The Future Looks Sunny for Florida Real Estate Investing — Here are 8 Markets to Keep Your Eyes On

Disclaimer: This post is meant to be used for educational purposes only and does not constitute legal or financial advice. If you are considering a real estate investment in Florida, HomeLight always recommends doing your own research to determine which investment option is best for your situation.

If you’re looking to invest in Florida real estate, you could be in luck. While the real estate market in Florida was red hot in 2020 and 2021, the market has been shifting a bit as we approach 2023. September 2022 year-over-year data shows a 29.9% decrease in the number of homes sold and a 21.7% decrease in the number of homes listed. At the same time, prices continue to rise steadily, with a 15.1% increase over the year.

What does this market environment mean for Florida investors? And how can investors maximize their potential earnings within the Sunshine State?

In order to get to the heart of the real estate market in Florida, we spoke with Nadia Tenouri, a top agent on Matthew Brookens’ team in the greater Tampa area. As an investor herself, Tenouri provides a unique perspective both on what qualifies as a hot investment market and a good investment property in Florida.

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Factors of a great real estate market in Florida

Before we dive into specific Florida investment markets, it’s worth noting a few things that optimize an area for investment in general. As you’re looking into investment locations, keep the following factors in mind.

A desirable area

A great property at a great price is nothing if it’s not in a great area. Savvy investors spend time researching the location of the property, paying special attention to features that would make it desirable to renters or buyers.

Many know that Florida is (quite literally) one of the hottest vacation spots in the country. With 8,436 miles of coastline and the world’s top theme parks, Florida draws more than 122.4 million tourists per year. That’s great news for the short-term rental market!

In addition, the influx of people choosing to call Florida “home” continues to rise. Moving data shows that Florida is the number one destination of folks relocating from other states. That’s great news for the long-term rental and fix-and-flip markets!

As you’re researching a local market within the state, consider what makes that area particularly attractive. Is there something –– such as a university, industry, or natural feature –– that will continue to draw tourists, renters, or buyers to that area?

A growing economy or job market

According to Forbes, Florida is one of the top states for economic growth in recent years. “Florida’s GDP ranked 4th in the U.S. and has seen growth of over 30% between 2011 and 2021.” Analysts attribute the boom in business to low taxes, business-friendly policies, and a strong workforce.

A growing economy usually indicates a stable, appreciating real estate market. At a local level, investors should take note of large businesses with a solid track record in the area, as well as any new businesses intending to move into the location. Both are great indicators of consistent residential needs.

Consistent population growth

Population growth is good for investors because it means the area will continue to demonstrate a strong demand for housing.

Statewide, Florida is expected to continue to draw residents, with a projection of around 300,000 additional people per year and a total population exceeding 23 million by 2025. The Orlando Sentinel says, “Florida continues to see population increases roughly equivalent to adding a city the size of Orlando each year.”

Of course, investors will want to dial that number in closer to their intended city or county. To research historical and projected population growth in any given area, consider searching U.S Census data as well as this county-by-county data compiled by the state.

Nice average rental rates

Since cash flow is directly related to rental income, investors should always look into an area’s average rental rates. Investors can expect the following rental rates, on average in Florida:

• Studio apartments: $771
• 1-bedroom units: $835
• 2-bedroom units: $1,021
• 3-bedroom units: $1,358
• 4-bedroom units: $1,610

However, within the state, rental rates vary significantly by location. Average rent for a 1-bedroom residence in Washington County is $557, while in Palm Beach County it’s $1,180. Even within the same county, factors such as waterfront access and community amenities create variable rent prices that investors will need to look into by neighborhood, specifically.

Aligns with personal portfolio goals

In addition to data, investors should also choose an area for how it can generally help advance their personal goals. For example, some investors have no interest in management and maintenance; they may therefore want to choose an area based more on long-term appreciation than on cash flow. Other investors prefer a hands-on approach to real estate; they would thus want to choose property that’s within driving distance of their permanent residence.

Tenouri says that her personal strategy eliminates condos, due to their tendency toward high HOA costs and assessments. Instead, she recommends single-family and smaller multi-family properties. “There are fewer uncontrolled variables, meaning ones that you can’t hedge against.”

Best cities in Florida to invest in real estate

With those factors in mind, let’s check out some of Florida’s top individual markets. We’ll take a look at some desirable local factors, as well as median home prices with data from Realtor.com, average rental rates from RentData.org, and population size data from Florida Demographics.

Orlando

As Central Florida’s crown jewel of tourism and commerce, Orlando is an excellent choice for both short-term and long-term investments. Orlando has seen home price growth of 21.5% in the past year, and it’s among the top 15 cities in the nation for projected population growth. On the southwest side of the city, investors can capitalize on vacation rental opportunities near the theme parks, while continual expansion on the north and east sides of the city make it a great area for buy-and-hold strategies.

Median home price: $395,000
Average rental rate: $1,713
Population size: 309,154

Miami

Because of its population density, Miami continues to be a hotbed for investment activity. Home prices in Miami have steadily increased for the last 125 consecutive months, the longest recorded growth trend on record. While the median home price may look daunting, keep in mind that beachside mansions and downtown condos push the city’s overall price point upward. There are plenty of affordable investment options if you look inland, especially toward Hialeah.

Median home price: $589,900
Average rental rate: $2,068
Population size: 439,890

Gainesville

Home to the University of Florida, Gainesville presents a great investment opportunity for rentals marketed to students and young professionals. In fact, over 65% of Gainesville residents rent their accommodations. Holding property in Gainesville pays off over time too; real estate appreciation is up 14.6% on the year. One could say that investing in Gainesville tends to bring great gains to your portfolio!

Median home price: $309,900
Average rental rate: $1,415
Population size: 140,398

Jacksonville

Established industry and steady population growth make Jacksonville one of the top cities for real estate investment. Jacksonville boasts four Fortune 500 companies, 20+ hospitals, two major auto parts manufacturers, a booming entertainment sector, and the third largest military center in the country. Combine that with affordable home prices and excellent rental rates, and you’ve got the makings of a great investment market.

Median home price: $321,000
Average rental rate: $1,455
Population size: 954,614

Cape Canaveral

If you prefer a more laid-back, small-town atmosphere for investing, take a closer look at Cape Canaveral and the surrounding Space Coast area. Cape Canaveral is home to Port Canaveral, the second busiest vacation seaport in the world. In top months, more than 100,000 cruise visitors come through this tiny town each week, many who opt to stay and enjoy the town’s quiet beaches or nearby Kennedy Space Center before or after their voyage. The close proximity to Orlando International Airport makes Cape Canaveral easy for out-of-state investors to access as well.

Median home price: $352,000
Average rental rate: $1,525
Population size: 9,970

Tallahassee

Florida’s capital city boasts a surprisingly low median home price, especially when viewed in light of a shocking 30.9% price increase since 2020. Tallahassee is home to Florida State University, which draws a high demand for student rentals. Its panhandle location gives Tallahassee a more temperate, seasonal climate than other parts of the state, which can be seen as a huge benefit to transplants moving in from the North.

Median home price: $299,000
Average rental rate: $1,361
Population size: 197,102

Tampa

The Gulf side of the state features the glittering city of Tampa, with its serene beaches and bustling waterways. But Tampa is more than a pretty city on the bay; it’s a flagship of economic activity as well. The Tampa Bay Economic Council says, “Tampa Bay is home to 20 corporate headquarters, five of which have been named to the Fortune 500 list for 2021. Almost 500 foreign-owned companies representing more than 40 nations are established in our community.” Tenouri specifically recommends the downtown area of Tampa, the beach town of New Port Richey, and the northern suburb of Wesley Chapel for investors.

Median home price: $430,000
Average rental rate: $1,651
Population size: 387,050

Lakeland

Tenouri also suggests that investors keep their eye on up-and-coming Lakeland. This mid-sized town sits conveniently in between Orlando and Tampa, making it an excellent choice for residents who want access to both larger cities. Lakeland is home to a handful of colleges, some lovely museums, and the corporate headquarters of Publix, all of which may help contribute to the area’s staggering 3.3% population growth in recent years.

Median home price: $350,000
Average rental rate: $1,375
Population size: 115,425

Tips for finding a great investment property in Florida

No matter what local market you choose, keep the following tips in mind as you pursue your Florida real estate investment property.

Partner with an expert real estate agent

Whether you’re investing locally or from another state, you’ll want to work with an agent who specializes in investment properties. Having an investment-focused agent on your team will be a great resource in understanding the market on a micro level, including capitalization rates, cash flows, neighborhood norms, and more. Using our HomeLight agent match tool can help you get in touch with that perfect agent partner.

Understand local landlord/tenant laws

In general, Florida is a friendly environment for landlords. Tenouri says that compared to other states, Florida’s non-payment and eviction laws are very straightforward, with noncompliance processes completed in 30-45 days. “It’s a very landlord-favored place and that’s good for investors,” she says.

But landlord laws vary on the local level, so you’ll need to research the requirements up front. Your agent can be a great resource in this aspect.

Run a realistic budget

As you’re evaluating investment properties, be sure to set a budget that includes things that are not reflected in the list price. Closing costs, property repairs, tenant placement costs, and ongoing maintenance are all significant expenses.

In addition, property taxes for real estate investments are not eligible for Florida’s sizable Homestead Credit, and insurance can be quite costly due to necessary hurricane coverage. Your agent can help you estimate these costs prior to making a deal.

Be ready to make an offer quickly

While the market in Florida is cooling slightly from recent years, investment properties are still moving quickly. Thus, you’ll need to be prepared to make an offer quickly when an eligible property comes on the market.

Tenouri says, “You really want to be on top of something within the first few hours it hits the market, if you want to get the best deals. You can’t really say, ‘Oh, let me think about it a little bit.’ I’ve had investors do that, that’s how you end up [missing out on deals]. You don’t want to take your time and think; you want to be ready the moment it comes on the market.”

Keeping that in mind, have your budget ready, your financing in place, and your market research done. When other investors compete for the same property, you need to be confident in your strongest and best offer.

The Florida real estate market as a whole presents an incredible opportunity for investors. With a little research and a great team in place, now could be a great time to buy in the Sunshine State.

Header Image Source: (Lance Asper / Unsplash)