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1031 into Florida advice needed
I live in the Pacific Northwest and have been investing in real estate here for years, but am considering retiring in Florida. I have a size-able portfolio that is a mix of commercial and residential. I didn’t acquire my portfolio by being some sort of an investment genius, rather, I just used profits from my business to buy whenever I had an opportunity. I then used most of these proceeds to upgrade the properties and make them more valuable.
Now I'm looking to sell off my assets and reinvest the money in Florida utilizing 1031 exchanges. I am open to commercial or residential. Probably leaning a little more towards residential, though for more stable cash flow. Further, I'm leaning more towards SFR than apartments. I am open to apartments, but my past experience with them has left a little bit of a sour taste in my mouth.
My question is, which town or community or area along the West Coast of Florida or the panhandle would be the best to move my money to for cash flow?
I spent the last phase of my investment career doing what I call snowballing. I kept rolling the profits into more properties and rolling the equity into more properties. Now I’m shifting my focus to retirement cash flow. I’ll probably take a bit of a tax hit in order to 1031 without carrying the mortgage across. I’ll have to pay taxes on the mortgage boot. That will leave me with a portfolio in which everything is paid for in cash and have maximum cash flow. It will also dramatically lower my risk profile so that I can relax in retirement.
I’m open to most parts of Florida other than Miami and the surrounding areas. So if you were moving there, which part would you move to if you were looking highest cash flow. Appreciation is nice, but not my primary consideration. All things being equal between two areas, if cap rates are similar, but one area is likely to have more appreciation in the future, that is something I would take into consideration, though.
Hey Thomas,
For the highest cash flow potential in Florida’s West Coast or panhandle, consider the following areas:
Tampa Bay Area: Cities like Tampa and St. Petersburg offer robust rental markets with steady demand. The rental yield is strong due to a growing population, a diverse job market, and a relatively lower cost of living compared to other major Florida cities. St. Petersburg, in particular, has a favorable rental market for single-family homes.
Clearwater: Close to Tampa, Clearwater has a strong rental market with attractive cash flow potential. Its appeal as a desirable coastal city helps maintain rental demand.
Fort Walton Beach: Located in the Panhandle, Fort Walton Beach and its surrounding areas offer a mix of steady rental demand and affordability, providing good cash flow opportunities, especially for single-family rentals.
Pensacola: This city offers relatively high rental yields due to its affordable property prices and stable rental demand, making it a solid choice for cash flow-focused investments.
These areas balance stable cash flow with potential for modest appreciation. Given your preference for cash flow over appreciation, these locations offer good prospects for single-family residences with lower risk and strong rental demand. Hope this helps! Please feel free to reach out directly if you have any other question, or if you would like to talk financing!
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Lender
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Quote from @Ty Coutts:
Hey Thomas,
For the highest cash flow potential in Florida’s West Coast or panhandle, consider the following areas:
Tampa Bay Area: Cities like Tampa and St. Petersburg offer robust rental markets with steady demand. The rental yield is strong due to a growing population, a diverse job market, and a relatively lower cost of living compared to other major Florida cities. St. Petersburg, in particular, has a favorable rental market for single-family homes.
Clearwater: Close to Tampa, Clearwater has a strong rental market with attractive cash flow potential. Its appeal as a desirable coastal city helps maintain rental demand.
Fort Walton Beach: Located in the Panhandle, Fort Walton Beach and its surrounding areas offer a mix of steady rental demand and affordability, providing good cash flow opportunities, especially for single-family rentals.
Pensacola: This city offers relatively high rental yields due to its affordable property prices and stable rental demand, making it a solid choice for cash flow-focused investments.
These areas balance stable cash flow with potential for modest appreciation. Given your preference for cash flow over appreciation, these locations offer good prospects for single-family residences with lower risk and strong rental demand. Hope this helps! Please feel free to reach out directly if you have any other question, or if you would like to talk financing!
Thanks, Ty. Appreciate the feedback.
Hey Thomas - I am an agent and investor in Fort Walton Beach, Fl. I have gone all in investing in this area, with the military population, tourism demand, healthcare population, etc - it is attractive for so many reasons. If you have any questions about the area or investment options, I am happy to help! Most importantly - The panhandle (Emerald Coast) has the best beaches by a mile :)
Quote from @Lake Lutes:
Hey Thomas - I am an agent and investor in Fort Walton Beach, Fl. I have gone all in investing in this area, with the military population, tourism demand, healthcare population, etc - it is attractive for so many reasons. If you have any questions about the area or investment options, I am happy to help! Most importantly - The panhandle (Emerald Coast) has the best beaches by a mile :)
Thanks, Lake. What's the CAP rate there for SFR and commercial?
Quote from @Thomas T.:
Quote from @Lake Lutes:
Hey Thomas - I am an agent and investor in Fort Walton Beach, Fl. I have gone all in investing in this area, with the military population, tourism demand, healthcare population, etc - it is attractive for so many reasons. If you have any questions about the area or investment options, I am happy to help! Most importantly - The panhandle (Emerald Coast) has the best beaches by a mile :)
Thanks, Lake. What's the CAP rate there for SFR and commercial?
Varies by property of course... I don't think cap rate for residential RE is necessarily the best metric, but I try and achieve a 10% minimum gross rent to purchase price figure, so a $300K property I am hoping to achieve a $30K/month gross income goal. This is easier to achieve for short term rentals, and a bit tougher for long term rentals - but I've been getting close for LTRs as of late (closer to 7-8% for LTRs).
Thomas,
I have worked with a number of investors like yourself, from the West Coast, that want to move their investments into a more landlord friendly area that is growing. There are a few areas that are growing now but still under fully developed. I tend to recommend areas just outside the well known fully developed areas. These are areas that the land is still relatively cheap and the growth is obvious. We focus on areas in Southwest, Central, and Northeast Florida. The other investors that I have worked with that have used the 1031 Exchange have found our proses and off market inventory very helpful in the transaction. Please feel free to reach out to me directly to discuss the areas that are working best for investors right now.
Quote from @Lake Lutes:
Quote from @Thomas T.:
Quote from @Lake Lutes:
Hey Thomas - I am an agent and investor in Fort Walton Beach, Fl. I have gone all in investing in this area, with the military population, tourism demand, healthcare population, etc - it is attractive for so many reasons. If you have any questions about the area or investment options, I am happy to help! Most importantly - The panhandle (Emerald Coast) has the best beaches by a mile :)
Thanks, Lake. What's the CAP rate there for SFR and commercial?
Varies by property of course... I don't think cap rate for residential RE is necessarily the best metric, but I try and achieve a 10% minimum gross rent to purchase price figure, so a $300K property I am hoping to achieve a $30K/month gross income goal. This is easier to achieve for short term rentals, and a bit tougher for long term rentals - but I've been getting close for LTRs as of late (closer to 7-8% for LTRs).
Thanks for the feedback. I am not expecting unreasonable returns, but just trying to figure out what would be the best market to go into for LTR returns. Around here I normally calculate about a 30% overhead when evaluating a property, but I’m pretty sure I’m gonna have to bump to 40% to cover the increased insurance cost there.
I’ve seen a fair number of SFRs that look like they would provide 8% gross using the only tools I have available over here, which is rentometer and Zillow. That would probably net around 4.5-5% cashflow plus appreciation given my overly simplistic formula for cash purchases.
Quote from @Todd Anderson:
Thomas,
I have worked with a number of investors like yourself, from the West Coast, that want to move their investments into a more landlord friendly area that is growing. There are a few areas that are growing now but still under fully developed. I tend to recommend areas just outside the well known fully developed areas. These are areas that the land is still relatively cheap and the growth is obvious. We focus on areas in Southwest, Central, and Northeast Florida. The other investors that I have worked with that have used the 1031 Exchange have found our proses and off market inventory very helpful in the transaction. Please feel free to reach out to me directly to discuss the areas that are working best for investors right now.
Great insight. Thank you
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#1 1031 Exchanges Contributor
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@Thomas T., There are some obvious areas that will be touted because of their incredible growth. Most of these have been the home of boom and bust for decades. Not that this is a bad thing. You just need to know what side of the growth curve the market is in when investing in some of those more volatile areas.
For retirement you're wanting to stabilize that income. So that means stable properties and stable cash flow. There's two big metrics I'm looking at now
1. Regional industry - People follow business. So I'm gravitating to the more stable areas that have a great business climate and history. The ones with critical mass - Orlando is always going to be an 800 lb gorilla. Tampa Bay has a great mix of federal and private investment. Seems like everyday a new $500 mil finance company is relocating here. Right now Tampa's rent to cost numbers are a little better. Ft Lauderdale and surrounding suburbs are not going anywhere. Pricier. But solid.
2. anywhere away from flood insurance. Flood insurance and regular insurance can kill an otherwise good property. But you don't have to go very far from the beaches to find properties that don't require flood insurance. And interestingly enough this has also catalyzed the interior 1/3rd of FL east of Orlando and west of the gulf coast. the I-75 corridor including Ocala, Brooksville, Spring Hill, Lakeland, The Villages (yes, and everything around them) are all experiencing incredible growth as incoming folks are looking for good priced properties out of harms way for natural disasters. Yet close enough to hit up the beach or Disneyland on any given day.
If you're a cash investor now is an awesome time to jump into NNN ST commercial. Cap rates were compressed. But financing has stagnated sales. Those with cash have a lot more choice as cap rates are starting to sloooooowly climb to accommodate the higher interest rates.
BTW - There are several ways you can act as a cash investor without having to take a hit on the sales by not replacing mortgages. We've got clients doing that every day. Kind of nice to head into retirement with no debt risk!!
Quote from @Thomas T.:
Quote from @Lake Lutes:
Quote from @Thomas T.:
Quote from @Lake Lutes:
Hey Thomas - I am an agent and investor in Fort Walton Beach, Fl. I have gone all in investing in this area, with the military population, tourism demand, healthcare population, etc - it is attractive for so many reasons. If you have any questions about the area or investment options, I am happy to help! Most importantly - The panhandle (Emerald Coast) has the best beaches by a mile :)
Thanks, Lake. What's the CAP rate there for SFR and commercial?
Varies by property of course... I don't think cap rate for residential RE is necessarily the best metric, but I try and achieve a 10% minimum gross rent to purchase price figure, so a $300K property I am hoping to achieve a $30K/month gross income goal. This is easier to achieve for short term rentals, and a bit tougher for long term rentals - but I've been getting close for LTRs as of late (closer to 7-8% for LTRs).
Thanks for the feedback. I am not expecting unreasonable returns, but just trying to figure out what would be the best market to go into for LTR returns. Around here I normally calculate about a 30% overhead when evaluating a property, but I’m pretty sure I’m gonna have to bump to 40% to cover the increased insurance cost there.
I’ve seen a fair number of SFRs that look like they would provide 8% gross using the only tools I have available over here, which is rentometer and Zillow. That would probably net around 4.5-5% cashflow plus appreciation given my overly simplistic formula for cash purchases.
@Thomas T. We've bought over 200+ units in the Jacksonville, FL area and we currently own and manage 51 units. Before that I worked for a company that bought 4000+ units and I oversaw 1000+ units in Jacksonville, FL. We also 3rd party manage in the Orlando area.
"Cap Rates" are 4.5-6.5 % depending on location, asset type, etc at least for long-term rental residential. I can't really speak to commercials as I don't know or have any experience there.
Find a good insurance person that specializes in what you're looking to do and have them look at deals before you buy them, it's a crap shoot right now.
40% isn't too crazy for the exp ratio without mortgage or replacement reserves, I definitely wouldn't go below that. Florida reassesses taxes every time a property is purchased, every county should have a property tax calculator you can use to get a rough idea or call the county and ask them how it's done. A lot of times it's 80-85% of the purchase price multiplied by the millage rate which you can find on the tax records for that property. You get a 4% discount for paying in Nov of every year versus March, technically every month you pay early is 1% but caps at 4%.
If you're going to self-manage Heist Weiss and Wolk is a great landlord-tenant attorney and they've helped write a lot of the leases and laws for FL NAA and other FL stuff. They have a ton of free videos on the laws here too. Their website is evict.com (which is hysterical to me).
If you're going cash and being conservative I think you'll be fine. We've had an oversupply in housing the past 2 years or so and will probably continue for the next 1-2 years, but everything I'm seeing has shown next construction starts have dropped substantially in the past 1-2 years so good chance we have an undersupply again in about 2-4 years once everything still being completed does finish and gets leased up. However, I'm also seeing some studies suggest our population growth might drop from about 350k to 250k to the state per year due to a lot of the growth being from boomers and they are continuing to age and the boomer population dwindles every day. So still 1% state-wide population growth per year, but possibly less.
Happy to give more general thoughts on stuff if you want to chat or answer specific questions. I don't know the west coast FL cities beyond generalities so I won't speak to them too much.
Quote from @Chris Grenzig:
Quote from @Thomas T.:
Quote from @Lake Lutes:
Quote from @Thomas T.:
Quote from @Lake Lutes:
Hey Thomas - I am an agent and investor in Fort Walton Beach, Fl. I have gone all in investing in this area, with the military population, tourism demand, healthcare population, etc - it is attractive for so many reasons. If you have any questions about the area or investment options, I am happy to help! Most importantly - The panhandle (Emerald Coast) has the best beaches by a mile :)
Thanks, Lake. What's the CAP rate there for SFR and commercial?
Varies by property of course... I don't think cap rate for residential RE is necessarily the best metric, but I try and achieve a 10% minimum gross rent to purchase price figure, so a $300K property I am hoping to achieve a $30K/month gross income goal. This is easier to achieve for short term rentals, and a bit tougher for long term rentals - but I've been getting close for LTRs as of late (closer to 7-8% for LTRs).
Thanks for the feedback. I am not expecting unreasonable returns, but just trying to figure out what would be the best market to go into for LTR returns. Around here I normally calculate about a 30% overhead when evaluating a property, but I’m pretty sure I’m gonna have to bump to 40% to cover the increased insurance cost there.
I’ve seen a fair number of SFRs that look like they would provide 8% gross using the only tools I have available over here, which is rentometer and Zillow. That would probably net around 4.5-5% cashflow plus appreciation given my overly simplistic formula for cash purchases.
@Thomas T. We've bought over 200+ units in the Jacksonville, FL area and we currently own and manage 51 units. Before that I worked for a company that bought 4000+ units and I oversaw 1000+ units in Jacksonville, FL. We also 3rd party manage in the Orlando area.
"Cap Rates" are 4.5-6.5 % depending on location, asset type, etc at least for long-term rental residential. I can't really speak to commercials as I don't know or have any experience there.
Find a good insurance person that specializes in what you're looking to do and have them look at deals before you buy them, it's a crap shoot right now.
40% isn't too crazy for the exp ratio without mortgage or replacement reserves, I definitely wouldn't go below that. Florida reassesses taxes every time a property is purchased, every county should have a property tax calculator you can use to get a rough idea or call the county and ask them how it's done. A lot of times it's 80-85% of the purchase price multiplied by the millage rate which you can find on the tax records for that property. You get a 4% discount for paying in Nov of every year versus March, technically every month you pay early is 1% but caps at 4%.
If you're going to self-manage Heist Weiss and Wolk is a great landlord-tenant attorney and they've helped write a lot of the leases and laws for FL NAA and other FL stuff. They have a ton of free videos on the laws here too. Their website is evict.com (which is hysterical to me).
If you're going cash and being conservative I think you'll be fine. We've had an oversupply in housing the past 2 years or so and will probably continue for the next 1-2 years, but everything I'm seeing has shown next construction starts have dropped substantially in the past 1-2 years so good chance we have an undersupply again in about 2-4 years once everything still being completed does finish and gets leased up. However, I'm also seeing some studies suggest our population growth might drop from about 350k to 250k to the state per year due to a lot of the growth being from boomers and they are continuing to age and the boomer population dwindles every day. So still 1% state-wide population growth per year, but possibly less.
Happy to give more general thoughts on stuff if you want to chat or answer specific questions. I don't know the west coast FL cities beyond generalities so I won't speak to them too much.
Hi @Thomas T.. I am from Seattle and have been investing in FL for years. I have a few thoughts.
1) You don’t have to invest where you live so I think your first move is to pick an area where you will be happy.
2) I still like FL although insurance is a problem and the rental and STR market has softened. I like new construction personally. Plus insurance rates are better.
3) I’ve invested in Ocala, Tampa, and Cape Coral. All have pros and cons.
4) If you are really looking for cash flow, there are much better options than single family properties with cap rates of 4-6%. I am selling mine for this reason
Some syndications will let you 1031 into them and will give you a much higher return - plus you don’t have to manage rentals!
Happy to chat with you about my experience and thoughts.
Tyler