REAL ESTATE IN MIAMI: WHAT TYPE OF PROPERTY IS POSSIBLE TO INVEST IN?
REAL ESTATE IN MIAMI: WHAT TYPE OF PROPERTY IS POSSIBLE TO INVEST IN?
Among investors interested in the US real estate market, many are looking at Florida and wondering what type of property is most attractive in Miami. Some prefer to buy properties that need renovation and resale in neighborhoods like Little Havana or the Design District, while others focus on investing in multi-family housing, hoping for financial gain and stability. In this article, we take a closer look at real estate in Miami: what type of property is available to invest in?
What type of property in Miami should you consider for a profitable investment?
The question of which type of real estate in Miami is the most profitable for investment is entirely legitimate. A debate exists among the most seasoned real estate investors, with those who swear by buying, renovating, and selling real estate on one side and those who choose to manage rental properties on the other.
The question of which type of real estate in Miami is the most profitable for investment is entirely legitimate. A debate exists among the most seasoned real estate investors, with those who swear by buying, renovating, and selling real estate on one side and those who choose to manage rental properties on the other.
Both strategies make sense because they are different from each other, allowing you to both reduce overall risk and maximize your chances of maintaining long-term financial health. Indeed, there are many benefits to diversifying your real estate portfolio.
However, it's important to understand that the multifamily and single-family housing markets in Miami are very different. These differences can affect your current and future financial results. Let's take a closer look at each of these markets to give you all the information you need to formulate your Miami real estate investment strategy and ensure the long-term success of your investment business.
The Miami Multi-Family Housing Market
Even with an employment rate currently above the national average, and with the expectation that this trend will continue, the majority of Miami residents do not own their homes. This may be partly explained by the high cost of living in the city and the rising cost of housing, particularly those located near the sea.
Miami is also a prime entry point for newcomers to the United States, both those moving from interstate and those arriving from abroad. These newcomers begin their new lives on American soil by renting, rather than buying, a property. It's this blend of diverse influences that has pushed Miami's renter rate to nearly 70%.
With rental demand in Miami still strong, rents have been rising slowly and steadily over the past few years. In 2018, the rental market saw a significant increase, with rents for a one-bedroom property rising from an average of $1,669 per month to $1,900. Additionally, in some neighborhoods, including Brickell, rents increased by 23.9% to $2,749!
However, market forces are at play in Miami and may diminish, or even block, your ability to earn passive income from investing in multifamily housing. First, the entry point for purchasing multifamily properties has increased along with rents.
Because there are more buyers than sellers in the Miami real estate market, it's harder to get into the market ahead of the competition, which can be fierce. The higher the rent, the less profit you can expect to make after paying off your mortgage and related investment expenses.
Miami continues to grow, with new units regularly being added to the city. This constant flow could create an overabundance of properties for sale, ultimately slowing down the multifamily housing market. In fact, in 2019 alone, no fewer than 11,000 units were planned for construction! Even with above-average job growth, potentially enough to attract newcomers to Miami, supply still exceeds demand by nearly 6,000 units. Landlords are therefore facing significant pressure to lower their rents in order to find buyers. Therefore, if you decide to move forward and invest in Miami real estate, prioritize multifamily housing that can withstand a potential rent decline.
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Investing in Single Family Homes in Miami
Although there are fewer homeowners than renters in Miami, and the rising cost of purchasing a home in recent years has likely pushed many people out, investing in single-family homes remains an attractive investment strategy for a steady return on investment. However, based on the above information, it may seem that buying a single-family home with the intention of renovating and reselling it is not a smart investment at this time. There are other factors related to the Miami real estate market that, a priori, might support this view.
For example, although the real estate market has seen a sharp rise in median selling prices in recent years, the pace has slowed somewhat. On average, sellers are getting slightly less than they ask for. The average length of time a property remains on the market has also increased. The properties that have suffered the most are those located near the sea.
Still, Miami home prices are expected to continue rising, even if the growth is less pronounced than in recent years. Median home price growth in Miami is 2.6% year-over-year. While this is slower than in the past, it shouldn't be overlooked. While there are fewer homeowners than renters in Miami, the market is stable. Focusing on real estate investing in this part of Florida, there is less volatility at the lower end of the market, particularly in high-profile hotspots like Little Haiti and Aventura—and potentially higher-than-average returns.
Some seasoned investors claim that investing in older, smaller homes in need of renovations would yield more returns than investing in multi-family properties. With the average time to buy, renovate, and sell properties in Miami ranging from 3 to 9 months, any investor choosing this strategy is typically operating within a timeframe that doesn't allow time for prices to fluctuate dramatically. By calculating your costs accurately and buying at the best price, it's possible to see your investment generate a healthy return fairly quickly.
The trick, of course, is to find investment properties in Miami—that is, properties you can buy below market value. To do this, you should follow certain leads, including those from the owners themselves.
Regardless of the type of real estate, the quality of information leads can make all the difference in a transaction and, more importantly, in an investment. In addition, seller motivation influences potential returns. As such, it is best to seek professional assistance for the success of your project .
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