PropSteam – Edition Jan 03, 2022
Where sunny skies and luxurious beaches meet a booming economy, it should come as no surprise that more people are drawn to The Magic City, AKA Miami!
For an investor, particularly a buy and hold investor, this city is bursting with opportunity in 2022, whether you specialize in short-term or long-term rentals. Population, market, and travel trends create a demand for these rental property types.
To help you understand these trends fully, we’re going to discuss five reasons Miami is a wonderful place for buy and hold investors.
Here’s what you should know:
- Miami’s Prices for Luxury Properties Are Continuing to Increase
Since 2015, housing prices in Miami have gone up by about 40%, and experts aren’t expecting this trend to slow down.
Miami’s luxury home prices are anticipated to increase about 10% in 2022, putting it in the top spot for growth rate by global city. Across the globe, these four cities follow Miami with their increasing price rates:
- Sydney (Australia) in second with a 9% increase,
- Los Angeles in third with an 8% increase,
- Auckland (New Zealand) and London (United Kingdom) tied for fourth with a 7% increase.
What does this mean for buy and hold investors? Well, as a property you’ve purchased continues to grow in value, the potential ROI (return on investment) increases!
In addition to earning a profit while a tenant is renting the property, you’re more likely to get a generous return when you’re ready to sell the property if it’s still increasing in value. Additionally, if you want to use the property’s equity to finance a renovation or buy your next investment, the increasing price should help you do that.
- Florida’s Population Is on the Rise
From 2010-2020, the population in the sunshine state grew around 14.6%, which is double the rate of average population growth in the United States.
While the population was already on the rise pre-pandemic, the pandemic only pushed more residents to the sandy beaches and warmer temperatures that Florida has to offer.
Other reasons for the rise in population include:
- Florida’s low taxes (Florida has the 11th lowest tax rate in the United States),
- Flexibility in living situations as more companies offer remote work,
- Big-city dwellers see the appeal of more land for their money,
- More people want to have a second home to vacation in and are attracted to Florida’s coastline.
In Miami specifically, the population has increased by about 19.73% since 2010, while the annual growth rate is around 1.09%.
- The Housing Shortage Is Expected To Continue
While Florida’s population is growing, housing shortages throughout the United States are expected to continue, possibly into 2025.
Material shortages are a contributing factor in the housing shortage as new construction homes aren’t being built as quickly and frequently as before. Since there are fewer new constructions, the market for existing homes is incredibly competitive.
We haven’t seen homes selling at the current rate since the late 1990s. Once homes are listed, many sellers have seen buyer interest in as little as one week! Also, relatively low interest rates have been fueling buyer demand, which some speculate will continue to offset inflation while others feel the interest rates may begin to increase again.
Since you can target homeowners of off-market properties with PropStream to secure a deal as a real estate investor, this gives you an edge in this competitive market. Having access to multi-sourced real estate data allows you to target motivated sellers while other buyers are only bidding on properties currently on the market.
Once you score a few rental properties, you can fix them up and have them ready to rent for new residents who can’t buy but are interested in living in the area.
- Rent in Miami Is Continuously Increasing
As a result of the housing shortage, Miami rent has risen around 27% and will likely keep rising in 2022.
Since many people moving to South Florida are coming from cities where rent is already high, the rent increase isn’t likely to steer them away from making the move.
Fun fact: The average rent in Manhattan for a 700 square-foot apartment is around $4,000, while the average rent in Miami for an 800 square-foot apartment is about $1,900!
Even if new Florida residents don’t prefer to rent with the higher costs, the current inventory levels can’t support the number of people moving there. Because of this, many people have no choice but to rent until more homes are available on the market.
- More People Are Planning to Travel in 2022, Creating Opportunity for Short-Term Rentals
Even in May of 2021, tourism in Miami passed pre-pandemic levels.
A month later, in June of 2021, occupancy rates in the area were at 117% what they were two years earlier. Now that more people are feeling comfortable with travel and restrictions have eased, this number is expected to grow even more in 2022.
If you’re an investor specializing in short-term rentals, this is a phenomenal trend to capitalize on, especially before spring break and summer holidays. Miami ranks number four in the nation for the busiest spring break spots, so a short-term rental in this area is a potential gold mine between March and April!