Buying Florida Rental Property - Pros and Cons

We have shared Florida is good for Rentals and high cap, but there are pitfalls to look into

https://www.reddit.com/r/financialindependence/comments/5r9o3f/buy_rental_property_or_just_continue_to_invest/

Which means @Jil that our insistence that we own rental property within arms reach is still a good general guideline if any.

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You look at that list and it applies to all states. Where is that part specific to Florida? 7% vacancy? If you have 7% vacancy every year there is something wrong with your house.

Come on, you are just spoiled from owning some Bay Area properties. Other places in the US are just not like here, more vacancies, lower rents in general and sketchier clientele. You also have to deal with possible major weather issues. The Bay Area is one of the best for a reason…

Isn’t there a rule of thumb: 1 mo vacancy per year (on average?)

disclaimer: Not a landlord

The key is to judge the current rent. If you ask the right rent, just plus or minus $50 of current rent in the market, home will be filled in 2 days. If the judgement is wrong, it stays more.

In cheaper rent areas the little charges are high compared to rents…The capex should not be included and the insurance is too high…But I agree…I would never buy rental shfs out of state, and especially not in Texas or Florida, no barriers to entry limits appreciation .Maybe consider highrise condos in Miami and rent as vacation rentals…might make sense if you wanted to go there a few weeks a year…

Speaking of Florida…

That’s a feature not a bug. That means we can still buy cheap RE in Florida.

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provided it will start appreciate faster.

Florida is about income. Forget about appreciation.

In that case, dividend-paying stocks are much easier without all the hassles, and can buy in smaller chunks.

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The other benefits of RE still applies though:

  1. Leverage can be much higher and loan terms better than stocks
  2. Cap rate higher than stocks
  3. Even though appreciation may be slow but value is unlikely to go south
  4. Much more tax efficient

With so much hassles, I would be pissed if the return of RE is lower than investing in a S&P index fund. Have not seen any study of RE vs DCA into a S&P index fund over a period of 10+ years.

If appreciation is stalled (not growing), Except leverage there is no point of going RE. There are plenty of REITs, which follow same real estate provides 10% dividend consistently last 10+ years

Personally, I bought NLY and NRZ, but staying away from it after FED started increasing rate.

REIT and stocks are easy to liquidate than real estate.

IMO, in real estate, if the location is not strong enough to hold the value, leverage becomes risky item. Above all, near by locations are far better than remote (Florida). Here, at least, we have a way to maintain our own and make it positive.

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REIT usually holds a diversified portfolio. I may only want to hold one property type in one particular market, say multi-fam in Orlando. It’s hard to do that with a REIT.

Also I bet REIT’s management fee is a lot higher than managing with your own property manager. With your own PM you have control what repairs to make, what contractors to use etc. With REIT you have zero idea what’s going on.

So I am the opposite. I am far more comfortable holding my own properties in far away markets than thru REIT. I have more confidence in the cap rate of a local market staying the same than some corporate’s yield.

REIT has to share 90% of income to shareholders. They do not have fee, but use 10% for operations. REIT maintains with all repairs as we do in rental, they take depreciation…etc, we do not see in detail work, but review all information in annual report. The additional benefit is growth oriented companies are really great.

Considering buying Florida, better to go for REIT (except for leverage reason) as REITs are good for liquidity and nice cash flow.

I used to hold REIT “O”, but recently sold it.

Now, I own OHI REIT, strong dividend payer at 7.7%, but also growth associated with it. I have also added pre-market OHI. After results, I came to know they are increasing dividend.

Since I am real estate heavy, I want to increase the share of stocks & REITs for cash flow.

Me2