Is this possible in Miami?

Question

Hi all!New investor here looking (hoping) to invest in Miami for my first property, if the numbers can work out. But can they? Two properties by the end of 2018 is the goal! Here's what I'm looking for:I'd like a 4-plex buy somewhere... …with landlord friendly laws (Florida, check!)…I would consider living, and maybe house-hack the first year. (Miami, check!)…with good public transportation and closish to an airport.…I can afford two properties. Depending on price and loan options two 4-plexes would be sweet but maybe a 4 and a 2....will cash flow well :)…there is a great property management company. (They say this makes a huge the difference.)...there are good property taxes and no rent control (I hear this changes by zip code)Thoughts? Any suggestions on neighborhoods in Miami that might fit the bill? Whats the overall market like in Miami right now?Cheers,André

Thomas Franklin · Answer

Andre Crabb In one of your replies, you mentioned the possibility of House Hacking. I am not a fan of purchasing a Residential Multifamily Property known as "House Hacking." If you are looking to owner occupy, you may want to consider starting out, with buying a Duplex, TriPlex, or a Four Plex. Many Realtors will suggest purchasing a property using a FHA Loan, to reduce your out of pocket money. If the property requires rehab, the Realtor and/ or Mortgage Broker will suggest applying, for a FHA 203k Loan. A FHA 203k Loan is where the purchase price and rehab costs are rolled into a single loan. Assuming you have a respectable FICO you can buy, with a FHA Loan (3-5% down, a 30 year amortization schedule, and a residential loan rate). You live in one unit and let your tenants pay the mortgage and other property expenses. This will give you experience as both a Landlord and Property Manager. The downside is you will need to live there, for a minimum of one year (to satisfy FHA Requirements); AND because you closed personally, you will not have Asset Protection, in the form of closing in the name of a LLC. What happens if one of your tenants has a slip and fall, on your property, or something else happens to them? You are on the hook and can be personally sued, for everything you own. Some people will say, "Take out a quality Insurance Policy and you will be protected." Ambulance chasing attorneys know their way around and can legally navigate around Insurance Policies. Another downside is you loose on the advantages, of the Federal Tax Code, by not closing in the name of a LLC. If you want to close in the name of a LLC, Mortgage Lenders will offer you Commercial Loan Terms (25-30% down, a 15-25 year amortization, and a ballon due in 5-7 years). This is what I am encountering, in the current Mortgage Industry. If you think you will go FHA, Conventional, FHA 203k, etc. and then Quit Claim the property, to a LLC, or a Land Trust you run the risk of the lender discovering a Title Transfer occurred and activating the "Acceleration Clause" or "Due on Sale Clause" that requires the loan to be paid in full, within 'x' number of days. These clauses are contained, in all Promissory Notes nowadays. Many Realtors and/ or Mortgage Brokers will not tell you this information. Many, but not ALL are only focused on the commissions he/ she will earn and not focused, on your best interests. You may be asking yourself what can I do? Locate a Motivated Seller that will consider Seller Financing. You may have to put more money down (10-15%), but you can close, in a LLC, with no worries about banks. I have a lengthy Legal Opinion, from my seasoned Legal Team regarding this matter.

Jason Brown · Answer

@Andre Crabb Hey Andre welcome to South Florida (Miami in particular) investing. A lot of people are under the impression that investing here is impossible because of the inflated prices that everyone is willing to pay for almost anything. I am currently finishing my first deal which I am hoping to BRRRR and then move on to the next. From the past 6-8 months of searching for deals I have done direct mail marketing, driving for dollars, speaking with wholesalers and much more. For someone entering the game here you may find that a lot of the realtors and wholesalers who you connect with will present that you with deals and proposals that easy math shows you in a just few seconds are really not deals at all. I've come across so many wholesalers and realtors pushing properties for retail value as if they are deals its insane! Whether through wacky ARV's or way off base rental income estimates I have a growing perception that anything that doesn't involve you working directly with a seller one on one is a to be taken with a grain of salt. Others here may disagree but from someone who is actually out here actively investing on a deal by deal basis and without a syndication or unlimited funds I would say that cash is king and the money is in finding the properties that banks won't finance so you can add the value through your fixes and rent them for top dollar. Don't feel intimidated by what some would call bad neighborhoods either. Invest for the long term and look for the neighborhoods that you see experiencing the effects of gentrification. Miami, in my opinion, is the best place to invest because it weeds out the uncommitted and rewards those that keep at it. Keep pushing and you'll do great!

Jack V. Ospina · Answer

Hi @Andre Crabb Anything close to brickell, Downtown, Public transportation, Metro rail is high in demand for rentals in Miami. I would say little Havana area is booming tremendously with multi units and rent quick. I think you do have many options right now for buying and holding with great cash flow.

Account Closed · Answer

Andre,If I were you, I'd try to purchase using "other people's money" and avoid sinking too much money into Dead Equity.So many clients come to me a few months after they purchase, out of money, credit cards run up for repairs and upgrades, with much lower credit scores, wanting to do a cash out loan.Buy and Hold is the name of the game for the next 5 to 8 yrs. The appreciation of FL real estate is what investors are looking forward to in this market.UN-burden yourself by trying to ensure you have a net positive cash flow and buy "desirable" properties. Don't go slum'n, instead look for the higher end properties, in good, appreciating areas.As far as the financing, Qualified borrowers can purchase Rental/ Investment Property with as little as 15% down and for my pre-approved "cooperative" borrowers, closing costs are paid for them as part of what I can present to them.I'm a long time FL Mortgage Broker, Real Estate Investor and landlord who can give you advice that you will never get from 95% of so called "experienced" professionals.

David Fernandez · Answer

Hi @Andre Crabb, I used to live and invest in Miami. Miami is definitively more a flip than a buy and hold market at this point due to the price of real estate, plus high taxes and very expensive insurance. Not saying that you can’t find deals, but it is harder than other markets to find cash flowing assets, after you account for all costs (taxes, insurance, repairs, capex, vacancy, etc). Also, the city has overbuilt in the recent years in some areas and you start see rent price declines, longer vacancies, and rent concessions.Areas that I am familiar with with potential and that check some of your points may be Shenandoah, Silver Estates, Coral Way, East Little Havana. There may be other areas, Miami is huge, but these are the areas that where my back yard when I was investing there. Good luck!

Shaun Patterson · Answer

depending on the area you buy,your financing, and price you might get some around the airport. but as said before the areas change by block in miami. so the numbers might work to house hack but it may need work or not in the best area. per unit prices in miami are acound 120-150k per unit retail and under 100k wholesale.

Andre Crabb · Answer

@Jason Brown thanks for the insights! As a nomad investor, any in-person lead generation is not an option. What has been you most successful approach? Do you not recommend working with brokers/realtors/agents and building a network? If you aren't a fan of agents/wholesalers, who is in your "network"?Account Closed hm thanks for the info there. I don't mind a little work, in fact I expect it. But I wouldn't want to house hack in a bad neighborhood. Any suggestions on which submarkets I should consider?

Andre Crabb · Answer

Hey guys, thanks for all the input!After chatting with @Jack V. Ospina, some other friends, and doing some thinking, doing a flip (maybe two 😜) instead of buy-and-hold is starting to make a lot more sense for my situation.@David Fernandez or anyone else,...have you flipped in Miami? What was your experience like? How was it putting together a good team?

D'andre Martin · Answer

@Andre Crabb I personally would say Broward county would be a great place to invest 20-30 mins away from Miami property taxes also are a little better on pockets. Definitely think it is something to consider. If you need any help brother feel free to contact me I am a realtor in Hollywood, Fl. Best Wishes!

Jay Helms · Answer

I love small multi-family @Andre Crabb. I'm not familiar with the Miami market, but happy to review the numbers on a deal with you. Let me know how I can help you.