Since you are visiting Mashvisor, it means that you are a real estate investor looking to expand his/her portfolio or someone thinking of starting a real estate investing business. In any case, you must consider Miami real estate investing. Why? We are answering this question below.
A City of the Future
One of the first reasons why you should go for Miami real estate investing is that Miami is turning into a busy, 24/7 city. fDi Intelligence, the foreign direct investment division of the Financial Times, ranked Miami #9 in the American Cities of the Future. Miami scored #2 in terms of business friendliness, #3 in FDI strategy, and #10 in infrastructure. These are important indicators for businesses. This means that businesses are likely to relocate to or open new branches in Miami in the coming years. And where there is business, there are jobs. And where there are jobs, there are newcomers. And where there are newcomers, there is demand for rental properties. So, Miami real estate investing should be on your agenda!
Miami is already a truly international destination, being the only place in the US with 45% of visitors from abroad. In addition, the city is a top domestic destination. It is the 7th most populous city with 5.5 million inhabitants, and the Metro area is among the top 15 in the US in terms of GDP. The economy is diverse with the leading sectors including tourism, finance, commerce, media, entertainment, arts, and international trade. In the US, Miami has the largest concentration of foreign banks, in addition to 1,400 Latin American headquarters of multinational corporations. Miami is also a major television production and music recording center, especially for Spanish-language productions. If you are thinking about Miami real estate investing, you would also like hearing that the Miami International Airport is #1 in the US in international freight and #2 in international passengers, while the Port of Miami is among the busiest. All this means one thing: Miami is likely to get more and more businesses and more and more people in the future. So, seriously consider starting your Miami real estate investing now!
At the moment, the Miami real estate market is moving to a buyer’s market. This shift is the result of inventories slowly going up, property listings staying up for a bit longer, and sales slightly going down. Such a slowdown is normal after the boom which Miami real estate has undergone in recent years. Indeed, it is a sign of a more stable market. According to experts, Miami is the most stable market in the country right now. Mr. Daniel Kodsi, Developer of Paramount Miami Worldcenter, says that Miami real estate investing is a safe and valuable investment.
While domestic investors are becoming more and more important in Miami real estate, the market remains dominated by foreign investors. A second home in Miami has been a popular choice from wealthy (and not so wealthy) people from around globe, but especially from South America. Latin American investors are so attracted to Miami real estate investing because of favorable legislation for the buyer (for example, in Florida all commissions are paid for by the seller), the relatively stable rents, and the legal protection against non-paying tenants (the option for eviction). Brazilians, Colombians, and Venezuelans top the list of South American investors in Miami real estate.
Brexit is likely to bring an influx of another group of foreign investors. While many Europeans have already been engage in Miami real estate investing, their number is expected to rise significantly after the UK leaves the EU. London used to be one of the most stable and profitable real estate markets, but the recent plunge in prices is pushing investors away. Because of its stability and recent developments, Miami will be able to attract many European and other foreign investors who would have – under different circumstances – preferred to invest in London.
This does not, however, mean that domestic investors should be underestimated. To the contrary, their role in Miami real estate investing is on the rise. In a survey of the Miami Herald and the Miami-based polling company Bendixen & Amandi International of Miami real estate investing experts, whereas the number of foreign investors is not necessarily dropping, the proportion and importance of local and out-of-state investors is increasing. One of the reasons is that Florida offers better tax advantages for real estate owners and investors than other states, including homestead exemption and no state income tax. A clear sign of the increase in domestic demand is the growing interest in good schools as opposed to dining and shopping options. Still, Miami continues offering beautiful beaches, fun-in-the-sun lifestyle, excellent shopping venues, restaurants, cafes, bars, arts, entertainments, and events.
With regards to the kind of properties for Miami real estate investing, luxury condos in and around Miami used to be the most popular options. Now, though, wealthy investors are also looking into another possibility: pulling their funds together with the money of other wealthy individuals and buying an entire multi-family property or complex instead of one single-family home. Real estate partnerships are on the rise in Miami real estate investing.
Another growing strategy in Miami is fix-and-flip. The Metro area of Miami featured the highest number of flipped houses in the US real estate market in 2015. The proportion of flips to total sales increased from 4.7% to 6.4% over a year. So, although experts recommend long-term Miami real estate investing, don’t overlook this option either.
We’ve saved the best two trends in Miami real estate investing for the end:
- Miami is ranked #9 in the highest average median rents in the US. The rent for a one-bedroom is $1,810 and for a two-bedroom – $2,500. Now that should compel you to invest in the Miami real estate market!
- In the past year Miami real estate properties appreciated at an average rate of 8.2%, compared to 6.1% for the US. The three-year Miami appreciation is 27.4% versus 22.6% in the US. That’s clearly another reason why you should go for Miami real estate investing.
The moral of all we’ve said about Miami real estate investing up to this point is that NOW is the time to buy your rental property in Miami. The main reason is growing prices. Real estate prices in Miami increased by 40% in the last 3 years, and they are expected to grow at 10% per year from now on. This rise will be pushed by the growing economy, the growing Latino population, baby-boomers retirees, South American investors, and investors pushed by Brexit. This means that the best strategy in Miami is long-time real estate investments as both rents and property prices will keep going up.
One very important question that you should answer for yourself before purchasing your income property in the Miami real estate market is which neighborhood is the best for you (for traditional renting as opposed to Airbnb). Below we are showing you the top neighborhoods for Miami real estate investing based on Mashvisor data and analysis. First are figures on the city averages, which you can use to compare specific neighborhoods.
Miami City Figures
- Median Property Price: $1,195,000
- Traditional Rental Monthly Income: $2,300
- Traditional Cash on Cash Return: 2.8% (link)
- Traditional Cap Rate: 6.1% (link)
Now let’s look at the top neighborhoods for Miami real estate investing:
1. Douglas Park
Mashvisor statistics point out at Douglas Park as the best Miami neighborhood for real estate investing, offering the highest CoC return and cap rate. The most significant feature of this neighborhood is the beautiful park around which it is located.
- Median Property Price: $608,000
- Traditional Rental Monthly Income: $4,200
- Traditional Cash on Cash Return: 4.6%
- Traditional Cap Rate: 7.7%
Flagami is the home mostly to middle-class Hispanics, and the residential market features apartments, duplexes, and single-family homes. While the expected rental income is more than half of the average for Miami, the median property price is only a fifth. Both the CoC return and the cap rate are excellent.
- Median Property Price: $240,000
- Traditional Rental Monthly Income: $1,400
- Traditional Cash on Cash Return: 3.6%
- Traditional Cap Rate: 7.6%
Close to Downtown, Brickell is Miami’s and South Florida’s key financial district. This neighborhood is the fastest growing one. While the median property price is less than half of that for Miami, the expected rental income is above the city’s average.
- Median Property Price: $499,000
- Traditional Rental Monthly Income: $2,700
- Traditional Cash on Cash Return: 3.2%
- Traditional Cap Rate: 6.4%
4. Biscayne Island
The Biscayne Island neighborhood is the west-most of the Venetian Islands, a chain of artificial islands in the Biscayne Bay. Residential development started in the 1940s, hosting now mostly apartment buildings. The median property price is above the average for Miami, but keep in mind that the expected rental income is double the city’s average. Though, this neighborhood remains an option for rather wealthy investors with a median price well above $1 million.
- Median Property Price: $1,375,000
- Traditional Rental Monthly Income: $5,600
- Traditional Cash on Cash Return: 3.3%
- Traditional Cap Rate: 6.2%
5. Coral Way
The architecture of the Coral Way neighborhood is an excellent depiction of the building trends throughout the 20th century. The area features Mission Revival Style and Bungalow homes from the 1920s, Art Deco buildings from the 1930s, and modest post-World War II properties. Prices are about a third of the Miami values, while the expected rental income is just below the city’s average.
- Median Property Price: $410,000
- Traditional Rental Monthly Income: $2,100
- Traditional Cash on Cash Return: 3.0%
- Traditional Cap Rate: 6.4%
Once you’ve decided to go for Miami real estate investing, make sure you check out Mashvisor for valuable analytics and comparisons on thousands of Miami properties in all major neighborhoods.