Investing in real estate is definitely one of the best ways to make money. However, there are many new circumstances which determine the success of your investment, and one of the most important ones is location. If you’ve spent even only a couple of months in the real estate investing business, you must have heard that location, location, location are the three most top significant factors when buying a property.
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For many good reasons, Florida has been one of the best places to invest in real estate in the US housing market for many years now. To begin with, Florida is the fourth most populous state in the US, and for real estate investors (and landlords) a lot of people translates into a lot of rental demand. Moreover, Florida enjoys one of the highest population growth rates nationwide, according to the US Census Bureau. The local economy is doing quite well, and the unemployment rate has been decreasing in recent years. All these factors spell out the perfect recipe for a profitable Florida real estate investment to be rented out on a long-term basis. Couple these with the many tourist attractions and the beautiful climate, and you end up with an ideal location for investment property in Florida in short-term rentals (or vacation homes) as well.
Another piece of good news for real estate investors considering purchasing an investment property in Florida is the fact that the Sunshine State has been witnessing strong real estate development. This has helped keep average property prices in most Florida markets at a relatively reasonable level.
What Investment Strategies Work Best in Florida
One of the beauties of real estate investing is the endless opportunities you face. Whether you are looking for options to make some quick money in the short run or to make a large profit in the long term, real estate has the right answer for you. So, the question becomes: What’s the best strategy for a Florida real estate investment – fix and flip or rental properties?
The Florida real estate market is so hot that it’s hard to go wrong regardless of which strategy you choose. Fix-and-flips are thriving, especially around Miami, where investors benefit from many bank-owned and foreclosed homes. This type of investment property in Florida is particularly good for the flipping because of the lower initial price and the frequent need for basic repairs and maintenance works.
However, no real estate investor who wants to make substantial money in Florida should ignore rental properties. After all, with rental real estate properties you enjoy short-term profit through rental income as well as long-term gains from appreciation. Florida investment properties for sale promise to be an excellent opportunity, regardless of whether you go for traditional (long-term) rentals or vacation homes. Demand and rent are high enough in both to make for profitable investments.
You probably don’t need more convincing that Florida is a top choice when considering where to invest in real estate in 2018 and beyond. However, you still need to know the best places to invest in real estate in Florida.
What Are the Best Places to Invest in Real Estate in Florida?
In a state as big and flourishing as Florida, there are many new opportunities to invest in rental properties. Nevertheless, as an aspiring real estate investor, you have to choose the TOP city and state locations on the market in order to secure success for your business.
There are many ways to define the best places to invest in rental properties. Here we will focus on the locations within Florida with the highest return on investment measured by the cap rate. In case you are a new real estate investor wondering what cap rate is, this is a profitability metric which measures the ratio between the net operating income (NOI) and the property asset value.
Cap Rate Formula:
Cap Rate = Net Operating Income (NOI)/Property Asset Value
As you can see from the formula, unlike the cash on cash return, the cap rate does not take into consideration the method of financing of the investment property. This is an important advantage when comparing the return on investment in different housing markets as it keeps the calculations straightforward and simple.
Following is the list of places, towns, and cities with the highest cap rate in Florida for traditional (long-term) rentals and vacation homes. The cap rate – as well as the average property price and the average rental income – has been calculated by Mashvisor, an advanced real estate analytics tool which helps real estate investors find the most profitable long-term and short-term rental properties in the US housing market. Mashvisor takes its investment properties data from the MLS and other public sources; the traditional rental comps from Rent Jungle, Hotpads, MLS, and Zillow; and the short-term rental comps from Airbnb.
Locations with the Highest Cap Rate for Long-Term Rentals in Florida
| Town | Long-Term Rental Cap Rate | Average Property Price | Average Monthly Long-Term Rental Income |
| W Palm Beach | 8.0% | $100,000 | $1,500 |
| Riviera Beach | 6.7% | $191,000 | $2,310 |
| Port Charlotte | 5.4% | $232,200 | $1,950 |
| Old Town | 4.8% | $229,200 | 1,300 |
| Vero Beach | 4.7% | $296,300 | $1,980 |
| Punta Gorda | 3.9% | $360,500 | $2,260 |
| Englewood | 3.8% | $406,600 | $2,230 |
| Greenville | 3.2% | $186,100 | $1,080 |
| Southport | 3.2% | $338,500 | $1,920 |
| Rockledge | 3.2% | $232,700 | $1,510 |
Data Source: Mashvisor, June-July 8, 2018
Locations with the Highest Cap Rate for Short-Term Rentals in Florida
| Town | Long-Term Rental Cap Rate | Average Property Price | Average Monthly Long-Term Rental Income |
| Daytona Beach | 8.1% | $244,100 | $2,900 |
| Ruskin | 7.6% | $263,900 | $3,410 |
| Key West | 7.6% | $1,065,400 | $8,620 |
| Riviera Beach | 6.7% | $191,000 | $3,650 |
| Rockledge | 6.0% | $232,700 | $2,610 |
| Saint Augustine | 6.0% | $353,500 | $3,480 |
| Gainesville | 5.8% | $272,300 | $2,390 |
| Pembroke Pines | 5.6% | $231,800 | $2,890 |
| Panama City | 5.6% | $264,500 | $2,350 |
| Brandon | 5.6% | $276,800 | $2,810 |
| Melbourne | 5.4% | $249,000 | $2,460 |
| Fernandina Beach | 5.3% | $418,400 | $3,140 |
| Auburndale | 5.2% | $317,100 | $2,700 |
| Mount Dora | 5.1% | $353,100 | $3,200 |
| Navarre | 5.0% | $339,500 | $2,840 |
Data Source: Mashvisor, June-July 8, 2018
A seasoned real estate investor might not be convinced by the cap rates above. All real estate experts have been traditionally saying that a good investment is a rental property which can bring a cap rate of 8% or above. While this used to be the case, nowadays real estate investing has become very competitive as there are millions of US real estate investors trying to make money this way. Thus, in the current housing market any rental property with a cap rate of 3%-4% or more is worth considering. In addition, you should keep in mind that these figures are city-level averages, and within each location you should be able to find properties with significantly higher return on investment.
A Tip for Increasing Your Return on Investment with Rental Properties
Location is of key importance to succeed with real estate investments. So, when you start your search for the best investments in Florida, make sure to begin with these towns and cities. If you want to push your profitability even higher in these real estate markets or others, remember that the best way to do that is to buy cheap and rent out expensive. To find cheap real estate properties to invest in, check out available foreclosures, bank-owned properties, and short sales.
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Daniela Andreevska is Content Marketing Director at Mashvisor, a real estate analytics tool which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that usually takes 3 months can now take 15 minutes. We provide all the real estate information in easy to understand visualizations.
