Investing in Florida Treasure Coast Real Estate
Investing in Florida real estate on the Treasure Coast is an effective way to accumulate wealth and create a passive income stream. There are many choices to consider when purchasing a Florida investment property, including single-family homes, multi-family residences, condos, townhomes, student housing, and vacation rentals.
In choosing an investment property, weighing the advantages and disadvantages of each type based on your budget, location, and target renters is essential. For example, single-family homes are simpler to manage and appeal to a broader range of tenants. At the same time, multi-family properties can provide a higher return on investment but require more upkeep. To make the right decision, consider your priorities, financial situation, and location before investing.
Florida Treasure Coast Rental Trends
Investing in Florida residential properties is an effective way to accumulate wealth and generate a passive income. Here on Florida's Treasure Coast, the median rental price for a single-family home is over $3,000 per month, with median condo monthly rents exceeding $2,000. Better vacation rentals during the season start in the $4,000 range, with solid demand and low inventory driving prices.
The type of investment property you buy will dictate how much you could receive in monthly rent payments. Location, size, and features will also influence your return on investment (ROI) or how much profit you can make. Here's a look at the most common investment property types and their main pros and cons.
Treasure Coast Single-Family Residences
A mainstay of Treasure Coast suburban areas, single-family homes with backyards and desirable neighborhoods are the first choice compared to multi-family housing. Further, many renters looking to buy are priced out of the market, even after spending years saving for a down payment. As of December 2022, the national average price for a single-family home sat at $372,700, according to the NAR. So if you've got the cash to buy a detached house, chances are high that renters will scoop it up.
Advantages of Single-Family Homes
For newcomers to investment property ownership, a single-family home may be easier to manage than other options. In addition, because they're in demand, you can expect to attract a vast pool of prospective tenants, giving you options to choose the family you'd like to work with. Furthermore, owning a single home means you won't worry about maintaining multiple units. Also, growing demand and loftier rents suggest that your house could bring in a substantial amount of rental income. You can use this income to pay off your mortgage and other expenses associated with the property while receiving rent payments from your tenants and building equity.
The Downside of Single-Family Homes
At the same time, a single-family home won't earn you as much rental income as other options, such as a duplex, fourplex, or other multi-family residences — unless you manage multiple single-family properties.
The other downside is vacancies. If your tenants move out, you may incur a month or two of vacancies as you procure new renters. You won't receive any rent during that time, even though you'll still be on the hook for all costs, including your mortgage, property insurance, property taxes, and homeowners association fees. Landlords with a single unit must remember this and keep a cushion of savings for these times.
Treasure Coast Multi-Family Residences
Multi-family homes include duplexes, townhouses, condos, or homes with an Accessory Dwelling Unit (ADU), making a single property available to multiple households. Multi-family rentals usually share common areas like a rooftop patio, community swimming pool, and gated entry.
Pros of Multi-family Residences
With a multi-family residence, you can increase your ROI much faster than a single-family home. For example, buying a duplex will yield two monthly rental incomes instead of one. Purchasing a multiple-story townhouse could equal several rental payments to cover your mortgage and expenses and provide revenue.
If one family moves out of their unit, you don't necessarily need to scramble to find a new tenant to move in immediately. In addition, your rental income won't flatten out to $0 overnight because you'll still have occupied tenants in other parts of the property, making multi-family residences a more stable investment option.
Cons of Multi-family Residences
With more renters comes more responsibility as the landlord. While you may collect more rental income, you'll have to look after multiple units under one roof, staying on top of repairs, maintenance, and renovations.
Some tenants may want a furnished unit while others don't, and some may opt to buy their utilities while others prefer a lease with all bills included in their rental price. Managing multiple units requires you to be available, flexible, and agile.
While there aren't concrete rules on whether to furnish multi-family residences, your tenants will look to you to provide furnishings in shared spaces, which entails buying a patio set, a barbecue for the backyard, and gym equipment for a recreational area. Expect to spend more on refrigerators, washer-dryer combos, and dishwashers. You'll invest more time into property management, too.
While a family living in your single-family home may tend to the garden or maintain the backyard, the tenants of your multi-family residence may count on you to keep the common spaces clean and tidy. You may have to hire a third party to help keep flooring and shared rooms in great shape.
A Word About Tenant Screening
Being selective with your tenants is critical. You'll also need to screen your potential tenants carefully and look for chemistry between the families. If you're renting to an elderly couple, for example, you may not want to accept a rental application from a bunch of university students throwing parties well into the morning. One bad tenant could wreak havoc on others under the roof, even in separate units.
Young urban professionals, couples, and empty nesters looking to downsize tend to flock to condominiums and apartments, making these investment properties a safe place to park your savings.
In 2022 condominiums rentals saw significant rental price increases due to solid demand, triggering intense competition among renters. That's great news for landlords in this hot rental market.
Condominiums ("Condos") are privately owned units in a larger residential building. Various types of condos are available, ranging from studio to three-bedroom units. Although, the most popular choices among homeowners are two-bed/2-bath residences.
While condo owners have their own living space, including bedrooms, bathrooms, kitchens, and living rooms, they share common areas like hallways, garages, mailrooms, and recreational facilities like gyms, swimming pools, and outdoor patios with other condo units in the building. In addition, a condominium association typically manages landscaping, pool cleaning, and other repairs, from faulty elevators to lobby renovations.
Advantages of Condominiums
The beauty of condominiums — aside from the universal demand from singletons, couples, young families, and seniors alike — is the convenience that comes from property maintenance. As a landlord paying condominium fees, you don't have to worry about mowing the lawn, tending to the swimming pool, or keeping the mailroom clean. You will, however, have to respond to queries from your tenants regarding the condominium unit itself. If you're buying a brand-new condominium with warranties and new appliances for your tenants, you should expect fewer maintenance issues or costs.
Cons of Condominiums
Convenience comes at a hefty price for landlords in the form of monthly condo fees that could go as high as $800 to $1,200, depending on your location and the amenities building residents receive. However, you can transfer this expense to your tenants by working it into their monthly rent.
With condominiums, you also need more control over how well the building is maintained. As a result, you may need to join the condominium's board to ensure the building stays in excellent condition for the sake of your current and future tenants and to safeguard your investment.
The likes of websites like Airbnb and VRBO have made it incredibly easy to market vacation rentals to tourists visiting your city.
If you're in a major tourist hotspot, like New York City, Miami, Los Angeles, or Orlando, purchasing an investment property ideally situated for visitors may be a worthy choice. (A caveat: Several cities have instituted regulations around short-term rentals, so be sure you know the requirements in places where you are looking to acquire property.)
A 2020 Airbnb report suggests the average Airbnb host in the United States makes about $24,886 annually. You could yield between $500 and $800 per night, depending on where your vacation rental is located and its size and features.
For example, a sprawling vacation property on South Beach in Florida could easily command prices of $800 per night during peak season. Families may consider this price tag a steal compared to renting several hotel rooms in the same area, and they'll have added perks like a kitchen to prepare kids' meals and a private patio to host dinners.
Pros of Vacation Rentals
Unlocking unlimited cash flow, depending on your property's popularity, is the defining perk of owning a vacation rental. Instead of receiving one rental income each month, you may have Florida-bound visitors throughout the seasonal Winter months and during the off-season, earning a massive ROI for your short-term and vacation rentals. The other perk? You — and your family and friends — can use the vacation rental while it's sitting empty or when you need to take a break.
Cons of Vacation Rentals
Unless you have a property manager taking care of your investment property, owning a vacation rental can become a full-time job. You'll need to vet potential visitors applying to stay at your vacation home, arrange their check-in and check-out times, schedule cleaning and laundry, prepare the property for the next set of visitors, and maintain a five-star rating to keep your calendar full of bookings. If you outsource this work to a management company, that's another expense on top of your mortgage payments, insurance, and property taxes.
Because vacation rentals must be like a hotel room, you'll need a steady supply of clean bedding, towels, pillows and blankets, toiletries, and kitchen staples like coffee and tea. Yes, your temporary tenants will look for wine glasses and welcome snacks! Make sure those are available to keep the good reviews coming. Providing these household essentials will be an ongoing expense in your budget, but they're mandatory to keep your business going.
Concerns about vacancy rates are highest for this kind of investment property. If you're in the low season or your city offers many vacation rental options, you may not receive any rental property income during some weeks or months.
Investment properties offer great benefits for landlords regardless of the route they take. You can enjoy tax breaks, collect rental income to cover expenses and watch your investment grow in value over time.
The type of property you choose, location, and its capacity will determine how much you can charge. Therefore, it's essential to do some budgeting, select a desired location, and assess the demand for housing in that area, which will help you find the perfect investment property for your ideal tenants.
Investing in real estate by purchasing an investment property can generate wealth and provide a source of passive income. That said, there are different investment properties to consider, such as single-family homes, multi-family residences, condos, student housing, and others.