Opportunities in Southwest Florida Real Estate

 



Opportunities still exist in Southwest Florida Real Estate, But Where?


The beginning of July brings hot humid weather, emptier streets, restaurants, shops and long humid days/nights. You can’t bend over and tie your shoes without breaking into a sweat. The weather is hot, no doubt, but is the real estate market hot as well? Are there opportunities to buy, to invest, for income and growth? Yes. There are opportunities. We are in an arena of steady price appreciation, a good rental market, inexpensive money, and dwindling inventory. The real estate market in Southwest Florida is not Hot Hot (not as in it's hot now, but cool soon), but there are still shiny gems of opportunity for the persistent real estate buyer.

Buyers today need to kiss a lot of frogs and not only kiss them take a lot of time digging for them. I’ll tell you where I see opportunities and share some insight.


Higher End Homes

Price appreciation has started to nudge the higher price homes up from their low. Not high enough to make them no longer a bargain, but more importantly high enough to encourage sellers to put them back on the market. This is a great time to buy at the high end. Prices have not totally recovered and the second and third home owners are beginning to put their homes on the market. The bargains are great, some homes being offered at a fraction (less than one half) of their replacement value.


REO'S and Foreclosed Homes

REO’s (Real Estate Owned, by banks) were once sold at such a fever pace that it was not unusual for us to have a dozen offers on just one property. Back in 2008 we had over 100 REO’s in our listing inventory. The average price was under $100,000 and we had so many phone calls every day we fielded the calls on REO’s to an answering service. Today we have less than 20 listed and the average price is over $200,000. Most of the really low priced opportunities are gone. What we are getting now is the higher priced homes where the owners hung on as the legal wheels ground slowly until banks have finally reclaimed the homes at the court house steps. Buying REO’s is not for the weak at heart. It takes preparation, due diligence and most of all patience. Oh and cash. Over 90 percent of the REO’s go to the cash bidder.


Bad Location, Great House

During the boom a lot of people forgot about the adage, “Location, Location, Location”, and built or bought in what they thought was the path of growth. Growth stopped, the house dropped in value and now the bad location is killing them. I went to look at a home last week that in any other location would be a million and a half dollars. Ten acres, two pools, elevator, three master suites, barn, paddock and a five car garage with a second level air-conditioned great room. It was ON A LAKE. REO price? $610,000. This is an extreme example but there are many others: Get out of the way a bit and there are real bargains.


Functionally Obsolete 


Energy inefficient, low ceilings, outdated plumbing, tiny rooms. Homes that need a total make over are also bargains today. Many of these are what we call “scrapes” or “tear downs” because unlike above, the locations give them their value. Wise investors and builders are stalking these homes, tearing them down and building up to code, energy efficient, right sized homes. One of our clients are buying infill properties like this near downtown Fort Myers.


Buy and Rent Strategy


Instead of buying and flipping, some investors are buying with a five year hold strategy. Homes today will give you a 5% CAP Rate and if you believe hat prices will go up, this strategy will be a big winner.


Commercial Investments

I like the commercial market now, a lot. Our economic climate is good and the capital market is hungry to lend on income producing property. Longer term leases are more common in commercial than residential, and while vacancies are longer, so are tenancies, management is easier and values are very easy to peg to income projections. In general if CAP rates exceed lending rates (and they do) it is a buy signal.


Going Vertical

Buyers want new and the building boom stopped in 2006. Builders are cautiously re-entering the market. There are opportunities to be the early buyer in developments where the developer picked up his land at a fraction of the replacement cost. I can hook you up with opportunities like this.


Real Estate buying has some basic rules that never change. Here are

mine:


1.    You make money when you buy, not when you sell.

2.    Know how you are going to get out before you get in.

3.    You can do a million deals where you make only a dollar of positive cash flow per month, but there is a limit to how many deals you can do when you lose a dollar a month.

4.    Look at your alternatives.

5.    Think of the worst case scenario that could happen with your real estate deal. If you can sleep with that in your head, the deal is okay.

6.    The deal will be there tomorrow. (Sleep on it).

7.    Everything will cost more money and take more time than you plan for.

8.    Leverage is a beautiful thing.  Use it.

9.    Cash is ALWAYS king.

10.  If you don’t ask, you don’t get.

11.  It’s not just about price.

12.  Location trumps price.

13.  Look at, feel, smell, touch, and visit your investment before you buy. (Immerse yourself in it)

14.  Do it yourself. It’s your deal, not your agents, your accountants, or your builders. Only you are  responsible for its success or failure.

15.  Buy fixable problems, not unfix-able ones.

16.  Know your right, or your projects right, to succeed.

17.  On taxes – Defer or convert.

18.  Don’t accept face value, dig deeper.

19.  If you find yourself in a hole, stop digging.

20.  If you wait for all your ducks to line up, you will never get in the water.

21.  Knowledge is power. Trade on it.

22.  Action beats inaction. Every time.  (Nothing happens until someone does something).

23.  It’s not over until it’s over. (Negotiation never ends)

24.  My word is my contract.

25.  To not buy is sometimes the best thing to do.