Central Florida Investment Properties
Real estate remains among the most profitable sectors for investors everywhere.
Any property purchased to generate income or build net worth through capital appreciation constitutes a real estate investment. Investment property owners earn money by renting their properties or re-selling for a profit.
The housing market in Florida is favorable to investors. The state boasts a high quality and low cost of living, low taxes, and steady population and economic growth.
As the demand for homes increases at an unprecedented rate, owning a rental property in Florida has never been more lucrative. Central Florida, which offers the same benefits as South Florida but without its high housing costs, is the perfect place to start.
These three tips on buying investment property in central Florida will give you the knowledge you need to make informed decisions on buying Florida investment property.
3 Tips on Buying Investment Property in Central Florida
There has never been a better time to buy rental property in Florida.
Central Florida—and especially Orlando—has recently appeared in several rankings of the best places to invest in real estate.
According to the Douglas Elliman portal, Orlando experienced a 20% rise in the prices of annual listings in the last year, and demand for homes increased by 260% in Central Florida.
Whether you plan to rent or re-sell a property, you should keep several important Florida property investment tips in mind.
The first step in buying rental property in Florida is to assess your budget and determine how much you are willing to spend. Additionally, you should estimate the amount of money you will likely make from the investment, whether through rental payments or a re-sale.
The second important factor to decide is where to purchase real estate. Central Florida is a lucrative area, but some specific locales are more profitable than others. For instance, you may decide to buy in Orlando, as demand there is increasing at a higher rate than in other areas.
Lastly, decide how you will manage your Orlando real estate investment. Most owners elect to have their properties managed by skilled professionals, which requires an assessment of several important factors.
Read on to learn everything you need to know about buying, owning, and managing your rental property in Florida.
Establish Your Budget for a Central Florida Investment Property
The first step to buying rental property in Florida is to examine your assets and establish a budget.
As with any budget, begin by compiling an overview of your finances. Calculate your assets, add your debts and expenditures, and compare the two to establish whether you can afford a new property.
Once clear on your finances, you will want to choose your payment agreement.
Experts recommend taking out mortgages, which typically result in lower overall costs.
When purchasing a property on a mortgage, you must ensure you can afford the down payment, the mortgage payments, and the closing costs.
The down payment is the lump sum you pay upon purchase. According to a recent survey, the average down payment is 5–7% of the total purchase price of the house. Ensure you have sufficient money saved to make such a payment.
Next, assess your mortgage budget. Investopedia recommends using the 28% rule, which is that your monthly mortgage payment should not exceed 28% of your monthly gross income.
The Federal Housing Administration, which provides mortgage insurance to approved lenders, allows consumers to spend up to 31% of their income.
Lastly, ensure you can afford your closing costs, which run between 2% and 5% of your total loan amount.
Keep HOA fees and taxes in mind as you compile your budget.
Alternative Payment Agreements
While mortgages are typically more financially accessible and logical for most buyers, they are harder to obtain for investment properties than for owner-occupied homes. This is because banks usually require higher credit scores, better debt-to-income ratios, and consistent documentation.
There are several alternative financing agreements that can benefit those who may not qualify for traditional mortgages.
They are as follows.
- Renting to own.
- Obtaining owner financing.
- Obtaining a private loan.
- Paying in cash.
Paying in cash makes buyers more attractive to sellers, and means not having to make interest payments, but is not an option for most people.
Rent-to-own may suit people who do not qualify for traditional mortgages.
Owner financing is an agreement whereby the buyer pays the seller interest, rather than making a lump sum payment.
Once you have determined your budget range, it’s time to hone in on your desired location!
Scout Neighborhoods in Central Florida to Find a Property
There are a few key factors to consider when buying investment property in Florida.
- Rental payments relative to housing payments.
- Property class.
- School systems.
- The average age of homes.
- Local employment.
- Commercial properties nearby.
Property investors generate wealth by choosing neighborhoods where rental payments are notably higher than housing payments. These are generally “up-and-coming” neighborhoods. Central Florida boasts more up-and-coming neighborhoods than most other areas of the country—and housing prices have risen by over 20% in Orlando alone.
The property classification system allows you to assess the potential of a neighborhood based on specific geographic and demographic characteristics.
A-class properties, for instance, are in highly desirable areas with better schools and less crime. These areas are more likely to have high property taxes and lower investment returns.
D-class neighborhoods boast affordable properties with high returns but are less desirable and often less safe neighborhoods.
The classification system can help you to identify the best neighborhood for your particular needs.
Areas with better schools, newer homes, reputable commercial properties, and higher rates of employment are likely to generate higher demand. But their lower risk implies lower reward.
Conversely, high-risk areas are more financially unpredictable but have more potential to generate high profits.
The Orlando metro area offers a diversity of neighborhoods across the classification spectrum.
Central Florida neighborhoods are rapidly growing, offering moderate risk with the potential for high returns, making them ideal for real estate investments.
As previously mentioned, investment properties in Orlando, Florida, and the greater metropolitan area are incredibly lucrative. The city is undergoing unprecedented population and economic growth.
In addition to Orlando proper, consider smaller neighborhoods such as Altamonte Springs, Palm Bay, Winter Park, Kissimmee, and Clermont.
Decide How You Will Manage Your Central Florida Investment Property
Buying your Florida investment property is only the beginning!
In the case of rental properties, effective management will ensure you generate a profit from your investment.
You can either manage your property yourself or hire a property manager.
There are benefits and drawbacks to both options.
A property manager is a real estate professional equipped to monitor and oversee the operational demands of a property. These include:
- maintaining leases
- collecting rent
- maintenance and repairs
- marketing and rentals
- tax maintenance
- screening prospective tenants.
The advantages of hiring a property manager are many; not only are they skilled professionals with the expertise to generate profits, but they also can save you time and effort.
Or you can choose to manage your property yourself.
This can reduce your costs but it is time-consuming.
Although it may seem an attractive way to save money, experts recommend hiring a property manager since most people underestimate the time and skills required to manage a property well. Call us today for assistance managing your new Central Florida investment property.
Is it Worth Buying Investment Property in Central Florida?
For most people, buying Florida investment properties is worth it.
Because Central Florida is a lucrative area, with diverse neighborhoods to suit every budget and portfolio, there are attractive real estate investments for all.
Researchers have ranked Orlando as one of the top places to invest in real estate. Investment properties in the Orlando metro area are particularly primed for success.
To determine your next steps toward buying rental property in Florida, consider how each of the tips above contributes to your unique situation, using Orlando as the target neighborhood.
Budget and Affordability
In 2022, Orlando’s economy is healthy. The city boasts a diverse economy and properties across the financial spectrum.
This means that regardless of your financial situation, Orlando has an investment property for you.
Because Florida has low property and income taxes, Orlando real estate investments have never been more accessible.
Orlando’s economic, cultural, and social diversity lends itself to lucrative real estate investments. Its neighborhoods cover the full spectrum of financial risk and return.
Additionally, Central Florida is experiencing unprecedented population growth and increased cash flow, which means that most of its neighborhoods qualify as “up-and-coming.”
Orlando has options for you, no matter what you seek as an investor.
Because of its booming real estate market, Orlando is experiencing an inflow of experienced property managers.
The availability and affordability of expert Orlando property management make owning rental properties in Florida easier than ever.
Contact Orlando’s highest 5-star rated property manager for a free rental analysis.
Summary of 3 Tips on Buying Investment Property in Central Florida
Most investors do not take advantage of new and lucrative markets because they are ill-prepared.
With the Florida investment property tips you have learned from this article, you will be better equipped than most to make sound real estate investments in Orlando and beyond!
Begin by drawing up your budget and deciding how you will finance your new property.
Next, scout neighborhoods to identify your ideal locale.
Finally, obtain expert property management to bolster your influx of passive income.
Contact our property management team today, for your free rental analysis!