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Rentals Over Flips? A Possible Naples Real Estate Investment Idea

Posted on Saturday, May 14, 2016

1480 Curlew Avenue Naples FL-large-019-pool-1499x1000-72dpi

(on water rentals – buy, rent and cash out later – interesting)

We just placed a beautiful on water home under contract this week for our buyers and they plan to turn right around and rent it.  And why not? As Naples real estate becomes pricey and inventory catches up we find it harder to make renovation and flip investments work So how about buy-to-rent?

Now don’t get us wrong. If you bought a while back and you have a spec home out there or a nicely done renovation good for you! You may have timed it just right and stand to do well. Going forward though we think it is tougher. Maybe we are too conservative in our estimates and/or we do not lever up our projects but nonetheless it looks tougher to us right now.

So how about buy-to-rent? Now this idea has some merit in our eyes. Our buyers liked the idea and separately we have another project up and going and a second possibility to look at this weekend. Maybe cash on cash rental returns are not as great as a flip two years ago but combine positive cash flows and a rising market and you may have something.

A 10% real estate rental cash annual cash return (before leverage) and rising real estate prices would look tempting wouldn’t it? Compare even modest rental returns (without any appreciation factored in) to the US Equity markets up .12% year to date at the time of this writing (VTI quote CNN Money) and rentals may look pretty good.


(building your own investment property in the Florida sunshine is actually a lot of fun)

Should you consider investing in Naples, Florida real estate?

Please keep in mind you should consult with an investment professional before investing. We are not investment professionals. We are Realtors and we do a bit of real estate investing on our own.  Unlike some popular real estate TV show episodes you can lose money at this so be careful. This article explores some ideas but it is not an offer to sell or encourage you to invest. Once you and your investment advisor decide to move forward call our Naples Best Addresses Team at 239.595.3921 and we will help you get started.

Readers of our investor newsletter will know the historical tales of Florida real estate investing. Henry Flagler would go “all in” and invest his entire Standard Oil fortune for projects from St. Augustine to Miami to Key West building railroads, traveling in his private rail car checking on this and that and founding among other areas Palm Beach. Barron Collier would plow his Street Car Advertising fortune into the southwest side of the state where few dared to go in those days and develop the beginnings of the trail linking Miami and Tampa and lay the ground work for my home town of Naples. They built, they gave back, they made a lot of money in the process. The families are still making money today.

The Lady Chadwick at Useppa

(The Naples lifestyle is drawing thousands of new homeowners – soaking in on-water life behind the barrier islands can be a part of it)

Well so what? What does all of this mean for you ? You can buy-to-rent, develop or renovate homes here both as a big company or as a private investor.  Individual investors are enjoying a real renaissance building speculative homes, renovating, flipping, or sitting tight on new purchases and renting.

Spec home builders look at land values to decide wether to tear down and build or just renovate. Land values also drive what product to build. What do I mean by this? Well land is so expensive in some areas spec home builders are forced to go big to cover the land costs over more square feet. 4,200+ square foot homes built right to the edge of the set backs are common solutions to the high land costs.

HFH House #2 (Plancher) B

(if the numbers are right don’t be afraid to tear down a perfectly good vintage home and build one targeted to the market)

What about flipping? Yep, still an opportunity for all the usual reasons like finding a distressed property, pre-foreclosure properties, foreclosed properties and so-called “pocket listings” at good prices. Next you need to perform budget conscious improvements and sell with speed. Finding the land is tougher these days.

Here is a trend to help the flipper –  buyers are severely discounting the value of a distressed home, more than the value of improvement would require sometimes. Why? We can only speculate why this is the case but there may be a couple of reasons for the steep discounting. First we are a tourist destination with a population swelling nearly 10x during season. Happy tourists want to go the beach they don’t want to paint and carpet and redo bathrooms. They want a place ready-made for a vacation. In addition an estimated 21% of our buyers are international. Want to run a renovation from a foreign country? Probably not.  The local “on the ground guy” may have an opportunity.

House shy tourists and residents help the buy-to-rent investor.  Many people lost a great deal in the great recession due to decreased home values and are now “house shy”- they do not wish to buy and they are looking to rent. Well there may be opportunities here to buy an investment property and rent it out in the face of this trend. Even better – rents are rising. With land prices rising you may want to speculate on further appreciation and let your rental property ride the tide of a rising market – buy, rent it, sell it down the road – or raise rents. Lots of options.

The Naples Best Addresses Co-Founders 1:2015

(30 homes sold or placed under contract last year: The Sterling Award Winning Naples Best Addresses Team At Coldwell Banker)

Why not pick up the phone and catch up with us and let us know how you are doing? Just give us a call at 239.595.3920 (Nan) or 239.595.3921 (Mark) or 239.285.2038 (David).
Please also consider reading our book “Understanding Naples Real Estate” to get you started on a real estate search or just give us a call about things to do here.

All the best,
Nan, Mark and David Goebel, PA’s
Co-Founders Naples Best Addresses
Coldwell Banker
Mark Goebel, PA and Nan Goebel, PA
REALTOR Coldwell Banker 5th Avenue South
Mobile: 239.595.3921 239.595.3920
Facebook: NaplesBestAddresses

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No legal, investment, or tax advice is being given in this Blog. Consult with legal, financial and tax professionals before acting on any real estate transaction. Actual real estate price and sales results are subject to market forces and are not completely predictable. The writings of this Blog are intended for the sole use of our clients.
We are pleased to announce a portion of our real estate earnings go to support the The Naples Botanical Garden, Habitat for Humanity Collier Count and The Naples Winter Wine Festival.
Some of the data related to Naples homes for sale and Naples real estate for sale on the website comes in part from the Broker reciprocity program of M.L.S. of Naples, Inc. The properties displayed here may not be all the properties available through the MLS reciprocity Program. This information is deemed reliable but is not guaranteed. Buyers and sellers are responsible for verifying all information about their purchase prior to closing.
Mark Goebel, PA is a REALTOR with Coldwell Banker on 5th avenue in Naples, Florida with 35+ years of visiting and living in Naples. After 25 years at Accenture, Mark retired as a managing director and spends his time helping non profits and building a Naples real estate team with his wife Nan and son David. Talk to Mark, Nan and Dave about life in Naples and why they chose this place to live full-time over all others and enjoy Naples real estate.
Contact us to learn more about Naples real estate trends, the florida rental market, Naples design ideas like coastal contemporary and transitional designs or just get a feel for the place like Naples Florida population trends.