Fort Lauderdale Multifamily Housing Market
Today's post is going to be geared towards the commercial real estate and investment crowd. Let me put a precursor into this discussion. Investing in multifamily housing is not for everyone! The day to day management of multifamily housing can be intensive, tedious, and quite frankly annoying. Further, financials on these buildings are rarely reliable. So with the doom and gloom is there upside to investing in Fort Lauderdale multifamily housing? Absolutely.
When the market crashed a few years ago multifamily housing was being sold routinely at double digit cap rates. In any crisis people rush into stability. At the time multifamily housing was seen as a more stable investment than the alternatives. Office spaces were becoming vacant by the hour, retail tenants were renegotiating leases downwards, condominium associations were underwater, the list of places your could not find cash flow in went on. If you use that as the back drop you can understand why the multifamily housing sector heated up, Fort Lauderdale was no exception to that. So what does any of that have to do with today? The result of all that multifamily buying was a compression of cap rates that few people saw coming. It's relatively routine now to find a building with a stable tenant pool, in a great location, selling at a low single digit cap rate.
The majority of investors I deal with that are interested in purchasing multifamily property do not live in the area. This leads to the question of property management. If you do live in the area and you are planning on managing the property yourself, be prepared! Tenants will call you at 1am when they've lost their keys. They will call at 9pm when the toilet is flooding. They will call you the day rent is due to say they don't have the money to pay. You'd like to think your building will never need upkeep and that your tenant pool will always be perfect, but that's rarely the case. This is why most investors turn the day to day property management over to someone else. The property manager will typically charge from 7%-12% of gross rental collection to manage your property. The reason I bring this up is because you will need to factor that expense in when you're putting together your income and expense figures. This is a commonly missed expense line that can really throw your net income out of whack.
When you're buying a building there are a few figures we will know. The taxes, a relatively accurate insurance cost, and a few other service provider bills such as garbage and landscaping. Really well run buildings that are in true turn key condition with all tenants on signed leases are pretty straight forward. However, many investors are now chasing yield which has them looking at buildings in poor condition. If you're interested in this type of deal, know that you're going to have few reliable financial numbers to base your decision on.
So knowing the above facts, people really invest in this stuff? Yes they do, and for good reason. Let me bring it back and speak specifically about Fort Lauderdale. As I type this post there are a number of residential rental developments under construction. All of these are aiming at higher end tenants. I'm hearing wild figures, like $2400 rent for two bedrooms proposed for these complex's. I work with my fair share of tenants looking for a rental. Once you get above $2100 the pool or renters really thins out. Most would rather purchase if they can afford that type of rent. The lions share of rental inquiries I receive are for properties between $1,000 and $1,600 a month. This is where the multifamily investors building comes into play. Your buildings rents will likely be in that range, or below. Vacancy rates in multifamily housing have been in the very low single digits this year. The expectation is that number will hold for 2014. It is my belief that you have a great opportunity to purchase multifamily buildings now, without much fear of vacancy. Vacancy can destroy a buildings financials which is why it's such an important consideration.
I could type an awful lot more on the subject of Fort Lauderdale multifamily investments, but in the interest of time I'll stop here. I'd be happy to have a more detailed discussion on the topic, feel free to call or email me.
I work as a Realtor in Southeast Fort Lauderdale. If you’re interested in buying or selling a home, condominium, or townhouse (townhome) in: Rio Vista, Victoria Park, Downtown Fort Lauderdale, Fort Lauderdale Beach, Sailboat Bend, Tarpon River, Croissant Park, Collee Hammock, Wilton Manors, Poinsettia Heights, Coral Ridge, or Las Olas Isles, please feel free to contact me at (786)443-7203 or through my email firstname.lastname@example.org. I am a Realtor that works on Saturdays in order to accommodate those with busy schedules.
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Written By Casey Prindle
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