According to many real estate pundits, it is difficult to make money in today’s real estate market, and it is close to impossible to make money in Florida real estate. However, if you closely follow the south Florida market, as I do each day, you will see several factors may help you to make money in Florida real estate.
First, overall sales of homes are increasing. Second, cash rich investors are buying distressed properties and turning them around at a profit. Finally, multi-family properties in Florida are selling at realistic multiples.
Today’s New York Times states that Florida is “overdeveloped, overspeculated and overleveraged.” But the Times also indicates that Florida’s warm climate will attract many of the more than 75 million boomers as they retire over the next 20 years. We know they’re coming, and they have to live somewhere. To make money in Florida real estate, or in any real estate market, we cater to those who are in need.
Right now, there are thousands of condominiums that stand empty. A recent example that made news is a 32 story building in Tampa that currently houses only 1 family. Far sighted vulture capital funds will pick up these properties at distressed rates of pennies on the dollar. They’ll hold these properties for a few years, and then sell them at a large profit. Because they foresee the trend of increasing population, they will make money in Florida real estate.
To the average buyers, short sales, with their 45-60 day waiting periods for an answer, don’t appear to be a way to make money in Florida real estate. Banks control the short sale process and typically take at least 45- 60 days to render a yes or a no decision. Because this is the time frame during which most homebuyers expect to find and close on a home, short sales and homebuyers are often at odds.
However, investors looking to make money in Florida real estate aren’t concerned with this time factor. While the home buyer grows impatient with the waiting process and starts to look elsewhere, the investor remains until the other bidders are gone. The investor’s lower, but reasonable bid may win by simple virtue of still being there. And since the investor has made offers on dozens or hundreds of homes, the odds are on his or her side. The investor will then fix up and resell or just resell these homes at a fast profit and move on.
The best way to make money in Florida real estate, or perhaps in any real estate market, is to buy and hold multi-family property for the long term. If these properties are bought at the correct multiple, they make money. There are many formulas for this multiple: the simplest is 7 or fewer times rent roll, or 10 or fewer times net. Forget cap rates. They usually apply to the current owner.
Making money in Florida real estate, especially in multi-family, involves due diligence. Carefully scrutinize rent numbers, expense numbers, and carrying charges for the mortgage you’ll need. By the way, today’s lenders, who are very cautious about commercial property (anything over 4 units), will require 25-30% down payments.
If everything looks good to you after you add these figures, talk to your accountant. Then, walk the property several times. Check to see that repair costs will not throw your figures out of whack. Scout the neighborhood. Talk to other landlords in the area if you can, or call other nearby multi-family properties to see what rents they are charging. Recalculate rent, expenses and carrying charges to make sure they still work. The main idea is that to make money in Florida real estate, your multi-family multiples must make sense.
Real estate is not going away. There is always an opportunity for investors to make money in Florida real estate. In Florida, we know older people will flock to places where there is warmth. And for investors, warmth is found in the place where money flows fastest.
Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.marcjablonhomes.com/
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