Miami Investment Criteria

[Juan Jose Marcos]

Good Afternoon Everyone,

I am a fairly new member to BiggerPockets and REI with the intention of jumping into the Miami market in the near future. I am actively seeking 2-4 unit properties and wanted to hear some local Miami members/investors specifics on their investment criteria. If you are kind enough to respond, please include what specific areas of Miami you have tied your criteria to (Little Havana, North Miami Beach, etc.). Looking forward to connecting with you all!

What capitalization rates are you looking for in Miami and in what areas? 

Year 1 COC return greater than what %? Subsequent year COC returns greater than what %?

Year 1 total return of at least what % (assuming 0% appreciation)? 

Minimum DSCR %?

Minimum cash flow requirement per year? 

Thank You!

Juan Jose

[Account Closed]

Hey Frank. 

Welcome!

I try to look for properties in neighborhoods that are gentrifying from at least two directions and returns above 8%. My top four neighborhoods are: 

Little River/Little Haiti - Gentrification sandwich: Design District and ex-Wynwooders moving north, Yoga studios and Hipsterness popping up all around Little River from the South. From the North you have El Portal and Miami Shores which is all soccer moms and happy schoolchildren. There is a strip of a few miles between Design District/ Buena Vista and El Portal/Miami Shores that you can still get in at a fairly low price point with performances ranging  from 8-10%. 

Allapattah- It's still the secret weapon and if I spelled it out... well it wouldn't be a secret anymore. 

Little Havana - Soon to be rezoned West Brickell, can still get in at a low price point and shortly will be completely flooded with city folk who are cutting out their commute or HOA. You have Coral Way pushing up from the South and once again the famed Wynwood pushing into Allapattah which is immediately North. But the general world of investors and contractors have picked up on this precious little pocket and while entry prices are still low, the returns are starting to suffer slightly, but if you look hard enough Little Havana is still golden madness.

Contractors are buying, rehabbing and flipping not minding the nearly astronomical value of sitting on it for a year or two until they complete Brickell City Center. So they're making a solid taking and the investors who are buying up these rehabbed properties are in for a small windfall. The wisest of us all are the long term investors buying properties in need of work, doing the work themselves and sitting gleefully on solid cap rates while biding their wise time. 

I've included an article on it below:

http://www.miamitodaynews.com/2014/12/30/west-bric...

Hallandale- Moving a bit more north but there is a pocket here performing at 12% on multi-families. The Chateau group among many other high profile commercial investors have purchased  commercial space in the little strip between Aventura and Hollywood. The commercial properties in the area are worth a heavy minute and the residential areas are dependably following. I would not buy West of the 95 in this area but East of it is a solid, safe and steady investment. Hallandale is the PB & J of Aventura and Hollywood, once again a safe little sandwich. 

Regarding rates of return, like you said I generally like to assume 0% appreciation but playing Devils Advocate, would an 8% net cap rate be unacceptable in a highly appreciating area? Say 8% to a Californian or Londoner and you'll have them swooning. I guess any neighborhood  in Miami you'd best bring your smelling salts, it's Magic City after all. 

Meirah B