Before you go out looking for the best place to buy condo in Florida, you might want to check out this investor’s guide to buying condos first.
The Investor’s Guide to Buying Condos in Florida
Before we discuss which location is the best place to buy a condo in Florida, let’s talk about investing in condos first to give you, our readers, a clearer understanding of what you’re getting into.
7 Things Investors Need to Know About Investing in Condos
Before anything else, as a real estate investor, you are left with several investment options to choose from. Some investors prefer to get into the typical fix-and-flip business while others want to be as passive as possible about it and just go with REITs. As an investor, you should know what you want. Meaning, early on, you should have an idea of what your investment goals and criteria are. Knowing these two things will help you identify which types of real estate properties to look for. Among those options are condos.
Condos, or condominiums, are housing complexes made up of numerous separate residential units. Think smaller apartment units collected in a community of several similar units.
Generally, condos are privately owned but have common amenities—like pools, gyms, elevators, parking facilities, and more—shared by the residents and unit owners.
Here are a few things to consider if you’re thinking about investing in one:
Condos Are Generally More Affordable Than Single-Family Units
The most expensive investment anyone can make in life is buying a house. Having a decent home to live and raise a family in is a part of the American dream. However, some folks tend to get overwhelmed with the idea of maintaining a house and a yard, so they tend to gravitate towards apartments and condo units. And while they are still one of the biggest purchases you’ll ever make, they won’t make as big a dent in your bank account like a typical single-family unit would. Of course, you’ll also have to consider that condos are significantly smaller in size and come with expenses that single-family homes don’t have.
Condos Can Generate a Good Rental Income
Condos used as rental units can bring in a good amount of money for property owners, especially ones that are located in prime spots in the city. While condos are more affordable, they rake in good rental rates, especially in areas where almost everything is accessible and walkable. This makes them a pretty good investment. However, investors should also watch out for the condo fees as they tend to eat up profit pretty fast.
Condos Are Slightly Harder to Finance Compared to Other Types of Housing Investments
One of the disadvantages of investing in condo units is that they are harder to finance. Yes, they are relatively cheaper compared to house-and-lots, but financing can pose a headache for investors. If you have to take out a loan to purchase one as part of your BRRRR strategy or other investment approach, keep the following things in mind.
Lenders typically ask for a 20% to 25% down payment from those looking to buy investment properties, including condos. Most lenders prefer investors to actually live in the condo unit for a year before renting it out. That being said, lenders who don’t mind this might ask for a higher down payment. So, once you’ve found the best place to buy condo in Florida, perform your due diligence and make sure you shop around for the best possible financing options.
Lenders Are Warier When It Comes to Financing Condo Units
If you plan to take out a loan, it is also important to note that lenders only give out loans on properties they approve. Condominium loans aren’t as easy to get approved compared to other types of income property investments. Unlike single-family homes, condos are at greater risk of coming with certain litigations and legal issues. If a condo association is under investigation, the chances of getting approved for a loan are very very slim.
Waterfront Condos Are Generally More Profitable
If there’s one thing that can greatly increase a condominium’s value, it’s being located near a body of water with a scenic view. These types of condos are generally considered more profitable because of their location. If you want to know the best place to buy condo in Florida, look for one that’s a waterfront or beachfront property.
Investors Should Be Aware of the Association Fees and Reserve Funds
Condos may be cheaper, but they come with other expenses that most single-family homeowners don’t worry about: association fees and reserve funds. On top of the usual association fees, a lot of folks are unaware of reserve funds. An association’s reserve funds act as some sort of emergency fund for the residential complex. So if the association’s reserve funds are hanging by a thread and a major repair is called for, the residents will be charged extra to cover the expenses.
Proper Data Analysis Need to Be Done When Buying Condos
Even if you’ve already found the best place to buy condo in Florida, you will still have to run the numbers to see if the math checks out. No smart investor will ever skip this part of the process. Analyze the numbers to see if investing in that particular condo or market is the wisest thing to do.
When it comes to property analysis, we at Mashvisor can help you save plenty of time and money trying to get the most accurate results. We all know how time-consuming and frustrating research and analysis can be when you do it the long, hard way. Mashvisor is a website that has helped thousands of investors locate the best investment properties and analyze their income-generating potential. Our investment property calculator will not only help you crunch the numbers, but it also comes up with the best rental strategy before you buy investment property.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.
Identifying the Red Flags of Buying a Condo
So before you set out looking for the best place to buy condo in Florida, you need to also know certain things to avoid to ensure that you don’t regret your decision. Here are some glaring red flags to watch out for when searching for condos to buy:
Poor Building Maintenance
Building maintenance is one of the first things to look for when buying a condo unit as an investment property. Poor building maintenance will greatly affect a unit’s market value and marketability.
Generally, residents of condo units regularly pay a certain amount of money for association fees. A big part of that money is supposed to go to proper building maintenance, such as keeping the complex clean, making sure it is well lit, and conducting the necessary repairs.. If a certain condo complex does not look well-kept, you might as well bring your business elsewhere.
Substandard Design and Construction
Similarly, a substandard design and construction can hurt your investment property. Even if you think you’ve found the best place to invest in real estate, if the building and the complex in itself don’t meet industry and city engineering standards, we would advise you to think twice about it.
Neighbors Not Paying HOA Fees
As mentioned earlier, condo residents pay monthly association fees to help keep the complex well-maintained. This improves its curbside appeal and protects the property owners’ interests as it will increase the building’s market value. If a condo complex has plenty of non-paying residents, it implies that they are not pleased with the HOA services they are getting.
If you’re considering investing in a condo unit, ask to go over the HOA financials. This record will show you how much money is collected, how it is appropriated, and how deep its reserve funds are. Having an idea of the HOA’s financial status can help you determine the quality of service it provides residents.
Poor Insulation Installation
Homeowners value privacy. Whether they own a single-family home, a multi-family unit, an apartment, or a condo, folks want to get as much peace and quiet as they can. However, living in a condo unit somehow compromises that privacy since residents are basically sharing lots of common spaces. So at the very least, residents expect their surroundings to be peaceful and quiet.
However, not all condo units are built equal. Literally. When shopping for a condo unit, take note of its insulation and the quality of its installation. A bad installation usually means that the place is highly susceptible to noise.
Pro tip: When checking out a condo unit, try going to an open house or during a busy time of the day. This will give you a good idea of how noisy the place can be.
Inadequate Parking Facilities
Understandably—not to mention realistically—not everyone living in a condo owns a vehicle. However, ample parking should still be available for tenants. Inadequate parking means that once all the parking slots have been taken, residents will risk parking their cars in unsafe areas. Some might need to park on the streets or walk further down the block for parking. This leaves them and their vehicles at a greater risk.
That being said, check if there is adequate lighting and if the parking area is well-maintained.
Agents Who Don’t Normally Sell Condo Units
If you’re buying a condo unit, talk to the right people. Not all real estate agents are knowledgeable about condo units, especially if they don’t normally sell them. If you’re serious about it, look for an agent who knows his or her stuff. An agent who only sells houses might not be able to answer all of your questions. Those who are equipped with knowledge and experience in selling condos can guide you on how to go about the process. From looking for a vacation home that lines up with your investment goal to going over a buy and hold real estate strategy with you, connecting with the right agent matters.
Pros and Cons of Investing in Condos
Just like any other investment, investing in condos has its fair share of ups and downs. Here are some of them:
Professional Maintenance. One of the major perks of owning and living in a condo is you have fewer maintenance concerns to think about. You no longer have to worry about roof repairs or garden maintenance. All these things are taken care of by the condo association.
Security. Most condos have tighter security and have gated or locked entries. In case of emergencies, tenants can easily ask the security team for assistance.
Amenities. Investing in a condo unit and converting it into a rental gives tenants access to certain amenities they wouldn’t have with the more traditional houses. These include pools, fitness gyms, and community clubhouse benefits.
Affordability. Condo units are generally more affordable compared to single-family or multi-family properties.
Appreciation. Just like any real estate investment, condos are very likely to appreciate over time, provided it is in a good location and great condition. However, due to its strategic location, they appreciate at a higher rate compared to other investment properties.
Proximity to Major Cities and Towns. The best place to buy condo in Florida is where most of the action is, and that is major cities and towns. In most cases, condos are located in the middle of or very close to major urban centers.
Homeowners Association Fees. As we’ve already covered, owning a condo comes with certain expenses most people living in single-family homes don’t have: association fees. In certain markets, HOA fees go up to $1500 monthly. This can be quite a financial burden, especially with inflation.
Excessive HOA Rules. On top of the additional expenses of owning a condo, investors and residents may find association rules quite restrictive. From the typical rules on noise and behavior to imposing regulations on design and decor, tenants have to learn how to live with these rules. If a rule is broken, expect to receive a warning or be slapped with a fine, or both.
Lack of Privacy. Condo living means living with tenants above, below, and beside you. Those who want peace and quiet are better off living in a single-family home.
Rental Caps. A lot of HOAs and condo boards put rental caps in place to limit the number of condos that can be rented out, especially if they will be used as vacation rentals. If you’ve found the best place to buy condo in Florida, ask about the complex’s rental rules and caps.
Possibility of Mismanaged Funds. Good HOAs manage their financials well. Always ask to go over the HOA finances to see if funds are being used appropriately and if the reserve funds are sufficient.
Litigation. Historically, condo associations and developers have faced litigation due to a number of reasons. These include, but are not limited to, substandard construction, professional malpractice, disputes, foreclosures, liens, and fraud. Some investors even ended up losing their investment properties so be sure to perform your due diligence when shopping for a condo unit.
Harder to Sell. Two factors affect a condo’s sellability. One is that not everyone wants to live in a condo. They prefer bigger houses with plenty of open spaces. Two, the HOA fees can be a huge turn-off, especially for people who aren’t as financially well-off as others.
Best Locations to Buy a Condo in Florida
One of the best locations for income properties, especially condos, is Florida. It is known to be one of the most profitable investment markets in the US to date.
There are numerous reasons why people from all walks of life love Florida and want to live in it. The state’s warm and dry weather makes it a subtropical paradise. It is filled with lots of great tourist attractions that make it a great place for vacation. Its job market continues to grow which also makes it attractive to in-migrants and investors. So whether you’re a real estate investor or just one who would like to have a change of scenery, Florida has plenty to offer.
10 Markets That Are Ideal for Condo Investing in Florida
Considering everything mentioned above, investors might now be asking where is the best place to buy a condo in Florida?
We have come up with a list of the locations to buy investment properties in the Alligator State. We have divided it into two categories: traditional long-term rentals and vacation rentals. Different factors were considered to come up with the two lists. Below are some of the most important factors used to draw the list:
Median Property Price. This metric is used to determine how affordable properties are in a certain market. This is not to be confused with the average property price. Real estate professionals prefer to use this metric as it reflects the market’s status more accurately compared to average property prices.
Average Price per Square Foot. This is the average price of a property by square footage.
Monthly Rental Income. This shows the average monthly rental income properties generate either as a traditional rental or vacation home.
Cash on Cash Return. One of the most important metrics used to determine how profitable a certain property is. Using the cash on cash return formula, investors can get an idea of how much they can make off of the property annually against their total cash investment.
Airbnb Occupancy Rate. This number is taken from rental comps and determines a vacation rental property’s booking ratio (booked days vs vacancies).
Price to Rent Ratio. This number gives homeowners an idea of whether it is wiser to buy a property or keep renting one. Investors use this information to analyze rental properties and come up with the appropriate investment strategies. A low price-to-rent ratio rating of 15 and below means it is better to buy a house than rent one. A moderate rating of 16 to 20 usually suggests it is better to rent than buy. Higher ratings of 20 and above mean that it’s definitely better to just keep renting.
Walkscore. This metric is used to show how accessible facilities and amenities are in a city or town on foot. The higher the number, the lesser the need for a car to get around.
Top 5 Traditional Rental Markets in Florida
Looking for the best place to buy condo in Florida to rent out long-term? We got you covered. Here are the top five markets that are ideal for traditional rental properties in the Sunshine State:
- Lauderhill, Broward
- Median property price: $159,703
- Average price per square foot: $137
- Monthly traditional rental income: $1,447
- Traditional cash on cash return: 4.34%
- Price to rent ratio: 9 (low)
- Days on market: 90 days
- Walkscore: 39
- Vero Beach, Indian River
- Median property price: $779,877
- Average price per square foot: $329
- Monthly traditional rental income: $2,275
- Traditional cash on cash return: 3.78%
- Price to rent ratio: 29 (high)
- Days on market: 90 days
- Walkscore: 78
- Port Charlotte, Charlotte
- Median property price: $476,213
- Average price per square foot: $259
- Monthly traditional rental income: $2,029
- Traditional cash on cash return: 3.72%
- Price to rent ratio: 20 (high)
- Days on market: 66 days
- Walkscore: 53
- Palm Bay, Brevard
- Median property price: $325,498
- Average price per square foot: $183
- Monthly traditional rental income: $1,656
- Traditional cash on cash return: 3.71%
- Price to rent ratio: 16 (medium)
- Days on market: 87 days
- Walkscore: 45
- Crawfordville, Wakulla
- Median property price: $384,135
- Average price per square foot: $195
- Monthly traditional rental income: $1,884
- Traditional cash on cash return: 3.61%
- Price to rent ratio: 17 (medium)
- Days on market: Data not available at this time
- Walkscore: 45
Top 5 Airbnb Rental Markets in Florida
If you’re considering getting into the short-term rental market and you want to know the best place to buy condo in Florida, here are five of the most ideal markets for vacation rental properties:
- Cape Coral, Lee
- Median property price: $580,641
- Average price per square foot: $297
- Monthly Airbnb rental income: $4,468
- Daily Airbnb rate: $209
- Airbnb occupancy rate: 75%
- Airbnb cash on cash return: 5.70%
- Days on market: 73 days
- Walkscore: 77
- Port St. Lucie, St. Lucie
- Median property price: $453,575
- Average price per square foot: $227
- Monthly Airbnb rental income: $3,762
- Daily Airbnb rate: $141
- Airbnb occupancy rate: 70%
- Airbnb cash on cash return: 5.46%
- Days on market: 142 days
- Walkscore: 57
- Navarre, Santa Rosa
- Median property price: $480,608
- Average price per square foot: $253
- Monthly Airbnb rental income: $3,722
- Daily Airbnb rate: $233
- Airbnb occupancy rate: 52%
- Airbnb cash on cash return: 5.38%
- Days on market: 37 days
- Walkscore: 5
- Miami Gardens, Miami-Dade
- Median property price: $348,244
- Average price per square foot: $246
- Monthly Airbnb rental income: $3,351
- Daily Airbnb rate: $220
- Airbnb occupancy rate: 56
- Airbnb cash on cash return: 5.32%
- Days on market: 79 days
- Walkscore: 33
- Sanford, Seminole
- Median property price: $353,850
- Average price per square foot: $212
- Monthly Airbnb rental income: $3,072
- Daily Airbnb rate: $120
- Airbnb occupancy rate: 60%
- Airbnb cash on cash return: 5.10%
- Days on market: 55 days
- Walkscore: 69
The Bottom Line: Is Investing in a Condo in Florida Worth It?
At the end of the day, even if you’ve identified the best place to buy condo in Florida, the question is, is it worth your time, attention, and money? While there are no hard-and-fast rules of condominium investing, a successful condo investment will still rely on the property’s location, the owner’s management system, and the right rental strategy. If you’re an investor who wants to get into the rental property market with a condo unit, you need to perform your due diligence, use the right investment tools, and connect with the right people.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.