When done correctly, investing in Florida real estate is one of the best ways to invest for the long term, while also receiving a monthly income from your investments.
Real estate investments historically earn stable rates of return, making this asset class one of the best places to put your money. But in order to glean excellent returns, it’s important to find profitable investment properties.
So, here are 5 tips to help you find profitable real estate investments in Florida.
#1 Avoid Get-Rich-Quick Speculation
Searching for profitable real estate investments requires a mindset of purchasing properties that will generate cash almost immediately, while understanding that real estate investments don’t make investors rich overnight. Therefore, purchasing real estate investments must be fact-based, and not speculation-based.
When considering whether to purchase a real estate investment property, base your decision on the property’s present value, not unquantifiable future valuations. Realistically analyze the property’s cash flow and net cap rate based on local comps for the property after rehab, and don’t get caught up with get-rich-quick speculations.
#2 Selection Criteria for Investment Properties
Real estate investors use different selection criteria for real estate investments. This diversity helps maintain a healthy and stable real estate market, but also results in winners and losers among investors.
Successful investors, then, develop a winning strategy for selecting investment properties that includes geographic locations, property size and type, property condition, and various financial indicators like cash flow and cap rate.
#3 Financial “Rules of Thumb” When Selecting Investment Property
There are some “rules of thumb” that can be part of an investor’s strategy when selecting investment property.
Here are 3 rules of thumb every investor should commit to memory.
70% Rule of Thumb for Flippers
Perhaps the most well known rule of thumb is the 70% rule, which applies to properties an investor intends to flip. This rule states that the maximum price you should pay for a property is 70% of its after-repair value minus repair costs.
2% and 50% Rules of Thumb for Rental Property Investors
The 2% and 50% rules of thumb help investors do the initial analysis to determine whether a property could be profitable as a rental. If the property passes these 2 criteria, it may be worth further analysis.
The 2% rule states that the rent collected from a property should be about 2% of its purchase price. This rule helps investors select properties that can generate adequate cash flow.
The 50% rule states that 50% of your income will be spent on expenses (not including financing payments). This rule helps investors select properties that can generate adequate cash flow and be profitable after all expenses, including financing payments.
#4 Network to Find the Best Investment Property
Most often, the best research to find profitable investment properties is through networking with experts in the real estate industry, including investors, real estate agents, lawyers, accountants, insurance agents, title agents, and inspectors.
The best real estate investment properties are often bought off market, meaning that the buyer learned about the property through networking connections, and purchased it before it hit the market.
#5 Use Technology
When searching for profitable investment properties in Florida, technology is essential for communicating and networking with industry experts, and for conducting research.
Investors can gain a wealth of local information from newsletters and social media groups by Realtors, real estate wholesalers, and other real estate experts. And of course, research using the MLS, Zillow, Trulia, Realtor.com and other resources are invaluable.
Rental4Income.com was created to educate seasoned investors and beginners in all areas of real estate investing, and especially with real estate investing in Tampa Bay.