According to Reventure CEO Nick Gerli, the Florida real estate market is teaching investors who bought at the peak harsh lessons.
In a thread posted on X (formerly Twitter) on Wednesday, Gerli pointed to a troubling, anecdotal case – an investor who purchased a home for $325,000 in 2023, hoping to rent it for $3,800 monthly. Today, that property sits vacant despite rent cuts to $2,500 per month.
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If rented, the owner would face an $8,300 annual loss after mortgage payments, according to Gerli.
That isn’t an isolated scenario. The Reventure CEO pointed to a surge in inventory across Florida, with some ZIP codes seeing listings double over the past year. It’s a red flag for the market’s health.
Florida real estate is cyclical, Gerli said. “Each boom – there’s people who think ‘this time is different,' ‘The area is transformed,' But in the downturn, they get reminded of the realities.”
Timing is critical in Florida’s market. The real estate executive said investors who bought between 2010 and 2020 likely have positive returns. But those who entered during the 2005-2007 or recent boom cycles struggle.
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Current market conditions are particularly challenging. Rents are stagnating or dropping while property taxes and insurance costs skyrocket. Gerli cites that the 2024 tax bill is $5,500 – nearly two months’ rent. Insurance can add another $4,000 annually in some counties.
Many investors overlook crucial details, like the loss of homestead exemptions, when converting owner-occupied homes to rentals. This can lead to dramatic tax increases. Add vacancy periods, maintenance, and management fees, and profit margins evaporate quickly.
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“It’s getting very hard to make money in Florida real estate as an investor,” Gerli warns. “Do the math carefully before diving in.”
But where are the opportunities for real estate investors looking to build wealth over the next decade? Several experts weighed in with GOBankingRates:
Boise, Idaho: Jeff Tricoli of Keller Williams cites Boise’s 218% home appreciation over the past decade as a promising indicator. A growing job market and continued high demand make it attractive.
Fort Wayne, Indiana: With median listing prices 102% below the national average, Fort Wayne offers an affordable entry point. Recent price dips could spell opportunity for long-term investors.
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Las Vegas, Nevada: The city's economy and booming tourism industry create opportunities for growth. Median home prices are up 6.3% year over year and rental demand remains strong.
Seattle, Washington: Mitchell G. David of Beach Life Premier Team points to Seattle’s tech-driven economy as a catalyst for long-term growth. Housing prices have doubled in five years, outpacing national averages.
Denver, Colorado: Denver’s surging population and expanding job market make it appealing. Its proximity to other major Colorado cities adds to its appeal.
Raleigh-Durham, North Carolina: The Research Triangle’s diverse economy and prestigious universities create a stable base of high-earning renters and potential buyers.
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Austin, Texas: A young demographic and no state income tax make Austin attractive for residents and investors. Median listing prices are up 9.1% year-over-year.
Charlotte, North Carolina: Real estate agent Fant Camak projects potential 145% price growth over the next decade, citing strong job growth and affordability.
Phoenix, Arizona: Tech job growth and lifestyle amenities drive demand in Phoenix. Camak suggests that 130% price growth is possible in the coming years.
Nashua, New Hampshire: Shaun MacDonald of Berkshire Hathaway HomeServices Verani Realty sees an opportunity in Nashua’s relative affordability compared to nearby Boston. He projects 25% to 50% gains over the next decade.
While Florida’s cautionary tale demonstrates the risks of poorly timed investments, alternative markets offer the potential for those willing to do their due diligence and take a long-term view.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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