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Brevard County, Florida is a great county to both live in and invest in. Property investments in Brevard County are one of the best investments a person can make. The county's industries are a healthy mix, which creates stability for smart investors. Not only does the county have a stable economy, but boasts multiple types of housing too. Zillow regularly has condos listed in Cocoa Beach selling for over $1,000,000, while in Cocoa, detached family homes can sell for less than $75,000. This diverse market place creates stability and a healthy growing community.
What makes an area good for property investments, specifically income producing rental properties?
Many investors look at the current market values and ask if the property will cashflow. A property investment is a big decision and multiple aspects must be investigated. Before thinking about cashflow, a macro analysis should be examined. The following questions are a great place to start your investment property search. If the answers to these questions cause concern, then maybe that location isn't right for your investment portfolio.
Do people find the location desirable?
If the general population wants to live in a location, there may be a reason to invest. When population growth is only due to industry, the people leave if the industry leaves (as seen in (Lordstown, Ohio). When the general population likes an area, more businesses open their doors, which creates more jobs and a sense of community.
For example, in 2016-2017 North Dakota was experiencing rapid growth, however when the economy started to slow people quickly fled the state. The problem is that no one wants to live in freezing cold temperatures without many of the recreational benefits.
Florida has seen steady growth year over year. Florida has many industries, but the growth can also be attributed to the fact that Florida offers a lifestyle that the general population wants to experience. Florida has a population of 21 million, with 387,000 new residents every year. Many investors specifically search out locations with active tourism which are often beaches and mountains. Active tourism should help point an investor in the direction but not be the primary industry.
People want to live in Florida! Florida offers famous golf courses, beautiful beaches, great fishing and of course Mickey Mouse.
Are jobs and careers available and growing?
A healthy economy requires regular job growth. It is always nice when a big factory moves to a town creating many new jobs, but what an investor is looking for is year over year job growth. This stability creates many jobs. This means that people are going to buy big houses and rent small apartments. More industries means less risk.
Florida has many different industries that help build strong communities. The Florida economy is not built on gas, tourism or a few manufacturers. Mickey Mouse brings tourists, but tourism doesn't run Florida, or most importantly Brevard County.
According to Statistical Atlas, Brevard County’s key industries are:
13.4% Healthcare
13.1% Retail
9.9% Manufacturing
8.7% Hospitality
8.0% Education
Florida has both long term careers and short term jobs, which build long term stability.
Are property values steadily increasing?
It is important that the property values are steadily increasing. Steadily is the key word, as rapid growth is not manageable. When areas grow too quickly, the locals who live and work in the community are priced out of renting and buying. Denver, Colorado is feeling growing pains and it may backfire on the community. According to the Denver Post, the city and community are struggling. Traffic and road construction can not keep up with the demand. Housing costs are unaffordable even though there are jobs, and many people can not find a place to live within their working budget. The city is struggling with standard utilities; not only are roads congested but other basic human needs are a struggle like water and sewage. Their financial struggles often put people in homes they can not afford, this can lead to market problems and risks for investing.
According to Zillow, the growth in Florida has been slow and consistent. This type of growth is ideal for long term investing and creates for an option to stabilize an investors portfolio.
Are the rental rates high enough to cash flow?
Cash flow is key to the success of any property investor. The cash flow formula is very simple: subtract all expenses (taxes, insurance, mortgage, maintenance) from gross rent. If you end up with a positive number you have cash flow. Cash flow does not mean an investment property is a perfect investment, it simply means that you will be able to pay all of your bills and still make money each year.
Today in Brevard County, lower end apartments are renting for $800 a month. A two-bedroom rental with a list price of $100,000 will most likely cash flow (depending on the loan and maintenance needed). These types of homes are commonly for sale in Florida and there is a large rental market to support this type of investment. A good real estate agent who specializes in income producing properties can help analyze properties. The information below discusses how to find income producing rentals but feel free to contact Adam Maxfield directly at (321) 423-8283.
Yes, properties in Florida can and will cashflow, especially in Brevard County!
What are the risk factors of the area?
Risk and reward are always items that must be evaluated when looking at any investment. Rental investment properties offer two key rewards, annual growth and income. Rewards are on one side of the scale and risk is on the other side.
Common investment property risk factors:
General market risk
The great recession of 2008 negatively impacted most investments, especially property values. However, even though property values dropped, rental rates increased across the nation.
Real estate does not offer liquidity, which means that when an investor wants to sell a property it could take more than 6 months. In 2019, homes sold in 180 days (on average). Whereas, stock can quickly become cash, which offers high liquidity.
Structural
Some structural problems can not be seen in a standard inspection. It is possible to find an entire wall that has been destroyed by termites while the interior drywall looks perfect. This risk can be minimized through inspections, but is still possible and could be a costly repair.
Surprise Repairs
Insurance companies do not always want to pay form home damage, and sometimes they don't have to. A small plumbing mistake can create a large expensive repair. These items are bound to happen; just ask any veteran investor and they will share a story or two. The remedy is to be prepared with a reserve fund set aside to pay for surprises. Risk is reduced when you plan on it happening.
Vacancy
Every time a tenant moves out there will be a time period of vacancy. Vacancies lasting more than a month can be costly and quickly ruin an investor’s cash flow. Repairs or a market flooded with too many rentals available can cause extended vacancy time. The remedy is to have a maintenance team ready to start the same day the property is vacant. The second way to reduce this risk is to build a property investment portfolio that balances out vacancies and investor cash flow. A good property investment advisor can help recommend how to balance your property portfolio.
Problem Tenant
This will happen, as most landlords have had to evict a tenant. Lower end rentals will often be more accessible to investors, but low cost rentals could have increased risk with tenants.
All markets have risks, including the real estate market in Florida. A benefit to the Brevard County rental market is that many of the properties are block construction which reduces maintenance costs. The key to mitigating risks is planning for things such as bad tenants, vacancies and surprise repairs. Keep a reserve and hire a Realtor with a history of investment properties.
What is the cost to invest? Is it in my price range?
The minimum cost to invest in properties is more than stocks or mutual funds. Investment properties offer growth and income, but with higher reward usually comes higher risk. The cost to invest greatly varies depending on geographic locations and market conditions. In Southern California the cost to enter the rental market is very high. An average duplex in Huntington Beach will be listed for more than $1,000,000, whereas a duplex in Brevard County can be listed for less than $300,000. A down payment can range from 10-25% of the purchase price, so the cost to invest can vary greatly.
A rule of thumb is to be prepared with 40% of the property value as an initial investment. If the buyer purchases the property with a commercial loan of 25% down, the buyer will have 15% as a reserve until the cash flow as accumulated or the buyer is ready for any surprises. The 40% is a conservative approach, and depends on property condition and if the property is currently occupied by a tenant.
Florida property values are reasonable and perfect for investors. A three-bedroom home which can rent for $900 can be easily found. These properties can quickly cash flow and only require a $15,000 to $20,000 down payment (depending on lender requirements and maintenance requirements).
Florida has properties that are easy to find and are affordable.
How can I find an income producing investment property?
This can be very difficult in some states and regions of the United States. The common ways investors look for properties are foreclosures, FSBO (For Sale By Owner) or using a Realtor.
Foreclosures are not easy to purchase and require a savvy investor who is ready to make a blind purchase. Many times the property can not be inspected prior to purchase and it must be purchased with cash. Once the investor owns the property, it is possible that the title has liens, which means the investor is now responsible for this debt. Unless the investor has a great construction partner, a good legal team and a lot of time, it is recommended to stay away from foreclosures. Due to the unknown factors, these properties are extremely high risk.
FSBO properties can be lucrative. Many times owners who want to move a property quickly and without paying commission fees will try to sell the property without a real estate broker assisting. For a savvy investor, this can offer savings because the seller may not know the value of the property. Lucrative FSBO properties are not listed on any websites and will usually only have a sign in a window or in the yard. A buyer needs to be wary, however, because when a seller is not working with a real estate agent the risk is increased. The seller will often disclose fewer items and the seller may not know the laws. These properties are a high risk and may offer higher returns but many times cost the investor more than expected with negative returns.
The recommended way to purchase and find investment properties is to use a realtor who specializes in income producing investment rental properties. The realtor will be able to search the MLS for properties. The MLS will list the current rent and capitalization rate. If the investor sees a property that they are interested in that is not listed, the realtor can approach the owner. A real estate agent who specializes in investment properties will know about the local risks and expenses like tax rates, rental availability, tenant availability, structural issues in the area and even how to locate tenants (not all real estate agents are Realtors).
If you have questions about income producing rentals please don't hesitate to contact me. I specialize in Brevard County, Florida, but I am happy to help connect you with a specialist nationwide.
Adam Maxfield
Realtor
Keller Williams Space Coast Realty
Mobile: (321) 423-8283
Adam@MaxfieldHomeSolutions.com
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