With a large number of second homes and condos, the South Florida real estate market is prone to boom and bust cycles that stem more from investment hopes than housing needs and despite the unpleasant news on the Zika virus, hurricanes and a slight slowdown of the real estate market, Miami is still the place to be! The Miami Association of realtors noticed that the market of the single-family home had a peak in sales during the month of August. The peak was both in volume and in prices with most of the closed sales being all-cash transactions! The demand for Florida housing is always growing but is it a good idea to invest in South Florida real estate?
Demand is High, But on Hold Set up your laundry room remodeling priorities
There are a lot of potential buyers who are waiting to jump into the market as soon as prices decrease a little. So the demand is there, just on hold. A lot of people have their eyes on Miami. It’s just a question of timing. During the last recession, Florida home values dropped 60% on average. Did you buy a house in Florida during the last seller’s market in 2006 for $250,000? Congratulations, that home would only be worth about $100,000 in 2009, if you could find a buyer, but chances are you couldn’t. That’s why Florida became the foreclosure leader in the US for years. Thousands of people quit Florida every week, and for years, people just moved out of Florida and left their underwater home behind to go into foreclosure. Fast Forward to 2017, Redfin expects the median home sale prices to gain 5.3% in 2017 compared to 2016, which would not be a major change from the 5.5% year-over-year gain expected to close out this year. Zillow is forecasting the median home value to rise 3.2% from $192,500 between November 2016 to November 2017. Zillow’s home value index rose 6.5% in the year ending November 30th.
Strong Rental Market
Whether you rent short term or long term, South Florida enjoys a strong rental market with high demand and good yields. Florida has several universities, which make investing in a mid-size home for 4-5 roommates or a single efficiency unit for students an attractive option, knowing demand will be high from September to June, and you could even rent it to tourists during the summer. During winter, you are also likely to attract snowbirds, and around Miami you have a constant flow of Latin American tourism all year long. Add to that a dynamic job market, and mid-size properties are once again a great bet for young professionals about to start a family. With a median rent price of $1,500, Florida boasts a 10.4% average rental yield, which is of course before tax, maintenance, and property management fees, but still a much better rate of return than any savings account on the market!!
Attractive Location, Location, Location
There are some spectacular properties in South Florida Seafront, high-rising towers with all amenities you can possibly imagine, mansions in back canals, or lower key tropical hideaways nestled between palm trees, Florida properties are attractive. When you buy a property, you should always think about the person who would buy it from you. If it is a long shot, it should be your forever property, otherwise putting it back on the market will be complicated, and it may take months or years to sell it, without the guarantee to make your money back! When the property features beach access, a pool, a lush garden, and so on, you can be almost sure there will be a buyer to take it off your hands in a short time. I couldn’t make this up even if I wanted to, There were actually people camping overnight in Fort Lauderdale for the privilege of buying $500,000 – $1,000,000 properties!
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With almost 20% of homeowners underwater on their mortgage in Florida, it is more important than ever that you check how affordable your mortgage will be before you buy a property. Just a few points in a mortgage’s interest rate can result in several thousand dollars more that you will have to pay for the property over the course of the mortgage. Freddie Mac’s Primary Mortgage Market Survey shows that the average 15-year FRM is at 3.25%, and the 30-year FRM is at 4.09%.
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If you are not afraid to DIY, undertake repairs and fix a place up, there are many properties priced to sell in South Florida. Some neighborhoods in Miami have already seen a new impulse with new restaurants, replica watches shopping centers, Ft Lauderdale has been booming as well, yet you still find neighborhoods close to the one that is trending at very affordable prices. In light of the strong rental demand, you can be pretty certain those neighborhoods will soon become sought after as well.
So in conclusion, Investing in real estate is not a decision to be taken lightly! Neighborhoods change by the minute, so do your research, always visit yourself after selecting a few properties, and try to see the place by day, by night, during the week and the weekend, to assess not only the building but the streets around, the shops, the noise… so you can make an educated decision about buying it and be proud to beycome an investor in the South Florida real estate market!