You're probably not very familiar with central Florida except for maybe Disney World, Sea World, and if you're a sports fan, perhaps the Tampa Bay Buccaneers, Rays, Lightning, and Orlando Magic. There is so much excitement in and around Tampa and Orlando and it has absolutely nothing to do with tourism.
Central Florida was one of the hardest hit regions during the mortgage crisis of the mid 2000's. In fact, Florida was the foreclosure capital of the United States (and still is #1 to my knowledge). Investors bought second homes in Florida regardless of their own financial situation and if the property made a sounds investment from a cashflow perspective. We all saw what happened. Now it's 2017 and Florida has rebounded substantially. However, it's not just lenders being stricter with loans and investors learning from prior mistakes.
Florida, and especially central Florida, has become a magnet for investors from all areas for a number of reasons. If you saw the video on the home page, you already know the top 4.
1) There is positive Cashflow. States like California and hot markets like Austin, NYC, Denver, etc offer no positive cashflow. Cap rates in LA averages 3%. Typically, 7-8% would mean a break even point on cashflow. Cities like Tampa and Orlando regularly achieve 8% but can reach 10%+.
*To the right is Realty Trac’s outlook on the best US cities to invest for rental income. Red indicates the lowest potential while green indicates the highest.
2) Central Florida is appreciating like crazy. Having cashflow is nice. Having cashflow while your property appreciates is ideal. Appreciation last year was over 6% in many markets and even as high as 14% in Lakeland (reportedly). While appreciation makes cash flow tough to achieve, central Florida is in a situation right now where you can achieve both. We'll see how long this will last for.
3) Properties start low! For $100k, you can still snag a 3 bedroom investment property in a big city. If you live in Los Angeles like me, you know that it's tough to get a hold of anything under $400,000. You may have all the knowledge and are ready to dive in, but if you don't have access to the capital, it can be very tough to get started.
4) Zero state income tax. While real estate offers some amazing tax benefits, paying state income tax is something that is tough to avoid. Fortunately, Florida does not collect a state tax. Compare that to California's 13%. Over a few properties and a few years, that adds up quickly.
Now that we covered the numbers, let's talk about the region itself..
4) Desirability. Florida is desirable. Does it get extremely hot in summer? Yes it does. But then why do tens of thousands of snowbirds buy second homes in Florida each year? Why do tens of thousands of students come from other parts of the country to attend college in Tampa and Orlando. (UCF is ranked #1 biggest school in undergraduate enrollment with 54,000+ students USF in Tampa is ranked 13th with close to 40,000)
Retirees dream of moving to Florida to live out their golden years. 50 million tourists also flock to Disney World each year. This doesn't include Busch Gardens in Tampa, the world famous beaches that surround the state with incredible fishing, and the world class golf courses that make up the interior of the state.
What other region offers all of this?
5) A booming diverse economy. It's great for Florida to be desirable, but if there aren't jobs, then you have a problem. People won't move somewhere they can't find work. Fortunately, tourism is just a small part of the economic makeup of central Florida. Agriculture, biotech, medical care, and more are growing by leaps and bounds. Florida has also seen an employment growth of 3% in the past few years, well above the country's average of 1.8%.
For more information about the local economy, check out these links...
6) Flexibility. The numbers are there. The potential is there. The growth is there. The desirability is there. The last perk about central Florida is the flexibility. What I mean is that many investors like to rent out their properties for 8-10 months of the year and spend their winters in Florida. Others like to have renters pay off their first property so they can use a 1031 exchange to acquire their dream home on the beach a handful of years later.
Whatever niche you have, Tampa and Orlando can cater to you. Short term rentals, house flipping opportunities, plenty of vacation rentals, student rentals, and assistant living situations as well.
Central Florida is not a short term plan and it's not a long term plan, it's whatever you're looking for now and 30 years from now.