Last week I walked into a potential single-family investment for a client of mine in St Petersburg. It was a smaller home, 875 square feet, 2 bedrooms, 1 bath. Recently remodeled. The seller was asking $329k for it. It was only missing one thing: windows!

That’s the market we’re in right now. A seller can ask nearly $400 a square foot for a home that doesn’t even have real windows.

(Before you ask it had jalousie windows, but that’s far from code with current energy standards and hurricane code in Florida.)

So what are we to do in a market like this? When inventory is this low, competition is this high, and it’s nearly impossible to find a deal. I like to remember one simple mantra:

Deals aren’t found, they’re made.

For those of you who have read my posts, you’ll know that I've been in the Tampa Bay market for 5 years now. I spent the first year and a half here building up a house flipping business, and from the end of 2018 to the beginning of 2020 I was a part of 22 flips in varying capacities: agent, developer, general partner, air conditioning repairman, landscaper . . . just kidding on those last two (but not really.)

(You can read a bit about the lessons I learned in house flipping here: https://www.biggerpockets.com/forums/643-tampa-real-estate-forum/topics/846432-lessons-in-house-flipping-in-tampa )

2020, pandemic, rising prices, and people fleeing blue states to come to Florida meant inventory for flips dried up. So, I spent all 5 weeks of Florida's lockdown educating myself and pivoting my business towards multi-family. My thought process was that I needed to take everything I had learned in flipping single family houses: my building supply contracts, my contractors, my knowledge of permitting, etc. and apply it to multifamily in order to scale up.

(You can read a bit about my move into multifamily here: https://www.biggerpockets.com/forums/643-tampa-real-estate-forum/topics/925022-changing-my-business-during-the-pandemic )

And it worked! For a while. . .

You see now it's 2022 and the challenges keep coming. Cap rates only multifamily homes have dropped so low that it’s nearly impossible to find deals that will cash flow. There’s seemingly endless money to invest, but nothing to buy. But then I remember my mantra: Deals aren’t found, they’re made.

My investors and I have had to change strategies in this market. If we’re buying high, we need to figure out ways to squeeze every last nickel out of every property we have. And we’ve had to get creative with it. And we’ve had to adapt our strategy with almost every property we purchase for what suits that immediate market.

Here’s two examples:

Ex1. We purchased two triplexes adjacent to each other in St Pete. Only 1 of the 6 units had been renovated. The renovated unit was leased for $1,700 a month. The other 5 units were leased between $800 and $1000 per month. Obviously there’s a large spread here and renovating the units is a no brainer. However, the rents were so low and with the rising rents, rather than leave the tenants have all agreed to pay $1,300 a month on their renewals. That’s a 23% increase in gross rent without any renovation expenses, any re-leasing costs, or any vacancy time.

Ex2. We purchased a quad plex in Port Tampa City. The buildings are in a great location and were in relatively good shape. The back two apartments had not been renovated and were leased for $900 a month. The front two apartments had one that was fully renovated leased at $1,700 a month, the other was partially renovated and leased at $1,300 a month. As the leases expired we didn't renew the back two units and set to renovating them. Simple renovations: LVT floors, paint, new toilets and vanities, new lighting. We then furnished the units. We're currently getting $2,500 monthly on each with 6 month leases to traveling medical professionals. We may convert one to a full STR as we project we can bring in about $3,500 from that based on our analysis.

The point is you need to really thing about how to best get a building to perform in this market. I had investors that passed up deals at the end of 2019 and in 2020 because they didn’t think there was enough meat on the bones. But with property appreciation, all those deals would have made sense in hindsight.

Deals aren’t found, they’re made. And it doesn’t just apply during acquisition. You need to be making deals throughout the ownership of your investment property to make sure it performs as best it can. You need to think about creative ways to get it to perform and get that cash flow to where it needs to be.

Tampa, Florida

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