Florida continues to be the land of investors’ dreams. Retirees, snowbirds, and those looking to start their careers in and around Miami make the area one of the hottest for rental properties.
Over the past year, Miami’s median home price has gone up, and Zillow predicts it will continue to increase in the next year. This high median home price is making it hard for people who are not making enough money to cover the amount of a mortgage.
People in South Florida spent $12.3 billion on rent in 2019 because they didn’t want to spend the money on inflated home prices. The need for rentals is expected to continue into 2020, which is good news for investors interested in rental properties.
According to Josh Clark, an economist with Zillow Group, “It is tempting for people to say millennials are renting longer because they don’t want commitment and aren’t ready to lay down roots. But it’s really an affordability issue.”
The state’s median annual income is $48,900 and millennials make on average $3,001 more than that a year, putting their median earnings at $51,901. People who make approximately $50,000 a year bring home about $4,167 per month, and spend up to $1,167 on housing costs. To afford a house in Miami, someone has to be able to pay at least $1,650 to their monthly mortgage plus taxes, a down payment, and other fees. These expenses are the reasons people, especially Millennials, are waiting longer to purchase a home. Even with the increases in rental prices, renting is still a better economic choice and is expected to continue throughout 2020 and beyond.
Investment Property Options in South Florida for 2020
The two best ways to invest in Florida overall are fix and flip or rental properties. Foreclosed and bank-owned properties are still in abundance and will continue to be if homeowners can’t sell their homes due to the economic disparity between income and home prices.
Rental properties are truly what investors are setting their eyes on in 2020 for South Florida. Rent prices are increasing, and more people are going to look for rentals. Investors can’t deny the double benefits of rental property investment:
- Monthly Income
- Appreciation
Long-term rentals are in demand as well as the prices for them, so you can’t go wrong. Especially since South Florida’s market has one of the best rates of appreciation (one of the top 10 in the country).
The best investment is a rental property that brings in a cap rate of 8% of more, but with so much competition in South Florida for rental properties, most real estate experts are saying 3% or 4% is worth considering. Of course, these percentages have a lot to do with location. Some locations you’ll end up with a better profit than others, but those aren’t always the best choice, as they may not have the long-term gains as some of the other more popular rental areas.
When looking for investment property in Florida, the southern part of the state is where you can have the most success. Another option for investing in South Florida is with vacation rentals. Vacation rentals are in very high demand and are even more sought out than long-term, traditional rentals. Remember, vacation rentals in Florida are year-round rentals, not like other touristy, vacation areas in which investors only see their investment pay off in the summer months. An option with vacation rentals is buying homes to rent out on Airbnb. Consider an average Airbnb rental income in South Florida is $3,439. Airbnb is a completely legal investment property option, and Miami and Fort Lauderdale have been identified as one of the most profitable cities in the U.S. to invest in one. Airbnb investors generated over $134 million dollars in 2018, and that success persisted in 2019 and will continue into and through 2020.
This gives you three options for investing in rental property in South Florida.
- Apartments/Condos
- Homes for Rent
- Vacation Rentals
Only an experienced real estate agent in South Florida can help you decide which one is best for you.
The Affordability of Rentals
In Miami-Dade, the average rent is $1,800 a month without any additional fees like in the case of a mortgage. With the average take home pay of $4,167, that monthly rent is feasible for more people, especially those who earn more than the average.
Neighborhoods matter when it comes to rental prices with Broward County rent prices starting at around $1,400 and Miami Dade rental prices ranging from $1,600 to $5,000 a month.
Florida Rental Predictions for Owners and Investors
The condo market continues to grow in South Florida. The hottest areas for condo rentals are in Doral and Southwest. That’s where people are gravitating to because that’s where most of the units are available right now. Investors have been buying up properties rapidly due to the rental market’s success, but those areas remain opportunistic for 2020.
This isn’t to say there aren’t any opportunities in other areas. According to CoStar, a real estate research firm, Miami is in the lead for the number of new apartments under construction. There’s 10.8 percent of inventory in development – the highest amount in the United States.
Contact Us for Investment Property in South Florida
We help investors identify the best properties to invest in for rentals, including traditional rental properties and vacation rentals. We work with your budget and help you match up your needs with what is available, so you can move forward quickly with the investment, and start earning a return.
Contact us now to discuss the best cities and neighborhoods for investment property in South Florida. We’ll help you every step of the way, so you can get the most return on your South Florida investment.