Newbie: Advice on Buy-and-Hold in Florida

[Matt Banahan]

Have been doing research to narrow down certain areas / cities to invest with buy-and-hold rental properties -- Florida continues to pop up in articles and when looking at metrics such as Pop Growth / Employment growth / etc -- specifically the Tampa, Orlando, and Jacksonville areas.

Understanding it's getting more competitive due to the publicity -- would love to learn and hear insight from members who have invested in those Florida cities and what areas they recommend to start my search. I will be investing OOS, but do have some family in south Tampa and currently getting their perspective of neighborhoods, etc.

Primarily looking at SFH or possible multifamily (2-3 doors).

Any insight is appreciated and hope to add value back as I gain knowledge / experience.

[Russell Holmes]

@Matt Banahan I'm a Realtor in the 'other' less-cool but also substantially cheaper Orange County...Orange County FL.  The Orlando and surrounding areas are a great market to invest due to many of the reasons you list. 300k people per year are moving here, there are more tenants than there are available rentals, and finding qualified tenants for nicely rehabbed properties is a quick process. I'm personally in Apopka, which is in Northwest Orange County, but cover Seminole and Lake counties as well.  While '1% deals' are few and far between, there are solid rental deals to be found. Central Orlando is almost completely priced out of cash flow.  Rents just simply aren't high enough to justify what prices have climbed to.  But travel about 20-30 minutes in any direction from Downtown Orlando and there are great deals to be found.  Prices drop faster than rents do and there are deals to be found in Longwood, Winter Springs, Sanford, Altamonte Springs, Apopka, Mt. Dora.  The infrastructure of toll roads and development is putting previously rural areas 'on the map' so to speak.  Being inland FL instead of near the coast, insurance isn't astronomical, property taxes aren't too bad, and tenants can commute easily throughout the Orlando area.

  I'm closing one house tomorrow that's in Longwood (Seminole Co) for an investor from Monterey CA. He offered based on my walk through video, flew out to see it after inspection, and is closing with a mobile notary.  I'll bring the keys to his PM on Friday after it funds and I throw a couple GFCI outlets in the place for him as a closing gift.  It's a freshly rehabbed 3/1.5 with a carport: new roof, new HVAC, new kitchen cabinets with granite, LVP throughout, etc etc.  It's just over 1000sf and closing at $175,500, beating three other offers to get it for that. It appraised at $178k and market rent is right at $1495/mo, PM is set to list it for rent this weekend.  It's a mile to the SunRail commuter train station, a short drive to two different corporate hubs: Maitland and Lake Mary, even closer to a large regional hospital, and the neighborhood is seeing quite a bit of rehab and development. Insurance (dwelling and $500k liability) is about $770/yr, property tax should be right about $3k/yr after the sale hits records. 

 I'm under contract on another house in Sanford (Also Seminole Co) for a US investor living abroad closing in March. It, too, is a freshly rehabbed house, this one just under 1300sf, 3/2 with a two car garage, screened porch, and back yard on a several acre community pond, closing for $225k. Convenient to I-4, SR 417 Toll, and right on the border of Lake Mary, walking distance to a great Elementary School.  It'll rent for $1650/mo, insurance quote of $707/yr due to being built a few decades more recently than the Longwood property.  Taxes about $4k/yr.  Progress Residential (hedge fund group with 30k+ single family homes) owns 5+ houses in this neighborhood setting a high bar for market rents and keeping them moving up. 

Neither of these homes would be considered a 'home run' deal like a 2015 BRRRR property might be, but they are rock solid homes with new systems, high tenant demand, and in rapidly growing markets. Distressed houses are being bid up sky high by newbie flippers paying too much, but deals can be found on rent-ready homes or those needing basic updates.

I have a handful of out of state investors I'm working with to find single family properties and a few looking at multis.  Multis are few and far between with good numbers in Orlando, but there are some new construction duplexes in Poinciana/Kissimmee (South of Orlando) being built and sold for just over $300k with $2700-2800/mo gross rents and crazy low $4k annual taxes (Polk Co taxes are low) and $540/yr insurance due to being new.

Some of these buyers I'm working with are jumping on deals and throwing in offers, getting some accepted and most out bid, but it's part of the game.  I've got other investor buyers who keep asking me to find 1% deals and saying everything I send them is overpriced. I'll send a property and walk through video to 5 investors.  One won't respond, two will tell me it isn't a deal, and two will throw in offers.  I can't force the market to produce 1% deals and I can't force buyers to understand the market....  1% deals can be found elsewhere in Florida, but there's a reason Orlando is mentioned more frequently than Lakeland or Jacksonville....it is a stronger market long term.  Cap rates go hand in hand with risk.  When investors in general view a market as being more stable, you aren't going to see cap rates like they were in 2014 or 2015 when the market future was more unknown and risky.  Move to a less stable and riskier market and you might find 1% deals with better 'on paper' cap rates.  However, which market is going to play out better in 10-15 years....my money is on the Orlando market.  These 0.7-0.85% deals with low maintenance, new systems, and in growing markets are going to soldier on to become phenomenal deals in a few years when entry level houses start north of $250k and you can't touch a 3 bedroom rental for less than $2k.  With the level of population growth and tenant demand, even if prices soften market rents won't.

I just saw some stats published by the Orlando Regional Realtor Association that median price climbed 8% from January 2019 to January 2020, Inventory of homes for sale dropped 15%, Sales increased 16%, $ Volume increased 24%. Meanwhile population has been growing for decades, unemployment is low, hundreds of millions of dollars worth of infrastructure and development is going on and mortgage rates are low.