Trio of Florida Cities Among Analysts’ Top Picks For Multi-Family Home Investments

An analysis of multi-family housing markets lists a number of Florida cities among those that are prime for investment-related gains, according to JER Partners.

The real estate investment management firm considers multifamily markets an attractive class of property right now, because occupancies are improving as a result of restrained supply and rising demand across the country.

In Florida especially, the condo conversion craze has removed many former multifamily properties from the rental market and exacerbated a demand-supply imbalance.

Also, as Florida home loan rates continue to creep up, it is becoming more difficult for first-time potential buyers to purchase a single-family home. Deteriorating housing affordability in some markets should begin to push demand back toward the rental market.

• On a national level, JER projects growth in both occupancy and rental rates, increasing the effective rent for apartment owners.
• Expected increases in effective rents are currently in the 4 percent range in 2006 ,and are expected to continue at that pace into 2007.
• Based on immigration and more boomers hitting retirement age, steady growth is expected over the next decade.

Areas projected to experience strong economic and population growth will provide the best opportunities for investment in multi-family homes. Also, hard-to-build areas on the east and west coasts, where available land is limited or zoning considerations restrict development, are targets for strong appreciation. This is certainly the case in segments of the South Florida housing market, where there is little, if any, land to be found.

In any case, the following U.S. markets provide great potential for investment in multi-family homes of one kind or another for an opportunistic investor…

– N.Y. / Northern N.J./ Long Island: The area is projected to continue with high occupancy rates—around 96 percent—through at least 2008.

– Northern Va. / Baltimore / Washington, D.C.: Selective opportunities will exist based on increased rents and lower vacancy rates.

– Tampa / Orlando / Fort Lauderdale: Strong job growth of 3.5 to 4 percent is projected for these areas, and Florida cities will experience additional growth based on the migration of boomer retirees.

– Atlanta: The area is growing significantly, with an annual job growth rate of 3 percent per year for the next few years, and vacancy rates (which have been high) will continue to drop in the coming years.

– Chicago: The Windy City is currently experiencing a 3 to 4 percent increase in rents and this strength is projected to continue through 2008.

– Houston / Dallas-Ft. Worth / Austin / San Antonio: All Texas real estate markets are on the rise as employment levels and housing affordability remain strong and look to continue that way, unlike many other booming areas of the U.S.

– Phoenix: Annual increases in jobs and a constant stream of retirees keep the Arizona city formidable in this market.

– Denver: Vacancy rates are decreasing and will continue to drop, and 2 percent annual job growth is expected through at least 2008.

– Southern California: Extremely high home prices make appropriate multifamily investments attractive, and the economy is performing serviceably.

These areas present great returns because there are often fewer competitors considering or even aware of the opportunity. While confining one’s self to specific geographic boundaries is never wise, opportunities for prosperous Florida real estate investment are bright in the next few years if you know where to look and how to place value on a property. Be sure you know how to evaluate your target home and monitor shifting market dynamics, such as the rise in Florida home loan rates that should continue into the second half of this year.