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Jun 4, 2016

Trending Topics: Three Ways to Invest in Real Estate on 30A and the Emerald Coast

We have always felt that our little piece of paradise is the most beautiful place in America. Now, it seems the rest of the country is discovering the secret. Real estate development is booming on the Emerald Coast from Ft. Walton to Panama City Beach and all along scenic route 30A.

Whether you’re a homebuyer who can’t quite find that “just right” home on the existing market, looking for a way to make extra revenue from consistently hot seasonal and year-round rentals, a successful home flipper or a big-budget investor on the lookout for long-term, quality retrun on investment, few areas in Florida are hotter right now that ours

So what opportunities are out there for news and developments? Investors and homebuyers are finding their paydirt in three main ways

Buying land and building — There can be a large pay off for an investor willing to put the time, energy and focus into finding a great lot and building a property. There are some great vacant lots available for purchase in all the popular beach communities along the Emerald Coast. Depending on size and distance to the beach, they vary in price point with lots away from the beach as low as $150,000 and Gulf Front lots well averaging around $1.5 million. If you are purchasing to build, you will likely want to purchase the lot through a lender that will roll the lot loan over to a the new construction loan. Not many lenders have programs that are easy for this purpose and buyers end up confused about terms within the financing. To finance a lot you, are going to need to put down a minimum of 25% of the cost of the lot. You also have to be patient and a good decision maker. The building process can slow to a halt and drag costs and time out if you are not prepared to quickly answer the questions of your contractor and/or design team. Most of all, you have to be very INVOLVED! You will have to make sure your project manager and general contractor is meeting the deadlines and moving things along. The longer it takes to complete the project the longer you have to pay carrying costs. If a hands-on challenger is one that thrills you personally, then this is a great option that can really pay off. As an example, we have clients all-in on a home (land and house) for $150 per square foot. In today’s market, that means the home would trade somewhere between $375-$400 a square foot. Not a bad return.
Buying an existing home to rent it out — This is the typical investment strategy we see along the coast when it comes to individual buyers. The buyer finds a home that is already on a short term/vacation rental program with proven income. Lenders will require 20% down for an investment home purchase, but there are some lenders that might allow the loan to float through as a “second home” purchase which would only require 10% down. In our area, a property that has gross rental income of 8–10% of the purchase price is a very good investment and any property grossing over 10% of the purchase price in rental income is the deal of century. If you are completely hands off and have a property management company handle the rentals you will need to automatically deduct 20–25% from the rental income for their fee — well worth it in both cost and convenience terms. However, if you are willing to stay involved, you can rent for similar dollar amounts through avenues like www.vrbo.com and ww.airbnb.com to net more. It is important to make sure you understand your net versus your gross when determining the actual return on this kind of investment, though. If you find a property that is netting your 5–10% of the purchase price you, will earn back your down payment in no time at all! You will end up with a property that is paying for itself and appreciating as our market continues to trend upward. Another solid return.
Flipping houses — This is probably the most difficult and risky of the three ways to invest on the coast. If the property is in a good location to the beach, it will still command a higher purchase price. Plus, a renovation budget would have to be very tight to stay within the scope of turning a profit. This is another investment that would require the investor to be very hands on and expect surprises. In our experience, buyers want to look in neighborhoods away from the beach where full time residents are purchasing their homes to lower the risk overall. You will be more likely to find a home that is in disrepair and in need of updating — but one that could bring in top dollar. A recent example as an illustration: a 3 bedroom/2 bath home purchased for $150,000, buyer put in around $50,000 for remodeling and the property and sold for $260,000. Again, a solid return.

We’re also seeing a lot of investment groups coming together to fund area developments. Sometimes it’s more formal, professional investors offering these opportunities to help their clients’ portfolios, sometimes it’s groups of families pooling their money to buy land, build and sell.

In fact, across the board, investment activity is very high in our area and growing — a great indicator that there is a real opportunity here to make money and own a piece of paradise.

Contact our investment property specialist Broker Jill Olivarez for more info today!