Should You Buy Old or New? What You Should Consider in Florida Investment Property
So, you are considering buying investment property in Florida but you don’t know what is better - old or new. With Alec Salameh of Coldwell Banker Realty, you can be assured that you have a Lee County property expert informing your Florida investment property purchases.
Knowing what kind of property to invest in and when depends on a lot of factors such as the market conditions, property location, property taxes, and more. Let’s dive into what to look for in an investment property in Florida.
The Real Estate Market
Perhaps the most important thing to consider when looking for a Florida investment property is what the current real estate market looks like. It is not ideal to invest in a seller’s market, as you’re going to end up spending more on the property than it may be worth in the future. This can change from location to location depending on the level of development in the area and surrounding attractions.
Unfortunately, there is no way to accurately map the market to determine the exact time or kinds of property that are always best. However, looking at market trends in Florida and current market indicators can help inform your decisions. According to Realtor.com and Bankrate, in 2020 April was the best time for buying investment property in Florida with the lowest average selling price. Alternatively, winter was the best season overall by lowest selling price, but November had the highest selling price throughout the year!
Ultimately, it is best to get in direct contact with a real estate agent that can advise you on the market based on inside information and expertise.
Old or New?
There are a few pros and cons to consider in regards to buying old or new investment properties but neither one is necessarily better than the other. Both options have different types of costs, maintenance, and resale considerations. It comes down to what you want to deal with and where you want to invest your money.
When considering an old property, the pros to consider include lower purchase price, established character and history, and proven investment value. Cons may include the cost of maintenance and remodeling, outdated design elements, and competition when purchasing. Keep in mind the balance between the low purchase price and the repairs that may need to be implemented either immediately or in the near future.
When considering a newer property, the pros to consider include lower maintenance needs, energy efficiency, and customization options. Cons may include 20-30% increase in cost, location restrictions, and lower resale value. Depending on the area where you are buying, a new investment property may be more difficult to get renters into, as well, because of the higher cost of rent you may need to charge.
Location, Location, Location
When considering purchasing any investment property, location is key. Beyond the aesthetic that you want from the property, there are many monetary considerations as well as logistical considerations. Consider property cost and resale value, taxes, and fees associated with the sale based on the location.
In addition, consider the type of property you are looking for. For example, in Florida, oceanfront properties have different laws than regular properties. Some of these include vegetation removal, light use during turtle nesting season, and property line laws in the ocean. There may be an opportunity to restrict public access to the property. However, this is an additional factor to consider in the purchase process.
It is important to consider what kind of property tax you can expect to pay. In Florida, investment properties pay different taxes than primary residence homeowners due to the Homestead laws. The average effective property tax rate in Florida fluctuates around 0.98% and it varies by county. Consult with a real estate agent to determine the best locations for your property tax goals. Keep in mind that older buildings may also have lower property tax.
Weather and Insurance
When considering buying investment property in Florida, you can’t get away without considering the weather. As you are looking for a property, consider what kind of weather conditions you can expect in each potential location. It is important that you make sure you are properly insured for all kinds of natural disasters that may impact the property.
When purchasing a new or old investment property, chances are that you have plans for the use of the property. Florida has many deed-restricted communities that are run by homeowners associations (HOA) that protect local property values. While some deed restrictions may not impact your plans, it is important to understand what you can and can not do once you purchase your property.
Remember to define who pays the closing costs at the time of sale. You can discuss this with your real estate agent to plan ahead as you look for a property. Florida has one of the highest closing costs in the country. Be ready to negotiate at the time of closing to make sure you are getting the best deal between you and the seller in terms of closing.
In line with closing costs, you should be aware of all fees and costs associated with the purchase. The county that you are purchasing a property in will decide who pays the title insurance at the time of purchase. Roughly 60% of Florida counties require that the seller pays for the title insurance while the remaining 40% require the payment from the seller.
As an investment property, you will need to consider how you are going to take care of the maintenance of the property.
If you buy an older property, you will likely need to invest more time and potentially money into the maintenance of the property. Think about if the property you are considering needs renovations. If so, do you need to hire a professional? In addition, when you do start renovations consider that you may need to make additional repairs that have not been identified in the inspection.
If you are buying new, consider how to perform upkeep maintenance on the property. Will you need to hire a landscaping contractor? What kind of amenities need to be maintained such as an outdoor pool? Keeping these costs in mind can help you choose between an older property and a new property.
Now that you know some of the big things to consider when buying investment property in Florida, it’s time to start looking at the available options currently listed!