Florida Fix and Flip Market – Reasons to Invest in this Evolving Market
If you are a fix and flip real estate investor, it is essential for you to have a keen understanding of the inner workings of the real estate market. Lacking an in-depth comprehension of the statistics and health of the market puts you at a disadvantage when trying to determine which properties are smart investments and which ones will ultimately fail to offer a positive return on investment. The initial step any investor should start with when selecting their next property is determining the state of the local market. In order to do that, you will have to be able to read the market data and translate it into practical terms. The following is a breakdown of the real estate cycle and why the Florida fix and flip industry is an ideal market to get involved in.
A recovering market typically feels like one that is in a recessionary period—occupancies are bottomed out, rental rates are not exceeding inflations and there is little to no new construction projects being completed. The main distinguishing factor between recovery and recession is that conditions are not steadily declining anymore.
From an investor’s perspective, if you are able to identify it ahead of time, a recovery market is an ideal opportunity to make investment moves. Properties are still priced ideally and the market in the recovery state will most likely be booming once again in the next two to four years. Still, attempting a fix and flip project during this phase of the market is inherently riskier because it will generally take longer to sell the rehabbed property.
The majority of hard money loans permit a year for repayment and there is imply no guarantee that you will be able to offload a property for an ideal price in that window of time. Still, if you have the expendable funds to purchase properties and hold onto them until the market is back in full swing, then you could stand to make a healthy profit in the long run.
The Florida real estate market has weathered the COVID-19 pandemic significantly better than others—making this resilient and steadily recovering market an ideal option for real estate investors looking to make a move in the fix and flip industry. With the median property price currently sitting at $487,033 and beginning to climb considerably as the economy starts to open up, the recovery phase of the Florida real estate market appears to be in full swing—making it the ideal time to snap up properties while they are still priced below market value.
This stage of the market is much easier to pick out, just be on the lookout for a market where demand and occupancy rates are increasing. For fix and flip investors, look no further than Florida to see a prime example of expansion. Properties are still substantially discounted but prices are steadily rising. If you purchase a fix and flip property within a year, not only will your rehab projects inject value but the underlying property will have appreciated significantly.
Just take a look at the statistics—the present population of Florida is approximately 21,993,000. With a growth rate projected at 1.6% over the next year, that number will ramp up significantly in 2021. Accordingly, industry experts are anticipating that the local real estate market will experience a serious uptick in the demand for rental properties. This is important for fix and flip investors to keep in mind, as more inhabitants translates into more potential buyers and tenants for your completed projects.
At this stage in the real estate cycle, vacancies are increasing and rent growth is stagnating because there are more units available than there are buyers. Although the market may still appear healthy as rent rates can be positive at the initial stages of the surplus phase, the oversupply of empty properties will eventually translate in the eventual decline of rent growth and property values.
Florida is definitely not in this phase—nor is it expected that it will transition to this phase at any point in the near future. Notwithstanding the enhanced demand for property in the Florida real estate market, the mid-year housing inventory levels are shockingly low—with Chief Economist O’Connor reporting that inventory levels are 27% lower than this point in 2019. A low inventory in conjunction with rising housing demand means that property values will increase significantly. Data from the Florida Realtors Research Department indicated that the average price for single-family properties was $277,500, a gain of 4.7% from the preceding year. It is anticipated that this trend will continue throughout the state for the foreseeable future.