Have you been thinking about a real estate investment in Fort Lauderdale? Those that read my blog often know I'm driven by math and numbers more than anything else in real estate. When you're investing in real estate you have to remove your emotion about a property, to an extent. Let's take a step back and ask why you are thinking of investing. Are you planning on living in the property at some point? Are you buying strictly for cash flow? If you're planning on living in the property at some point then we have to look at more than just the numbers. What I'm saying is know what type of investor you are and what your exit strategy is going to be before you consider buying.
When I speak to investors I often get the question, do you have any REO's for foreclosures in the Fort Lauderdale area for sale? The true answer is that the foreclosure inventory is almost gone. We read in the papers that there are more REO's in Florida than anywhere else. What isn't told is that the foreclosures aren't getting onto the open market. Once a bank forecloses a property it can be purchased on the steps of the court house. I know a number of people that made a pretty good living buying these properties at the court house themselves. Then private equity firms caught on. As an example the Blackstone Group was buying up to $1 billion in Florida real estate last I had heard. KKR and Waypoint Homes are also enormous funds that are in the game. They have armies of people that cover the court house and outbid anyone standing around. This isn't a good or a bad thing, it's just what's happening.
Let me further illustrate the point by looking at the foreclosure inventory in Fort Lauderdale. When I work with investors I take a wider area than my typical 17th Street to Sunrise Box. My investor map, which is featured here, takes an area of 95 to the west, and the Atlantic Ocean to the east. I go up to Oakland Park Boulevard, and all the way down to 595. So a much larger box than my typical area. If we take that area and search all single family homes for sale we will find 536 single family homes for sale. If you search for only foreclosures you get 14 results. Some quick math tells you that only 2.6% of the available single family home inventory in our search box is a foreclosure! Only 2.6%! If you do the same search for condo's you find 663 matches. Of those 663, only 21 are REO's or foreclosures. That works out to 3.2% of available condo inventory in our search box is a foreclosure!
Some investors will now say to me, but wait, it's still worth buying those foreclosures as they have a huge discount to the market! That's also a misconception. On the single family side you do see discounted prices in REO vs non foreclosed inventory, but you're not comparing apples to apples. A typical single family home foreclosure will not have appliances, the owners sell them before the bank forecloses. As someone that listed foreclosures for Fannie Mae for the past four years I can tell you horror stories as to what I've found inside the homes. I've seen it all from motor oil dumped on carpets, all the way to cement being poured into the plumbing. So you can have one home that is not a foreclosure sell at $250,000 that shows pride of ownership and is well maintained. Next door a foreclosed home sells at $150,000 and the statistics show a foreclosed home that sold at 40% discount to market. What you don't know is that the foreclosed home needs $100,000 in repair to bring it into the same condition as the non foreclosed home. In the end and after all repairs they are worth the same amount.
Typically investment properties cash flow best when you're below $200,000 per unit. What we're really looking for is to find something that is priced low enough, and can rent high enough, that we create a cash flow. On a condominium the financials look something like this:
Purchase Price $150,000
Monthly Rent $1,400
Monthly HOA Fee's $400
Taxes yearly $2,100
So we would have yearly income of $16,800
Our yearly expenses (taxes and HOA) would be $6,900
Our Net Income would be $9,900. That would give us a cap rate of 6.6%. Not a bad yield on an asset backed by real estate!
The properties below may work in terms of cash flow. Contact me to find out more or to get a more complete list of available properties.
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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, Harbor Beach, Lauderdale Harbors, Sailboat Bend, Tarpon River, Croissant Park, Collee Hammock, Seven Isles, Nurmi Isles, Idlewyld, 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 to accommodate those with busy schedules.
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Written By Casey Prindle