Is 12% COC reasonable in the greater Tampa Bay, FL area?

Question

While evaluating duplexes and single family homes in the Tampa Bay, FL area (From Clearwater/St Pete out to Lakeland), I've received feedback from a local agent that finding a property yielding a 12% COC return in the greater Tampa Bay (Florida) area is unrealistic. I've watched many of the webinars where it is repeated that 12% COC return is generally the minimum you want, along with at least $100/door in cash flow (Though I'm targeting 200+). Being new to REI, I'm unsure if this is true, and what they say in the webinars is only limited to certain areas and/or limited to ideal markets... Or, is it reasonable to look for these deals and perhaps they're not wanting to put in the time with me to find these deals or they have just been unable to find them? I'm in no rush and my target is 2-3 properties this year, depending on price point. Should I consider lowering my expectations for COC returns, or should I continue to evaluate properties, as suggested in the webinars, until I find one that meets that criteria? I understand that every deal is unique and there can be other variables to consider, so this is just an 'in general' type question. Thanks!

Sam B. · Answer

12% CoC is high in this market and a good rule of thumb is not to believe anything you hear from anonymous real estate investors on the internet.

You're not going to get under 25% down non-oo on a multi at anywhere near ~5% for 30 years fixed. 90% of lenders follow Fannie/Freddie guidelines, those who don't charge extra or shorten terms to make up for it.

Account Closed · Answer

Hi Phillip, I like this calculator:  https://www.calculator.net/rental-property-calculator.html

You'll need to look up some numbers to enter into it.  These are handy to find some of the numbers you need:

This one will give you average rents and vacancy rates (scroll down to see vacancy rates after you choose a metro area:

https://www.deptofnumbers.com/rent/

Property tax calculator: https://smartasset.com/taxes/property-taxes

I am a doubting Thomas.  I like to crunch my own numbers.

Stephanie Simmons · Answer

@Phillip Rosin

A lot of title companies will have a calculator on their site that will give you an estimate of things like taxes and the closing fee.

Ask the sellers what they are paying in insurance  and/or hook up with an insurance agent that can give you pricing on a landlord or commercial policy.

Ryan Webster · Answer

@Phillip Rosin

We invest in the Tampa area. I can tell you it's a very hot market. Acquiring a property that yields 12%coc at aquisition will be hard and most likely be in an area you dont want to invest and with a tenant profile you dont want to manage. However finding a value add property with the opportunity to yield 12%coc is absolutely doable.

Tampa is one of the few markets left where absorption is still out pacing completion of new construction deliveries to the market. Which shows demand is higher than supply.

Rent growth year over year is just above 6%. Which means almost every property for sale should be showing loss to lease giving opportunity for organic rent growth just by raising rents to market prices. Combined with opportunity to reposition property through renovations and you could prove even higher rent premiums. Tampa's demand to supply spread also provides very low vacancy rate of 4.5%.

Charlotte Dunford · Answer

@Phillip Rosin in mobile home park investing where I'm at. Not only is 12% coc achievable, for one of my heavier value add parks, I'm getting 20% for my investors alone, not even including my split. Consider mobile home parks or another asset class when traditional residential real estate becomes saturated.

Ola Dantis · Answer

@Phillip Rosin

Results portrayed in webinars are no guarantees of future investment results.

BUYER BEWARE...

Gavin Welch · Answer

@Phillip Rosin your 12% Coc seems high especially for duplexes or quads.. now you may get lucky, but I think it’s a bit high

Gavin

Phillip Rosin · Answer

@Stephanie Simmons thank you. I misunderstood before.

Stephanie Simmons · Answer

They aren’t protected. You can typically go to the tax appraisers website - many of them will calculate how much the taxes has been reduced by SOH “Save our home” legislation. Also look at comps from the year before and see how much those homes taxes were assessed.

Also the tax I was referring to in the prior post was title transfer tax.

Phillip Rosin · Answer

@Stephanie Simmons When buying a personal home, taxes can go up greatly after reassessment. Is this typically a consideration with investment properties as well, or are those not protected by the same annual increase limits as a homestead property? Thank you.

Is 12% COC reasonable in the greater Tampa Bay, FL area?

Most Popular Reply