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Secrets of Real Estate Investing in Florida: Best Tips and Tricks for 2024

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Florida, long a spot for snowbirds and holiday-makers, has a fiercely competitive real estate market: it’s one of the fastest-growing states in America, particularly with retirees who would like to downsize in a more welcoming climate. With a growth rate of 1.9%, nearly every form of commercial real estate does well, especially as it currently has an ample supply just waiting to be capitalized upon.

If you’d like to add Florida to your portfolio, consider these helpful tips to launch you into a sunnier economic prospect than ever before.

Rely on a DSCR Loan

Purchasing a property is quite pricey if you choose a traditional mortgage, and it also requires a lengthy investigation into your own finances, which can make it difficult to secure funding in a timely manner. Thankfully, you can apply for a DSCR loan in Florida, which uses the income-generating potential of the property rather than your personal financial information in order to qualify you. 

A DSCR loan is based on the debt service coverage ratio, which divides the rental income by the cost of financing the loan to create a numerical scoring of the property’s success. You want to strive for a ratio of 1.25 or more, as this shows that your building will make 1.25 times how much it costs to fund it.

This is particularly great for undervalued properties because it means you’ll have a higher ratio; you can then purchase more properties with the same loan, as it is the combined ratio of all the properties rolled into the mortgage that determines how much funding you can access. 

Focus on Short-Term Rentals

Florida is well-known for its huge tourism industry: Walt Disney World brought over 17 million tourists to the state last year, and this number is likely to grow as more families ramp up their traveling after the pandemic. 

While there are Disney resorts, these are often incredibly pricey, leading budget-conscious consumers to seek cheaper alternatives that are still within driving distance of the park. As such, you can capitalize on Florida’s high housing inventory by purchasing properties and converting them into rentals.

When selecting properties that will do well as a rental, consider the safety of the neighborhood, proximity to highways, and ease of access for those entering and leaving. A small fenced backyard with a nice patio allows families to make a hearty meal if they choose not to eat at the park, while a hot tub serves as a great sell for couples there to visit for a honeymoon or anniversary. 

You might consider painting the home in a distinctive but attractive color or adding an architectural feature out front in order to differentiate it from neighboring houses: easily finding the property contributes to the overall guest experience and ensures you higher ratings.

Rely on Developed Land Rather than Undeveloped Properties

It can be exciting to break ground on a new building, but this may prove a challenge in Florida: the state is currently experiencing a dearth of new construction thanks to a lack of manual laborers. You may experience long wait times and higher costs as construction companies scramble to fulfill orders, and this can make it difficult to get a good return on your investment. Thankfully, though, there is a decent three-month supply of real estate, which is the gold standard for a healthy market. 

If there aren’t enough properties in your given niche, consider the cost of a conversion, as well as the zoning laws that influence exactly what you can do. Converting office spaces into housing is very popular right now, and it may be more cost-effective than building a brand-new structure depending on the intricacy of the project. 

Be Mindful of Climate

Unfortunately, it’s a fact that Florida is facing climate pressures right now, particularly when it comes to strengthened hurricanes and rising sea levels. In fact, numerous insurance companies have stopped operating in the state due to the increased risk of flooding and storm damage, proving that there are serious concerns in certain parts of the state.

To protect your investment, rely on resources like the Risk Factor, which rates the given risk of any particular property for issues like wildfires, floods, earthquakes, and more. You should also look at flood maps from the Federal Emergency Management Agency (FEMA) and purchase flood insurance if you want to invest in a high-risk area. 

Consider making upgrades to improve the resiliency of your property, such as sump pumps, foundation vents, and raising electrical outlets above historical flood heights. When building a new construction, place it on sturdy piers so that it is less likely to be damaged; unfortunately, this is challenging to do for existing structures, and the height of the building should be taken into consideration when you make your cost-benefit analysis. Be sure to advertise these improvements when seeking tenants, as it provides excellent peace of mind.

Sunny Florida is an investor’s paradise, and you can join the ranks of these successful entrepreneurs by analyzing a variety of factors, such as location and climate risk. Leverage a DSCR loan, make necessary improvements, and you’ll find yourself a successful investor in this beautiful state next to the GatorRated team.