Why do so many people want to invest in Florida real estate?
The answer lies with economics. It’s all about good old-fashioned demand and supply!
There are a lot of reasons people look to Florida for real estate investment opportunities. In this article, I will not only address the top reasons people love Florida real estate property investment, but I will also help you understand why our investment team loves that market so much and why it makes sense to invest there now and over the long term.
Let’s dive in.
High Demand Equals Real Estate Investment Opportunities
According to the Census Bureau, approximately 900 people move into the state of Florida each year. That number represents net in-migration. That means when you consider people leaving the state, people moving into the state, deaths, etc., each day, the state of Florida’s population grows by approximately 900 people.
The reasons people move to the state of Florida are many and include:
- Lower cost of living
- Weather
- Job opportunities
- Lower taxes
- Retirement
- Overall quality of life
I estimate approximately 1/4 of those people are wealthy and approximately 3/4 of those people represent ordinary, middle-class people. This distinction is important because it affects the quantity and types of housing that are necessary to accommodate the growth in population.
Supply Side of the Florida Property Investment Equation
On the supply side of the equation, they are building apartments at a very fast pace throughout the state of Florida. Because of that, you may be tempted to conclude that the amount of new housing being added to the state is sufficient to meet the demand. If you just looked at this supply-side metric without diving into the details, it would be easy to come to that conclusion.
However, when you dive into the details, you realize that in the multifamily space, the supply being added is mainly the “A” Class, top-end, fully amenitized properties – almost resort-like. There is very little, if any, housing being built that is affordable for ordinary people. That means the same ordinary people representing approximately 3/4 of the population growth in the state are trying to find a place to live and no one is adding to the inventory of affordable multifamily housing.
Because of the cost of construction, developers can only afford to build “A” Class properties that demand high rents. So, if it is your intent to invest in A Class properties you are closer to a demand/supply balance or maybe even an unfavorable situation, depending on the amount of new supply and new demand. The result may be slower appreciation or the need to hold an “A” Class asset for a longer period of time to get the appreciation you're looking for.
Alternatively, if you invest in B&C Class assets like our investment team does, there is no question that builders cannot build B&C Class assets to meet the very high demand in the market. As a result, we have excess demand and a supply shortage, resulting in upward pressure on rents and housing costs for B&C Class assets. Because of this, we are able to increase rents at a fairly rapid pace with this type of asset.
So, assuming you invest in B&C Class assets like we do, the demand/supply equation sets up very favorable economic conditions making it much easier to make money investing in Florida multifamily properties.
