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SW Florida RE Investing Good or Bad?? Cape Coral?
I visited SW FL a few months back and was surprised to see how cheap homes were in the area. We stayed on Sanibel Island but visited family members in Cape Coral. Would Cape Coral be a good city to invest in? All the properties I’ve researched provided a positive cash flow. My goals for this investment:
1. At least break even every month
2. Want to sell and make a profit in 5-8 years
I have a feeling with all the inventory in Cape Coral it’s going to take a few more years before we even start to see an increase. Although, the few Real Estate Agents I’ve been in contact with all seem to think that RE prices have hit rock bottom and probably won’t go any further. I would probably have to disagree with that seeing the amount of properties in pre-forclosure/short sale situation, etc.
Any investors out there that know that market? Good or bad time to buy?
Thanks!
This is a good question, Matthew. There is a lot of misunderstanding about the condition and future of our economy and real estate. I call this current chaotic housing market the “Perfect Storm”. In fact, we may never see another depression like this again in our lifetimes. What many perceive as a problem, is actually a huge opportunity.
As far as being the rock bottom, that’s anyone’s opinion and exactly what you would expect an agent to say who is trying to close a sale. On the investment side, my colleagues (agents included) and I believe that we are looking at at least another 3 or more years. This is based on continued pre-foreclosure listings and the backlog of properties already in the process. In the U.S., the average number of homes in foreclosure is normally 100,000 – currently there are over 1 million homes in foreclosure. There are just too many to handle in a timely manner.
So, don’t be in a rush, but be looking. These are the best times ever to buy real estate – but DON’T pay retail or market value. You can acquire great properties at nice discounts.
Cape Coral is an excellent example of this. One particular investor I work with purchased 40 homes there via short sales in the last year and is looking for more. His business model is almost exactly the same as yours.
- Home is purchased for about $60K – $80K on a short sale (including the repair) – market value of each exceeds $100K
- Deal with single family homes only – no condos
- Stay away from anything with Chinese drywall
- The home must be south of the Hancock Bridge parkway (in the SE or SW section) – this makes it easier to rent and later resell
- The previous owner or tenant wants to stay in the home and pays rent of about $800 – $1,000 per month
- The exit strategy is to sell in 7 – 10 years when most of the lost value is recouped
This model allows for a win-win-win scenario
1 – the bank wins (see below as to why)
2 – the owner or tenant wins because they get to stay in the home they love
3 – you win because you get a nice chunk of instant equity courtesy of the bank
You can use this model with any geographic area, just adjust the purchase price and rent accordingly. But make sure it is in a good area.
I have found also that the banks actually prefer a short sale over a loan modification because they can make more money that way. What many people don’t know is that banks often get help from the government to pick up deficiencies, sometimes to the extent that the bank actually makes a tidy profit on a short sale.
I teach seminars on how to locate the best deals and do short sales and the people in the classes are always shocked to hear about this. But, it makes buying a short sale a great option.
I also wrote a book on the subject and sell it on my website.
Thanks for the excellent and well-written contribution.
All the best,
Short Sales Insider
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