Posted on Wednesday, January 14, 2015
(framers at work on a new home in Naples)
Here in Naples, Florida average home prices were up 15%+ in 2014 following an 18%+ jump ind 2013. Compare these returns to the US Equity markets moving up 10% or so in 2014 and a very shaky start this year and you have the makings for more investing interest here. We wont talk about emerging market or European equity markets – or commodities for that matter. Real estate returns look tempting.
The Dow Jones equity REIT is up a whopping 32.82% over the last twelve months (CNN Money) and more than one investor is looking to real estate as an investment these days.
Enter Naples, Florida where resale supplies are still low, volumes are good and it looks like we may be in for another good tourist season. Should you or your clients consider investing in Naples, Florida?
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. This article explores some ideas but it is not an offer to sell or encourage you to invest. The article is intended to explore some things we are seeing here in Naples. Enjoy! If you like what you read get with an investment professional before deciding to go forward. Once you decide to move forward get with us here in Naples and we will help you get started.
(sales brisk at the local Naples farmer’s market)
The historical tales of Florida real estate investing have made the rounds throughout our country. 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.
In more modern times groups like the Deltona Corporation, really three brothers, sold the dream of living in Florida to many folks across the country and built up Marco Island. Westinghouse would build Pelican Bay and many a gated community – over 100 actually – would spring up around Naples. The local wisdom is it would take three tries to launch a gated community with the original group sometimes far out of the picture by the finish line. Even Habitat for Humanity in Collier County found its legs here operating the largest affiliate in the country in Collier County.
Today the big commercial developers are back in business building up large, gated communities. They are building thousands of homes and accounting for an estimated 50% of all single family home sales.
Well so what? What does all of this mean for you or your clients? Well you can still develop homes here both as a big company or as a private investor. Seven figure incomes have been reported recently from individual investors. Corporate developers like the group at Twin Eagles and Treviso Bay and Fiddlers Creek are seeing strong sales. Although waning now, institutional investors like REITS and Hedge Funds are investing as well. Let’s take a look at each group and talk about how you might fit in.
Institutional Investors may have had their fun for now. The Naples News reports institutional investing in Collier and Lee County has dropped off http://www.naplesnews.com/news/2014/feb/27/investor-home-buying-declining-sharply-lee/?CID=happeningnow. Institutions are probably looking elsewhere as a lot of the foreclosed inventory and multi-family units have been gobbled up over the past few years.
Corporate Developers are now in full motion. Single family home inventory in particular is low in Naples, prices are rising, and many a tourist would like new construction with no “fix-up” required. Enter the corporate developer to solve inventory shortages by building homes – a lot of homes. Sure you may have to drive a bit from these new developments to get to the beach but who cares – at prices like $300-$350 per square foot for something new vs. $800-$900 per square foot close to the beach you may choose to drive a bit – after all you probably drive up north to your favorite things.
(a new on-water Key West spec home in Naples)
What about the individual investor? Where do they fit in to all of this? Individual investors are enjoying a real renaissance after a very bleak couple of years. Building speculative homes, flipping, buying and renting, and some other ideas are all options for the individual right now.
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 – 4,200 square foot homes built right to the edge of the set backs – but the market seems to say ok and buyers are buying this product. In fact, prices have been rising in the upper end of the market faster than the middle part of the market. Off we go – big homes going up on lots or big homes projects tearing down the old stuff and breaking ground.
Just drive around near the beach and you will see a lot of speculative and custom home building going on right now. The scuttle but we hear is opportunities are becoming harder and harder to find both for renovations and tear downs as we go up and up in this new real estate boom here.
(a new on-water British West Indies home in Naples)
What about flipping? Yep, still an opportunity for all the usual reasons like finding a distressed property, performing budget conscious improvements and selling with speed. There is a factor at work here which helps 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.
The Naples News wrote an excellent article on the local real estate market and I encourage your to read it at http://www.naplesnews.com/happening-now/house-flipping-still-active-in-southwest-florida-but-on-the-decline_58643740. They correctly point out the house-flipping market here is going strong but on the decline. They also provide a table from Realty Trac showing the action seems to be in the $100,000 to $400,000 range.
(raising the roof in Naples on a new spec home)
If you would like to invest don’t forget the rental market. Many, many people lost a great deal in the great recession due to decreased home values – in fact many people lost their homes. Many of these folks are now “house shy”, they do not wish to buy and they are looking for rentals. Well there may be opportunities here to buy and rent your place out especially if you can manage the rents yourselves. With 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.If you would like to know more about buying or selling here in Naples, Florida please give us a call at 239.595.3921. We have toured or owned property in Naples for nearly forty years and we are truly fortunate to call this wonderful paradise our full-time home.
Please consider reading our book “Understanding Naples Real Estate” to get you started on your real estate search https://www.naplesbestaddresses.com/offer/ or just give us a call about things to do here.
We look forward to meeting and talking with you soon,
Mark Goebel PA, Nan Goebel PA and David Goebel, PA
Co-Founders of the Naples Best Addresses team
Mark Goebel, PA and Nan Goebel, PA
REALTOR Coldwell Banker 5th Avenue South
Mobile: 239.595.3921 239.595.3920
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 County, The Race For The Cure Citrus Ride, The Seacrest Country Day School and The Naples Winter Wine Festival. Some of the data relating to Naples homes for sale and Naples real estate for sale on the NaplesBestAddresses.com 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. Talk to Mark and Nan about life in Naples and why they chose this place to live full-time over all others and enjoy Naples real estate.