How is the Orlando Real Estate market looking right now?

Question

I'm looking to invest in the Orlando Real Estate. How is the market looking right now? I've seen a lot people worry about the cost of insurance.

Chris Grenzig · Answer

@Vin Gupta Shawn is right and he's probably one of your best resources on BP for the Orlando area. From a rental perspective things are definitely taking a bit longer to rent and it's becoming more common to see concessions than 1-3 years ago. Insurance premium relief is trickling back into Florida, as Shawn said, but it's not widespread yet. Rental rates are pretty flat in the Orlando area, and vacancy has expanded and you'll see rates in the 7-10% range, but it just depends on what source you get it from.

The "good news" is I think there are some tailwinds behind rental properties coming int he next 1-4 years. There has been a ton of new construction all over Florida, so supply and demand tipped very quickly in 2022-today. However, new construction starts have plummeted since 2022/2023, so within the next 1-3 years current projects that were started in 2022 will finish up, but the pipeline of projects that started in 22/23 is way smaller so projects being completed in 2025-2028 will be significantly less so supply and demand should tip back (all else being equal). I've seen some reports saying new supply for that 2025-2028 range will drop below the levels of 2015-2018 in many markets in FL but I don't have actual sources and changes in different markets and areas.

I think the combination of fed cuts, insurance carriers slowly coming back, population/job growth being steady, future new supply dropping off, and a few other things bode well for rental properties in the coming years. So if you can find deals that work well today, I think they have a good chance to perform really well in a few years, it's just tough to find those opportunities in FL today.

I say this both as a property manager and also as someone who owns 51 MF units too.

Shawn McCormick · Answer

@Vin Gupta Insurance is an issue state wide, not just Orlando. When purchasing, things that will amplify rates are roofs that have less than 10 years life, old water heaters, flood zones etc. Relief is coming, but just not fast enough. More carriers are being approved to come into the state and the competition should help ease rates.

The overall MSA market is still doing well. Inventory has jumped over 50% from a year ago, but values continue to rise at almost 3%. So, things are taking longer to sell because we have more homes on the market, but prices/values are still high. You can find motivated sellers and still get some deals.

Let me know if you need more info. Best of luck!

Chris Grenzig · Answer

@Vin Gupta it's definitely not easy, I don't think a 1 bedroom apartment is going to do it. I think if you can find a $300k house that's a 3x2 that needs a little bit of work and you can have some small equity built up day 1 that might work.

I would look in the Apopka, Forest City, Longwood, Casselberry, and Winter Springs areas and try to find a house for around $300k, the rent should be $1700-$2,200 and that might cash flow you a little bit. I'm not saying there are hundreds of these houses available, but that might be a better chance than a 1 bedroom apartment near the theme parks.

You could also try to connect with wholesalers and buy a rehab property with the intent to refinance and rent out. It'll be a bit riskier than buying something already renovated, but if you have the right team and numbers in place you could pick up some more equity on day 1, have less money out of pocket, and have something that produces some cash flow.

Cash-flowing rentals in Florida right now are tough overall, so you won't pull up places for sale in the greater Orlando area, throw a dart at the metaphorical board, and find a property that easily cash flows. I think we're in a lull or low point for FL rental properties and there are some potential tailwinds in place for the next few years, so if you can find something decent today, I think there's a good shot it performs well in the coming years. The key is finding something that works today, and the potential tailwinds in the future are icing on the cake.

Vin Gupta · Answer

Thanks for the insight. This is really helpful.

Vin Gupta · Answer

@Shawn McCormick @Chris Grenzig This is really great insight. Much appreciated. I'm struggling to find a property that cash flows. I'm looking at 1 bed apartments (near the theme parks). $300k budget. When I factor in mortgage rates, HOA fees and insurance. All of the properties have negative cash flow.How can I find properties that cash flow positive?

Javed Hussain · Answer

As someone in the greater Orlando market the cashflow numbers work the closer to the hood you are but I've been noticing a much higher vacancy rate at "market" rents.

How is the Orlando Real Estate market looking right now?

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