Fort Lauderdale Real Estate Investing Strategy
It's been a while since I geared a post specifically towards Fort Lauderdale real estate investing. Earlier this week I wrote about rental housing inventory. The post resulted in a number of emails from my investor crowd. The bulk of emails were asking what kind of deals I'm looking at now, and where I think there may be opportunity. The truth is what worked a year ago, isn't working today.
What strategy do I still really like? Cash flow neutral real estate investing! To know me is to know I'm a pessimist, and a conservative, when it comes to investing. I'm forever worried that a deal won't work out for a client. To that end I try to minimize risk in every deal. Putting less cash into a deal, and having a tenant pay off the debt on the property is a great way to control risk. This also really works best on lower dollar properties, which leads me to the next theme of this post.
Go big or go home? Not in the current real estate environment. What I'm about to write isn't sexy. It's not fun. It's tedious, occasionally maddening, but of lower risk than a number of other strategies out there right now. If you came to me three years ago with $1 million and told me to deploy the capital in the most logical way possible, I would have bought you a single multifamily building. If you bring that same $1 million to me today, I'm going to spread the money out all over the place. I'm going to walk through three property types today and give you thoughts on investing in each:
- Single Family
Multifamily in Fort Lauderdale
I've touched on multifamily housing before. I'm well versed on this property type and have completed some very complicated deals in this space. However, the days of finding a distressed note, purchasing it, then taking over the building, are long gone. Today's strategy has to focus where most others aren't, that's in the duplex to fourplex property type. Cap rates have compressed dramatically on the larger buildings. A well located, stabilized, larger building will likely yield you 5% (at best) after all expenses. Institutional buyers, as well as the larger multifamily investors aren't touching the 2-4 unit buildings. This property type is scattered throughout Fort Lauderdale so there's a decent amount of available inventory. Why do I see value in these right now? The answer is simple, cost per door! Let's say you're looking at a fourplex for $250,000. That's a cost per door of $62,500. If you take a look at cost per door you can get a sense for how comparatively inexpensive some of these buildings are trading for right now. My focus isn't on the prime location in this space right now. My focus is to gather as many doors in the most cost effective way possible. As long as the buildings are in decent condition financing on this property type is readily available.
Single Family Real Estate Investing in Fort Lauderdale
I'm going to warn you now, the single family deals I like right now tend to be on the messier side. This is about as risky as I get, however the risk is very calculated. Yesterday I wrote a post about the difficulty some buyers are having obtaining homeowners insurance. While this is not good news for the financed buyer, it creates an opportunity for the all cash buyer. Look I always say you need to get away from the noise. To put it another way the most opportunity can come out of times when you think like a contrarian. The large funds buying single family homes will need homes that are insurable, and in close to turn key condition. The wholesale or "flipping" crowd are going to look to buy at a steep discount to asking price (they'll offer 65% of the after repaired value of a home minus costs of repair). That makes those two groups very predictable. I operate in more of a hybrid model. Due to capital gains taxes it can make a whole lot of sense to buy, fix, rent, and hold for a few years.
All that being said, what type of single family deals do I actually like right now? Simple, I need to get around the financed buyer who will pay top dollar for a home. Those looking to live in a home for a number of years, versus invest in it, will pay a premium. So I'm looking for an older home that will likely not pass a 4 point inspection. That knocks both funds, and financed buyers out of the picture. Then I need to know how much the flipping crowd is going to offer. My offer needs to be above theirs. I can spend more because I have a longer hold period. I can make the difference up with income generated from the property, while waiting for capital gains to pass. Long theory short, I'm looking at homes priced on the low end of their respective markets, in relatively poor condition, that would be easily rentable. That also means nothing on a main road!
Condominium Investing in Fort Lauderdale
This is the most passive, and easiest strategy to explain. For the most part lending has returned to condominiums, provided you can put 30% down (or so I've been seeing). When I screen I'm looking for a few basic things. I hesitate to write this as it's a bit of my secret sauce. The reason I am writing this is because I'm advocating low dollar condominium purchases. Few agents are going to tell their clients to spend less money. I'm telling you that right now, it's possible.
Once I've put my filters in place it's not like there are hundreds of condo's that fit my criteria. On a good day I'll look at 2-3 listings that may work. I'm looking for condo's priced below $160,000. HOA dues have to be below $300. If I do that I should generally be above a 5% cap rate. On some deals I can stretch to 8% cap rate (typically on lower dollar). However, if you can add debt onto the purchase, and not be cash flow negative, these are huge wins. It's a condominium so it's incredibly passive for the investor. Someone else takes care of everything for you. The tenant pays down the mortgage through their rental payments. You have the upside potential of property appreciation. Best of all, you're not putting $400,000 at risk!
If you'd like to speak more about Fort Lauderdale Real Estate Investing Strategy 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