Austin, TX or Cape Coral/Lehigh Acres, FL - Where to invest?

Question

Hi All,

I recently sold an investment property in CA and am looking to do a 1031 in a landlord friendly state. My criteria is as follows:

1- Primary goal is appreciation over the next 5/6 years, cashflow positive preferred but cashflow neutral at a min.

2- Preferred portfolio - Duplex & SFH in TX or Duplex each in TX and FL.

3- Area of interest - I-35 corridor by Austin TX and Cape Coral/Lehigh Acres FL.

4- Focus is on new construction properties for obvious no immediate maintenance needs and Developer incentives on interest.

I know Austin is a no brainer but I would like to get your expert opinion on Cape Coral/Lehigh acres FL area. I have seen older articles on these areas but wanted to get a more recent opinion.

My main concern in FL is the flood and storms. Is that a legit concern in Cape Coral (which is my preferred location over Lehigh Acres)? I feel that cash flow would be better in Lehigh vs. Cape BUT when it comes to appreciation, Cape would be better.

All advice and comments welcome.

Roberto Ramirez · Answer

Thanks for the SWFL update - I'm currently trying to decide what direction to go with a property (land) we recently inherited in Lehigh Acres. My wife and I like the idea of building a house on the property and either using it to generate rental income or just selling it once it's completed. My area of expertise is in finance but in stock/equities/commodities and not in real estate so I'm trying to read up as much as possible on the current state of FL real estate. Sounds like it'll get worse before it gets better. We can hold the land for longer if the idea of building could generate future profits or obviously just sell the property.

Todd Anderson · Answer

Sabuj,  All the investors that I work with have the same opinion considering Cape Coral vs Lehigh.  Cape Coral will have the potential for better appreciation.

In the last 8 months the builders I work with in  Cape Coral have kept building and inventory of New Construction is up.  As has been said before rents have flattened in SWFL because of this.  This inventory will be absorbed but it may take a short time.  We have builders now that are getting aggressive in their Incentives.  We are seeing buy downs to low 4% and now we are even seeing some UNDER 4%.

I do sill like the Lehigh area for Duplex.  It is a much more Blue Collar area and the duplexes acquired by the investors that I have worked with, are doing well.

I talk with other investors who have had problems with their builder's every day.  We encourage the investors that we work with to only look at houses that are 1-3 months from completion.  This work great for 1031 investments and takes away the builder using the investors money to build the project.

Ryan Kelly · Answer

@Sabuj Banerjee if you can secure a cash flow positive new build after builder incentives, snatch it up! Be prepared for the leasing phase to take longer than expected. We have high inventory and we’re nearing the end of the leasing season, which starts to cool off after September.

Adam Bartomeo · Answer

You can check out my market updates to get a grip on the market in SWFL. My most recent post is below. It is a GREAT buyer's market right now. SFH's are on sale but with that comes lower rents. Personally, I do not B&H in Lehigh as there isn't much of a draw there.SWFL Update - Cape Coral, Ft Myers, Lehigh, Naples (biggerpockets.com)

V.G Jason · Answer

Both of these are suffocating with inventory, too much is piling on top, so interesting you pick between those two.

But there's really no reason you put both in the same category. Austin is the superior city. SFR, limit your MF exposure. A high quality SFR in Austin will pay dividends in the long-run, and don't invest for anything but that. 5-6 years is too little, but if you are to expose yourself to that I would still take Austin.

Those deep parts of SW FL are cyclical with retirement up & downs on economic recessions. Austin is everything and then some, the brightest future in the world. It's not going to rally again probably till Q2 2026 but that's okay, that's probably at the earliest.

Adam Bartomeo · Answer

Sounds like some of the folks on here are under playing the true status of the SWFL market...

@Todd Anderson "The inventory will be absorbed but it may take a short time" Define "short time"... What I am seeing is the absolute bare minimum is a year before the market stabilizes. The over building is not even close to stopping and will not be absorbed shortly. There is so much inventory that owners are turning to annual rentals and now that market is completely saturated. The small spec builders are bringing hundreds of homes to the market in the next few months.

Sabuj Banerjee · Answer

Thanks All for your comments and insights! Very helpful. All things considered, I decided to stay away from FL for now. Will be investing in Austin and the surrounding areas.

With that in mind, I have two follow up questions for this community:

1- I am considering purchasing a new duplex from Two Ten Communities in Buda. Any insight on this builder?

2- I am also looking at Lenar homes in Plum Creek, Kyle and Whisper in San Marcos. Trying to figure out which one to pick with cashflow and future appreciation in mind?

Plum Creek, Kyle - 1900 SF, 4 bed 2 bath, Corner lot, large backyard, great school district rating

Whisper, San Marcos - 2300 SF, 4 bed 3 bath + study room, moderate backyard, OK school district rating

The Whisper property is about $20K higher priced. Both are cash flow positive

Any thoughts or comments on these above?

Todd Anderson · Answer

I totally agree Adam.  I would consider 12-18 months short term in a buy and hold investment.  I also agree that there will be more coming to the market this year, witch is not good for the builders, and will create a buyers market.  That's why I mentioned the builders that we work with are offering such good incentives.  New permit applications have now dropped.  Once the market does stabilize, we should again see appreciation.

Bob Stevens · Answer

FL no way!! Correction coming, already started. insurance through the roof. The Cape, a bigger NO WAY LOL. Austin, if you're lucky you will get 3, 4 % net , why bother.  Much better options. I live in FL but do all my investing OOS , avg 15- 20% NET caps based on cash purchases.

All the best

Austin, TX or Cape Coral/Lehigh Acres, FL - Where to invest?

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