 2021, I could get a freshwater canal lot on the MLS for $10-$15k. Those same lots are now selling for $45-$50k. So a 4x increase in just under a year. In early 2021, I could construct a 1600-1700 sq ft 4/2 or 4/3 for $225k through Rent to Retirement. Now I can't do it for under $250k. So build prices went up about 10%, but land went up nearly 400%.

So some would look at that and say "I'm too late to the party." However, keep in mind that rent in early 2021 was around $1,800 for that 160-1700 sqft 4/2 and is now closer to $2,400-$2,500. Additionally, appraisals on that 1600-1700 sqft 4/2 that I could build all in for $238k (lot + build + closing costs) appraised for around $280k, but are now appraising for $360-$410k. 

So today you can still build a 1775 sqft 4/2 (current model I'm building) for just under $300k on a freshwater canal lot (lot + build price) that will rent TODAY for $2,500. I don't think rents can continue on their current upward trajectory. However, Cape Coral has some large tailwinds helping it out such as the massive influx of people (look up recent articles by UHaul on migration patterns and they cite Cape Coral/Fort Myers in specific), low supply of available rental and housing, and overall desirability due to weather, proximity to the Ocean, price point, low taxes, business-friendly state, etc. 

Personally, I think the underlying value of land is what will continue to increase at a rapid pace in 2022. You see that in coastal areas across the nation. It's the land that is the real value. At some point, the combined cost of the land + build (mainly driven by land increases) will reach a point where there isn't enough cash flow to justify anything other than an appreciation move. However, I still think canal lots this close to the Ocean in SW Florida under $50k remain a good value. 

Look, hindsight is 20:20. We all wish we would have bought 100 lots early last year. Who knew? Well @Peter Davis has been singing this for years, but unfortunately, most of us didn't know him then. However, I think you need to look at what's in front of you right now rather than lamenting that you didn't get in earlier and ask yourself if a new construction 4/2 1775 sqft home with a custom builder for $300k on a freshwater canal lot within a couple miles of the Ocean in Southern Florida that rents for $2,400 conservatively makes sense. It does for me. It might not in 6 months or a year, but right now I'm making hay while the sun is shining!