Periodically, some real estate observers sound the alarm about multifamily pricing in the South Florida market, expressing fears that properties are too hot and could plunge, thanks to overbuilding or a hiccup in the broader economy. These cautionary observations remind me of the tale of Goldilocks and the Three Bears, with market commentators complaining that the “porridge,” or housing environment, is either too hot or too cold.
In contrast, we would suggest that it’s just right.
Florida’s got a lot going for it, including beautiful beaches, a sought-after climate and plenty of jobs, as indicated by the state’s lower-than-national unemployment rate of only 3.4 percent in June. Southwest Florida in particular added more than 15,000 jobs during the last year, according to Gov. Ron DeSantis.
Many of the new employment opportunities were in high-paying categories like construction and STEM (science, technology, engineering, mathematics) jobs, along with traditional ones like leisure and hospitality. Palm Beach, Broward and Miami-Dade Counties also posted relatively low unemployment rates of 3.6 percent, 3.3 percent and 3.2 percent respectively, according to figures released by the Florida Department of Economic Opportunity.
As more companies and small businesses move to Florida, creating new jobs, more individuals will follow. This influx will help to maintain the demand for apartment rentals and co-ops, which are particularly attractive to the lifestyles and budgets of the key millennial market.
SENIORS STILL LIKE FLORIDA
Rentals and co-ops are also attractive to seniors who come here for the weather and for the lower taxes, particularly if they’re concerned about the tax burden on their pensions. The continued migration of older individuals also increases demand for age-restricted and other senior-related housing, including independent and assisted living centers.
For investors, all of these trends translate to continued opportunities, particularly in acquiring older B and C class properties for renovation or tear-down. Acquisition price points for these classes remain competitive, and although rents may soften a bit as more product comes on the market, demand should remain healthy enough to keep the floor from bottoming out.
Despite the favorable environment, investors should still exercise reasonable caution, including selecting experienced brokers and other advisors who can help throughout the due diligence and purchase process. For existing properties, consider requesting income and expense statements for the current and previous years, and review current rent rolls, service contracts and other reports as applicable.
And of course, maintain an adequate cushion of cash reserves. After all, unexpected events will likely occur, particularly at larger properties. The property may not be fully rented all the time, or some tenants may miss their rental due dates.
For investors that do their homework and are adequately prepared, the multifamily market in South Florida may present attractive opportunities – especially now, when the mixture is not too cold, not too hot, but instead is just right.