As soon as he finished training to be a real estate investor, Kevin reached out to ask which type of investment property in Miami, Florida he should buy. Since we’d been friends and neighbors for years, he already knew that I preferred to buy houses to renovate and sell in areas like Little Havana, the Design District, and wherever else I could find a good deal on a great fixer-upper. But, he’d heard that investing in multi-family units held at least as much, if not more, potential for providing financial gains and career stability. So, to help get him off the fence about which direction to take his fledgling business, we reviewed the current market for both types of properties—over a beer from Biscayne Bay Brewing, of course.

Which Investment Property in Miami Florida Should You Buy?

Kevin’s questioning over which types of investment property he should buy in Miami, Florida isn’t unusual for new investors. But, debate exists even among seasoned real estate investors over whether you should buy, rehab, and sell investment properties or keep multi-family property as rentals. Many argue that both strategies are equally important for reducing your overall risk and, thereby, increasing your chances for maintaining long-term financial health. And, I don’t disagree that there are, indeed, benefits to creating diversification in your real estate portfolio.

But, the markets for multi-family units and single-family homes are quite different from one another here in Miami. And, these differences can affect your bottom line—now and in the future. So, let’s take a closer look at each so that you, like Kevin, can formulate a real estate investment strategy that helps you get, and keep, your investment business up and running.

The Miami Market for Multi-family Properties

Even with an employment rate that is currently higher than the national average and the expectation that this trend will continue well into 2019, the majority of Miami’s residents do not own their own homes. That may be, in part, because of the high cost of living in the city, generally, and the rising cost of owning a home more specifically—especially as you move towards the beach communities. But, Miami is also a main entry point for both interstate and international newcomers who simply begin their residency by renting, not buying. And, it is this brew of multiple influences that have pushed Miami’s portion of renters close to 70%.

With the demand for rentals in Miami consistently strong, rents have slowly but steadily increased over the years. But, in the last year alone, the rental market saw a big uptick when rents for a one bedroom went from an average of $1,669 per month to $1,900. And, in some neighborhoods, like Brickell, rents increased by a whopping 23.9% to $2,749. If you were able to buy multi-family housing in the last year or so—and at a price that ensured a good cap rate for your investment property—the rise in rents have likely boosted the flow of your monthly income stream as well.

But, market forces are at play in Miami that may diminish, or even stall, your ability to make passive income from investing in multi-family units going forward. First of all, the entry point for purchasing multi-family properties has gone up right alongside rising rents. And, with more buyers in the market than sellers, the cost of getting your foot in the door before the competition is going to keep rising, too. The more you have to pay for a rental, the less chance you’ll see a profit after the mortgage and operating costs are paid—even if local market rents stay high, which they may not.

New units are being added to the Miami area all the time and this constant stream of development could create a glut of inventory that soon dampens the multi-family market. In fact, more than 11,000 units are slated for development in 2019 alone. Even with a  higher-than-average rate of job growth that’s expected to draw even more people to the area in the coming year, supply is still set to outpace demand—by nearly 6,000 units. This will drive asking rents down, and possible rent concessions up, as property owners scramble to fill vacancies. So, if you choose to move forward and invest in this sector, choose only those multi-family opportunities that can weather a potential future fall in rents.

Investing in Single-family Homes

Though there are fewer Miami homeowners than renters, and the rising cost of buying a home in recent years likely squeezed more people out, investing in single-family homes remains my preferred investment strategy for consistently realizing solid ROI. But, given the information above, it may not look like buying single-family homes to renovate and sell is a smart way to invest your money or time—right now, at least. And, if I didn’t know otherwise, there are other market factors that, at first glance, could support this view.

For example, though the housing market has enjoyed a solid run of rising median home sales prices in the last several years, the previously swift upward pace has slowed a bit. And, on average, sellers are getting slightly less than asking. Median days on the market expanded some, too. But, it’s the market at the waterfront that has really cooled.

That said, home prices in the city of Miami are expected to keep climbing—even if at a slower clip than in recent years past. And, though a 2.6% year-over-year increase in median home list prices is already considered pretty modest compared to a few years ago, it’s certainly nothing to sneeze at. Yes, there are fewer homeowners here, but the market here is stable. Plus, if you focus on buying investment property in Miami, Florida at the lower end of the market, you’ll see less volatility—especially in up-and-coming hot spots like Little Haiti and Aventura—and potentially better-than-average returns.

Personally, I find that buying older, smaller, ugly houses to rehab and sell benefits my bottom line much more than investing in multi-family properties. Since, the average timeline for buying, renovating, and selling houses is only three to nine months, you’re working within a market framework that isn’t likely to shift dramatically. So, as long as you correctly calculate your costs and buy at the right number, you should easily be able to price your investment competitively to sell—and make decent returns.

The trick, of course, will be to find deals on investment property here in Miami, Florida that you can purchase below market value. And, when it comes to buying investment property anywhere in Florida, the best leads always come from the homeowners themselves.

Where to Get Better Leads on the Best Investments

As Kevin and I were wrapping up our chat over our last couple of beers, I made a point to mention that, whatever type of property he chooses to buy, it’s the quality of leads that can make all the difference with deals. And, the more motivated the sellers, the better your potential returns. That’s why, when I decided to start buying investment property in Miami, Florida, I also chose to become an independently owned and operated HomeVestors® franchisee.

And, I made that choice because the marketing tools for investors that every franchisee gets access to, like the nationally-known and trusted “We Buy Ugly Houses®” ad campaign, bring motivated sellers to me. Often, these sellers are financially distressed because of high medical bills, an unexpected job loss, or a death in the family. So, they need to sell fast to gain relief. It’s HomeVestors® franchisees, like me, that have been there to help over 140,000 homeowners—since 1996, in fact. It’s the best way to get qualified leads on great deals in Miami. Just ask Kevin, the newest member of Miami’s “We Buy Ugly Houses®” team.

If you’re thinking about buying investment property in Miami, Florida, call HomeVestors® to ask about becoming a franchisee. We’ve got qualified leads to help you reach your potential.

Each franchise office is independently owned and operated.