Posted about 2 months ago

The Best Cities in Florida to Buy Investment Property

Featuring an impressive 1,300 miles of pristine beaches and endless sunny skies almost year-round, Florida’s real estate market shines for savvy real estate investors eyeing top-performing rental properties.

As remote work becomes the norm, the Sunshine State’s appeal skyrockets even further, attracting a surge of new residents in search of both long-term stability and short-term rental housing options.

To help get you started in real estate investing in Florida, the Express Capital Financing team has highlighted some of the hottest Florida markets worth exploring to start the search for your next profitable rental investment property.

Benefits of Investing in Real Estate

Investing in real estate in Florida presents numerous benefits for potential investors. The thriving real estate market in the area provides ample opportunities for high returns on investment. With a steadily growing population and a strong economy, the demand for housing is on the rise, making it an ideal location for real estate investment.

On top of that, the state offers various investment opportunities, including single-family rentals, fix and flip properties, and ground-up new construction. This diverse range of options allows investors to choose the type of investment that best suits their financial goals and strategies.

Beyond the potential for high returns, investing in real estate in Florida also comes with tax benefits. Investors can take advantage of tax deductions related to property expenses, mortgage interest, and depreciation, ultimately reducing their tax liabilities and increasing their overall profitability.

Reasons to Choose Florida for an Investment Property

Florida is an increasingly popular destination for investment property due to several key factors.

Firstly, the state has a strong economy and has been experiencing a significant rise in home prices, making it a prime location for potential profits. Real estate trends in 2023 also indicate continued growth in the Florida housing market, making it an appealing choice for long-term investment.

Specific areas of interest for investment in Florida include cities positively impacted by the tourism industry like Miami, Orlando, and Tampa. These cities have all shown promising real estate growth and potential for high return on investment. Additionally, Florida’s opportunity zones and attractive areas for Airbnb make it a desirable location for property investors.

The Florida housing market predictions are optimistic, showing continued growth and potential for long-term profitability. This, coupled with factors such as an influx of new residents, a strong job market, and a desirable climate, makes Florida a highly desirable investment location.

Factors to Consider Before Buying an Investment Property in Florida

When considering the purchase of an investment property in Florida, there are several important factors to take into account to ensure a successful investment.

Location, property type, market conditions, rental demand, and potential return on investment are crucial considerations that need to be thoroughly evaluated before making a purchase decision.

By carefully examining these factors, investors can make informed choices that maximize the potential for long-term growth and profitability in the Florida real estate market.

Let’s dive into the most important factors now.

Job Market and Job Growth

The current job market trends in Florida indicate strong job growth projections, with several companies contributing to the state’s economic expansion. For example, Amazon recently announced plans to build a new distribution center in Apopka, creating an estimated 500 new jobs.

Additionally, Lockheed Martin is investing $50 million into their Orlando facilities, expecting to add over 500 new high-wage jobs. Over 2023, the state’s unemployment rate was at 2.9%, slightly lower than the national average of 3.6%.

The growing job market in Florida has led to increased housing demand, particularly in cities where major companies are expanding. This has created lucrative rental investment opportunities for real estate investors looking to capitalize on the influx of new residents.

The economic impact of these job market trends is not only boosting Florida’s employment rate but also spurring growth in the real estate sector.

Cost of Living

The cost of living in Florida varies depending on the city, but the average cost of housing is relatively high. The average rent for a one-bedroom apartment is around $1,200 per month. Transportation costs can also add up, with the cost of public transportation being around $100 per month. Groceries for a typical household can cost around $800-$1,000 per month.

Utilities such as electricity, water, and A/C can add other costs that need to be taken into account. Healthcare costs also play a significant factor in the cost of living in Florida, with an average monthly health insurance premium of around $1,000.

Average Home Values and Median Home Prices

In Florida, average home values and median home prices vary widely based on location and property type.

For example, in desirable areas such as Miami or Naples, average home values can be much higher compared to more rural or suburban areas. Additionally, the type of property, such as a single-family home, townhouse, or condominium, also impacts the average home values and median home prices.

Researching recent sales in the area is important to determine the potential for future appreciation. It’s essential to compare the purchase price to the average home value to understand if the property is undervalued or overvalued. This can also provide insight into the potential return on investment for the property.

Equity Growth and Return on Investment

Unexpected costs and risks in Florida real estate investment can impact equity growth and return on investment. These may include property maintenance, taxes, insurance, and economic downturns.

Mitigating these risks by conducting thorough due diligence and having a financial cushion is crucial for ensuring sustainable equity growth and maximizing return on investment.

Rental Income and Cash Flows

In Florida, the rental income potential for long-term rentals is generally strong due to the year-round demand from both residents and seasonal visitors.

Local rental rates vary depending on the specific location within the state, with popular tourist areas commanding higher rents. However, overall, Florida boasts healthy occupancy rates for long-term rentals, particularly in urban and coastal areas.

When calculating cash flows for long-term rentals, it’s important to consider potential expenses such as mortgage payments, property taxes, insurance, and maintenance costs. These expenses can significantly impact the overall cash flow from the rental property.

Factors that determine the appropriate rental rate for each property include location, size, and condition. Properties in prime locations with modern amenities and in good condition typically command higher rental rates, thus impacting the potential cash flow.

Maintenance Costs and Occupancy Rates

The historical data on maintenance expenses and occupancy rates over the past 5 years reveals a clear relationship between the two.

Generally, as occupancy rates increase, maintenance costs tend to go up as well. This is due to higher utilization of the property leading to more wear and tear, as well as an increased need for regular upkeep.

Conversely, during periods of lower occupancy, maintenance costs often decrease as there is less demand on the property.

Several potential factors could impact maintenance costs and occupancy rates in the foreseeable future.

Property age is a significant factor, as older properties typically require more maintenance than newer ones. Geographical location also plays a role, with properties in high-demand areas often experiencing higher occupancy rates, but also potentially facing higher maintenance costs.

Market trends, such as changes in consumer behavior or economic conditions, can also greatly influence both maintenance costs and occupancy rates.

Another significant factor for maintenance costs is whether you use a property management company or not. Going with a professional company comes with an initial outlay, but it often saves you time, and therefore money, so often worth the investment.

Tax Implications for Real Estate Investors

Real estate investors in Florida need to consider several tax implications.

Property taxes in Florida are levied at the local level and can vary widely based on the county and city. It’s crucial for real estate investors to understand the specific property tax rates in the areas where they own investment properties.

In terms of income taxes, Florida is known for not having a state income tax, which can be a significant benefit for real estate investors. This means that investors can potentially save on state income taxes compared to other states with income tax.

As mentioned above, there are several tax benefits and incentives for real estate investors in Florida, such as the Homestead Exemption for owner-occupied properties, which can result in a significant reduction in property taxes.

Express Capital Financing’s Top Cities to Invest in Rental Real Estate

So, now you’re all clued up on the ins and outs of investing in Florida, check out our top picks for the best cities in Florida to kickstart or expand your rental investment business.

Miami Beach

Considered the biggest international draw in all of Florida and home to some of the nation’s premier restaurants, beaches, retail locations, and entertainment options, Miami Beach is a world-renowned vacation destination that draws millions of visitors and new residents alike year after year. And the Miami Beach real estate scene definitely reflects its popularity.

New construction is in full-swing in multiple sought-after neighborhoods featuring high-end finishes and amenities that are sure to attract high-paying tenants looking to be within walking distance of all Miami Beach has to offer.

Snapping up a rental property here is a safe bet for a high return on investment and a sustainable stream of passive income year-round.

Orlando

There are a ton of reasons why Orlando is a top city for real estate investors.

Just to name a few: world-famous amusement parks like Disney World and Universal Studios; reasonable cost of living compared to other urban areas; and impressive property appreciation rates meaning your rental property will only increase in value as time passes.

Orlando features a large population of more than 2.5 million and a booming local economy premised around a vibrant tourist market. This makes it an outstanding community for either raising a family or providing potential tenants a place to call home.

Kissimmee

Just to the south of Orlando, Kissimmee long flew under the radar. That’s certainly not the case now with average home values increasing over 5% last year alone.

What’s more, the Kissimmee population has ballooned by more than 23% over the same timeframe, with new residents attracted to the area’s proximity to amusement parks and beaches as well as its affordable cost of living in such an ideally situated area.

With these positive trends fully expected to continue for the foreseeable future, savvy real estate investors can still get in at a relatively low barrier of entry financially speaking and reap the rewards in the near future as this popular market continues to evolve in the right direction.

Jacksonville

Jacksonville experienced a growth of approximately 11 percent over the past 10 years, and experts forecast another 50 percent population expansion over the next decade as well.

The average home sale value is $235,000, which is a promising appreciation of nearly 14 percent since this time last year.

A key plus of the Jacksonville market from a real estate investor’s perspective is that there are plenty of promising foreclosures that can be bought for up to a third under its listed value in the greater metro area which is a great starting point to maximize your earning potential for a future rental property.

Get Started Today

When it comes to securing the financing you need to capitalize on the abundant opportunities in the Florida real estate market, Express Capital Financing is the partner you can trust.

With our extensive knowledge of the local market and commitment to providing personalized guidance with competitive financing options, Express Capital Financing is the partner you need to turn your Florida real estate dreams into a prosperous reality.