Moving to FL in 2 years, buy house now and rent?

Question

My husband and I live in Iowa and plan to move to FL. in 2 years when his son graduates. I am thinking that with real estate still low down there it might make sense to buy house now and rent it out for 2 years? How do we determine what would be a financial model that would make this work? I'd obviously love to make money for the 2 years, but since it will eventually be our house, will a lower cash flow situation still make sense?

Aaron Montague · Answer

@Jolene Perry

I'd treat it like any other investment.  If it meets your numbers, whatever they are for cash flow per month and cash on cash return, buy it.  If you want to move into it when you move down there, good.  If you want to buy something else, you've got a solid investment that is generating money for you.

Are you open to living in an apartment building?  Then a 2-4 unit place might be good for you.

Scott Seaman · Answer

I agree with @wes - I'm in St Pete and I think banking on  future appreciation is normally a poor strategy but especially so in Tampa Bay right now - hedge funds dumped billions in over a short period buying SFH last year and that was the prime driver of the increases - not increases in jobs or infrastructure that would lead to sustainable long term growth. There are still a higher than normal percentage in the foreclosure pipeline. Still a high vacancy rate in retail and office markets. A lot of apartment/condos coming online in the next 12 months after a few years of zilch.   The same property can be a great deal, a decent deal or a millstone around your neck with the major difference being measured by 5-6 blocks which no out of town shopper is going to pick up on in a quick trip.

That being said I just closed on a legal duplex/off the books triplex that I'm working on getting the 3rd unit legitimate status. So I'm not totally negative about the area; we just moved here in Nov and love it. Just saying that it's an area getting a ton of press as this real estate market Mecca - and very little coverage of just how complex the market really is here.

Siye Baker · Answer

@Jolene Perry

I think you will find that you have a ton of options. FL is a huge state, with a seemlingly endless supply of houses for sale. There are some really good deals, you will need to make sure that you are not acquiring significant deferred maintanence without it being factored into the purchase price. Get a good inspection from a qualified inspector. I passed on a house yesterday because of all the things the inspector brought to my attention. A good property managment company is crucial. Keep us updated!

Doug Merriott · Answer

A lot of it depends on your strategy. If you are flush with cash and can just buy a house and wait on the returns, great go for it. However if a second house would cause undue strain on your families finances then maybe now is not the time. When you are down here you should take a look around, figure out what city works best for you maybe check out an investors meeting.

Ryan Swan · Answer

So you want move in ready, in a nice area (that you'd actually want to live in), and close to the beach? I doubt a property meeting all of these criteria would be cash flow positive after debt, tax, upkeep, prop. management, and other expenses each year for the next 2 years.

If you find the "perfect property" and want to lock it down so it's ready for your move, then by all means go for it. Think of the cost of renting it out as "holding fees" to make sure you get the property you want. If in 2 years you find that your value has appreciated 10%, then that's icing on the cake.

If you do end up renting it out, don't forget to set the tenant's lease end date to work with your moving plan!

Jeremy Davis · Answer

@Jolene Perry As me and my mother are both agents we have dealt with similar situations. My 1st advice is look online and find a good experienced agent that also does property management. As much as i hate to say this i would call the remax offices as they are normally full of good agents. ( they taylor to high volume higher income agents so you newer or not so good agents won't normally go there, I'm not saying that there companies don't have great agents hell i think me and my mom are both awesome agents and we don't work for remax we own our own brokerage that is small but we love it ) then i would tell that agent exactly what you want! Then make sure that the criteria they rent on is approved by what you would expect. I would rather make 100$ a month on that house for the next two years and not have to worry about the house being trashed! also look for a tenant who is willing to sign a longer lease! and that the lease expires before you get down there.

Aaron Montague · Answer

@Jolene Perry

There are plenty of good opportunities in every market. You just have to go find them. Tampa should have exactly what you want, just make sure you know what that is :) I suggest writing down your personal desires AND your investment goals, then finding a property that matches.

To

@La Nae Duchesneau s point, a lot can change in two years. Maybe you decide that Arizona is a better place for you than Florida. Even then, you still have a positive cash flowing property in Florida.

@Alan Russell  makes an interesting observation about family. I recommend dealing with family because I've had positive experiences dealing with a couple different members of mine. But I believe I had success because we left nothing up in the air. Everything went down in writing BEFORE the money was lent or the work started. I recommend writing everything, and I mean everything, down in an agreement that is signed by both parties and witnessed by someone outside the family. Trust me, you'll be happier in the long run.

Alan Russell · Answer

Interesting topic....My Sister-in-Law is doing this right now (moving to NC though).  Her current house is appraised at 300K and she owes 50K and only has 5 Years left on current Mortgage.  After doing some research she discovered that with the current rates she can refinance the current home for 150k cut her current house payment in half saving $ 700/month.  This will allow her to purchase a home here in NC for around 125000 and pay cash.  Renting this out for a year or two till she is ready to retire will allow herr to live pretty much mortgage fee.  Of course I end up with a little more work managing her property for her in the interim but its family right?

La Nae Duchesneau · Answer

Two things to consider-

1- A lot of things in your personal life can change in 2 years. Someone bought the house 2 doors down from me in Sarasota FL planning on moving there in 2 years when their son got done with high school. They divorced in that time and never moved in. I am not saying that is going to happen to you. But things can happen unexpectedly and when the time is right for you, you won't be second guessing yourself. It will feel right and you will want to do it yesterday.

2-It may be more money to buy a house in 2 years from now when you are ready, but don't forget, you will probably sell your house for more money as well.

Scott Seaman · Answer

@eric - sorry for brief reply, I'm on my phone.  Was mainly discussing residential on the foreclosure end.  Pretty much any Google news search for Tampa Bay foreclosures - current top 5 listings talking about Tampa Bay region still high (but dropping) at a rate of 1 out of 122 houses getting notice, damage area could take as the hedge funds adjust to what they bought last year as well as impact of siphoning off profit from local region that local REI usually pumped back into the community, and somewhere north of 65% of area sales were in cash - with rates still this low. And none of that is really factoring the whole period of flood insurance uncertainty of the last few months to figure out what "normal" means in this market right now.

As for office and retail - nothing cast in stone, a few sub markets have done some big things in the last year but many more are doing worse. Prices are higher but how much is growth vs absorption after a long lean period of no construction?  Majority of leases 5,000 ft or less which indicates more start up with a higher likelihood of not lasting the term of the lease (but indicates improved outlook for consumer demand) and other observations like Craiglist ads heavily pushing the small shared office aimed at the long term unemployed deciding to create their own job by developing mobile apps and such. Mostly personal observation mixed with personal opinion, I don't focus on it full time like you do. YMMV

Moving to FL in 2 years, buy house now and rent?

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