What Florida Property Investors Should Know About Florida Real Estate Investing and Mortgages
The only thing hotter than Florida weather is the state’s real estate market. Investors are eager to expand their business into the Sunshine State and take on Florida investment property loans. Whether you’re a seasoned professional or just dipping your toes into the investment waters, understanding financing options is key.
Let’s explore Florida real estate investing and learn how Defy Mortgage can help you make the most of Florida’s property landscape.
What is an Investment Property Loan?
Investment property loans are a crucial component of Florida real estate investing. These loans come in various types and options, each suited to different property types and different needs of Florida property investors. Florida investment property loans are becoming increasingly popular as real estate value is appreciating.
Options For Florida Investment Property Loans
Florida property investors have access to several loan options, each with its own features and requirements.
- Conforming Loans: Conforming loans adhere to the guidelines set by Fannie Mae and Freddie Mac, including loan limits that vary by county. These loans often offer competitive interest rates and terms but have strict requirements.
- Jumbo Loans: Jumbo loans are used for higher-priced properties that exceed conforming loan limits. In Florida’s luxury real estate markets, such as parts of Miami or Palm Beach, jumbo loans are common for investment properties and may have stricter terms compared to conforming loans.
- FHA and VA Loans: Government-backed loans are primarily designed for primary residences. However, the FHA does allow the purchase of multi-unit properties (up to four units) as long as the borrower occupies one of the units.
- Non-QM Loans: Non-QM loans don’t adhere to conventional lending guidelines. These include bank statement loans, asset-based loans, or other alternative documentation loans. Non-conforming loans can be valuable for investors who may not qualify for conventional financing.
Types of Florida Investment Property Loans
- Residential Investment Property Loans: Designed for properties with one to four units, such as single-family homes, duplexes, triplexes, and fourplexes. These loans often have terms similar to conventional mortgages but may require higher down payments and have stricter qualification criteria.
- Commercial Investment Property Loans: These loans cater to larger residential properties (five or more units) and non-residential real estate such as office buildings, retail spaces, and warehouses.
- Land Loans: These loans are used to finance the purchase of undeveloped real estate. Lenders typically want to see a clear plan for the land’s development or use when considering these loans.
Who Would Be a Good Candidate for Florida Investment Property Loans?
- Real estate investors (seasoned and novice)
- Individuals looking to purchase a short-term rental property
- Property developers
- Landlords
- Foreign nationals looking to invest in US property
- First-time homebuyers looking to buy an investment property
- Self-employed individuals looking to purchase an investment property
Options for Non-QM Florida Investment Property Loans
There are designated programs for Florida investment property loans programs that accommodate all Florida property investors, including self-employed individuals, contractors, real estate investors, and entrepreneurs.
For these groups of Florida property investors, non-conforming, or non-QM, loans may be ideal. Some non-QM programs are as follows:
- DSCR Loans: Qualification is based on the property’s Debt Service Cover Ratio, or DSCR. These loans are great for rental investment properties.
- Bank Statement Loans: Bank statements are used to determine qualification, versus the traditional tax return, W2, or pay stub documents. These are ideal for self-employed individuals or those who have an irregular income flow.
- Fix-and-Flip and Construction Loans: These loans consider historical experience as the main eligibility factor. These loans are perfect for real estate investors who want to fix and flip a property or construct a new property.
- Foreign National Loans: As the name suggests, these loans are for foreign nationals and expats. There’s no FICO or SSN required, so it’s a great option for foreigners who want to purchase an investment property in the United States.
- Profit & Loss (P&L) Loans: These mortgages use business P&L (profit and loss) statements to determine eligibility. In order to receive a P&L loan, the individual must be self-employed for a minimum amount of time and the business must be established for a minimum amount of time.
- Interest-Only Loans: An interest-only mortgage offers reduced monthly payments for a fixed duration, typically spanning 5 to 10 years. The appeal lies in its short-term affordability, granting borrowers greater financial flexibility. Interest-only loans are suitable for people who want flexible payments or anticipate an income increase in the future.
Requirements for Florida Investment Property Loans
It’s important to note that investment property loan requirements vary by lender. Here at Defy, parameters for our Florida investment property loans are as follows:
- 620+ FICO score
- 85% maximum LTV (resulting in a lower down payment)
- No maximum loan amount
- 0.75 Minimum DSCR ratio
- 3 months cash reserve
- Foreign nationals allowed
- Interest-only option available
- No income documents or tax returns required
- 620+ FICO score
- 90% maximum LTV
- $6MM maximum loan amount
- 12-24 months of bank statements (personal and business accepted)
- Interest-only option available
- 620+ FICO score
- 90% maximum LTC
- 70% maximum ARV (as completed value)
- Available for 1-4 unit investment properties
- Fixed interest rates with interest-only during construction phase
- 620+ FICO score
- 85% maximum LTC
- 70% maximum ARV (as completed value)
- $10MM maximum loan amount
- Available for ground-up construction, fix-and-hold, and fix-and-flip, up to 4-unit properties
- Good credit report/history from the U.S. or their home country. An International Credit Report may be necessary depending on the borrower’s U.S. credit history.
- Necessary documentation needed for pre-approval
- Ability to pay down payment (usually between 20% and 30% of the property purchase price)
- Verifiable income with consistent work history: includes two years of job history or income statements
- Liquid cash reserves to cover closing costs and mortgage payments.
- 600+ FICO score
- 90% maximum LTV
- $6MM maximum loan amount
- Borrowers must be self-employed for two (2) years and business must have existed for two (2) years
- CPA-prepared and signed profit and loss statement (P&L statement)
- 30-year fixed, adjustable, interest-only options
- 620+ FICO score
- 85% maximum LTV
- $10MM maximum loan amount
- 15% down payment, but no requirement for a principal paydown
How Florida Property Investors Make Money From Investment Properties
Florida real estate investing can be a lucrative venture if approached strategically by Florida property investors. There are three primary ways that Florida property investors can generate returns from their Florida investment properties: rental income, appreciation, and fix-and-flip strategies.
Rental Income
Florida’s expanding job market and population growth create a steady demand for long-term rentals. Cities like Orlando, Tampa, and Jacksonville are seeing an influx of young professionals and families seeking quality housing. Florida property investors can capitalize on this trend by purchasing single-family homes or multi-unit properties in desirable neighborhoods.
Florida’s booming tourism industry also makes short-term rentals an attractive option, especially in coastal areas and near major attractions. Properties in destinations like Miami Beach, Orlando, or the Florida Keys can command premium nightly rates during peak seasons. Success in the short-term rental market requires Florida real estate investing in properties in high-demand tourist areas and equipping the property to meet vacation rental standards.
Appreciation
Real estate appreciation is another way investors can profit in Florida. Factors contributing to appreciation in Florida include population growth, migration from other states, economic development, job creation, infrastructure improvements, and limited land availability in desirable areas. Holding properties for the medium to long term and reinvesting rental income into property improvements can help maximize appreciation potential.
Fix-and-Flip
The fix-and-flip strategy involves Florida property investors purchasing undervalued or distressed properties, renovating them, and selling them for a profit. Florida’s diverse housing stock and steady demand make it a suitable market for this approach.
Short-Term Rentals
A short-term rental is a property which is leased out for a short time period; this can range anywhere from a single night to months. Short-term rental platforms include Airbnb and VRBO. Short-term rentals are known for their owner flexibility, and Florida property investors can generate profits from their properties when they’re not using them.
Why is Florida Real Estate Investing Profitable?
Florida property investors are compelled by the state’s real estate market, which combines financial advantages with strong market fundamentals. Florida real estate investing has shown to be a profitable business, especially based on the appreciation over the past years. Here are several key reasons why joining Florida property investors can be a smart move:
Tax Advantages
The state’s tax structure is particularly favorable for Florida property investors. Unlike many other states, Florida does not impose a personal income tax, which can result in significant savings in Florida real estate investing, especially for high-income investors. This means that rental income from your investment property is only subject to federal taxation, potentially increasing your overall returns.
Florida also has no estate tax for individuals who passed away after January 1, 2005. The absence of estate tax allows for more efficient wealth transfer to heirs, making the state an attractive location for Florida property investors to build and preserve generational wealth through real estate.
Another notable advantage of Florida real estate investing is the state’s robust asset protection laws. Florida’s homestead exemption protects primary residences from forced sale due to judgments, creditors, or bankruptcy proceedings (with some exceptions).
Booming Tourism Industry
Florida’s tourism industry is a powerhouse, drawing over 140 million visitors in 2023. The state’s allure stems from its pristine beaches, warm climate, and world-renowned attractions such as theme parks, golf courses, and natural wonders. This consistent influx of tourists creates a robust demand for short-term rentals, presenting a lucrative opportunity for Florida property investors.
Vacation rentals, particularly in popular coastal areas and near major attractions, can generate substantial income during peak seasons. The flexibility of short-term rentals also allows Florida property investors to use the property themselves when desired, combining personal enjoyment with financial returns.
Growing Demand for Real Estate
Florida real estate investing is underpinned by strong fundamentals, including a growing population and a thriving job market. The state’s economy continues to diversify, attracting businesses and professionals across various sectors, which in turn drives demand for housing.
Florida ranks among the top destinations for international buyers. This diverse pool of Florida property investors and residents contributes to a dynamic and resilient real estate market. The influx of international Florida real estate investing capital can help stabilize property values and create opportunities for savvy Florida property investors to tap into global demand.
Affordable Prices
Despite its popularity, Florida still offers relatively affordable real estate compared to many other high-demand markets in the United States. This affordability, combined with the state’s strong rental demand, creates opportunities for Florida property investors to acquire properties with attractive potential for both rental income and long-term appreciation.
Diverse Investment Opportunities
Florida real estate investing markets cater to a wide array of investor preferences and strategies. The state’s diverse population, including retirees, young professionals, families, and seasonal residents, creates varied opportunities across different property types and locations.
From beachfront condos to suburban family homes, urban apartments to retirement communities, Florida real estate investing offers something for nearly every financial strategy. This diversity not only allows Florida property investors to align their property choices with their financial goals but also provides opportunities for portfolio diversification within the state.
Pros and Cons of Florida Investment Property Loans
Investment property loans offer a pathway to real estate investing, but like any financial decision, they come with both advantages and disadvantages. Understanding these can help potential investors make informed Florida real estate investing choices aligned with their financial goals and risk tolerance.
Pros of Florida Investment Property Loans:
- Real estate investments can generate returns through rental income and property appreciation, with rental income potentially covering mortgage payments and yielding additional profit.
- Investment property loans can facilitate house flipping, a strategy involving purchasing, renovating, and reselling properties for profit.
- Real estate investments enabled by property loans offer portfolio diversification, potentially reducing overall risk and enhancing long-term returns.
- Investment properties serve as an effective hedge against inflation, as property values and rental incomes tend to rise over time, often outpacing inflation rates.
Cons of Florida Investment Property Loans:
- Real estate investments carry higher risks due to market volatility influenced by economic conditions, local development, and demographic shifts.
- Selling investment properties can result in significant capital gains tax liabilities, potentially reducing profitability.
- Managing investment properties demands time and effort for handling tenant issues, maintenance, and regulatory compliance.
Real Estate Market Trends for Florida Property Investors
The Florida real estate market has shown remarkable resilience and growth over the past few years, with home values appreciating significantly. Over the last five years, Florida home values have surged by approximately 80%, a trend that experts predict will continue.
The first quarter of 2024 saw an increase in new listings, a positive sign for buyers who have been facing limited inventory in recent years. As of March 2024, the statewide median sales price for single-family existing homes reached $420,600, while condo-townhouse units stood at $330,000, indicating continued strong demand and value in the Florida housing market.
However, the market is not without its challenges. Rising mortgage rates, which have exceeded 6%, are impacting affordability and buyer demand. This is reflected in the sales data, with existing single-family home sales decreasing by 10.4% year-over-year in March 2024. The condo-townhouse market has seen an even steeper decline, with sales dropping by 16.6% compared to the previous year. Despite these declines in sales volume, the increased inventory and new listings offer opportunities for buyers who have been waiting on the sidelines.
The median sales price for single-family homes increased by 3.9% year-over-year to $420,600 in March 2024. Similarly, the condo-townhouse market saw a 3.1% increase in median prices, reaching $330,000. This ongoing appreciation suggests that the Florida real estate market remains robust and continues to offer potential for long-term value growth.
The current market conditions present a complex landscape for buyers, sellers, and investors. While rising mortgage rates have cooled demand to some extent, the continued price appreciation and increase in new listings indicate a market that is adjusting rather than declining. For buyers, the increased inventory may provide more options and potentially more room for negotiation. Sellers, while facing a less frenzied market than in recent years, can still benefit from the overall appreciation in home values.
As of recent data, the median rent for all bedrooms and property types in Florida stands at $2,500 per month. This figure is significant, as it positions Florida’s rental market at 17% above the national median. The Florida rental market is notable for its wide price range, accommodating various budgets and lifestyle preferences.
Florida’s rental market is considered “hot,” with demand increasing compared to the national average. This characterization suggests that the rental market remains competitive, with properties in desirable areas likely to experience high occupancy rates and potentially quick turnovers between tenants.
Looking forward, the Florida real estate investing and the Florida rental market is likely to remain robust, supported by the state’s continued population growth, strong tourism sector, and diverse economy.
Top Cities for Florida Investment Property Loans
- Miami: A vibrant hub with diverse opportunities, plus exciting nightlife and captivating sports teams. Miami is considered as a top city for foreign national investors.
- Orlando: Known for tourism, especially because of its Disney and Universal theme parks; for that reason, there is steady rental demand.
- Tampa: Growing job market and attractive neighborhoods for people of all ages.
- Jacksonville: Affordable properties and population growth.
- Daytona Beach: Beachfront potential and revitalization.
- Palm Beach: Luxury market with strong rental demand.
Florida Investment Property Lenders
Here’s a list of some lenders that Florida property investors can use for Florida investment property loans:
1. Wells Fargo
Wells Fargo emerges as a powerhouse in the commercial real estate lending space, boasting a massive $681.8 billion commercial loan portfolio. Their services cater to a wide array of clients, including individual borrowers, institutional investors, financial institutions, internationally recognized investment banks, and other third-party investment groups.
For real estate investors eyeing substantial commercial properties, Wells Fargo’s reputation and extensive experience can prove invaluable. They have the capacity to guide investors through complex transactions and provide tailored solutions for large-scale commercial real estate acquisitions.
2. loanDepot
loanDepot has carved out a significant niche as the second-largest non-bank lender in the United States. They offer a diverse array of loan types specifically for single-family homes, with services available across all 50 states. As a direct lender, loanDepot maintains control over the entire mortgage process, which allows them to keep home loan rates competitive and accelerate closing times – typically 50% faster than the industry average.
3. Chase Bank
Chase Bank stands out for investors looking to acquire high-value properties, offering one of the market’s highest jumbo loan maximums. Jumbo loans are designed for larger loan amounts that exceed the limits set for conforming loans, making them ideal for premium or luxury real estate investments.
Chase Bank’s expertise in this area is evident in their ability to handle loans up to $9.5 million. This high ceiling opens up opportunities for investors to consider properties in the upper echelons of the real estate market. Additionally, Chase offers interest-only jumbo loan options, which can be attractive for investors looking to maximize cash flow in the early years of ownership.
4. Rocket Mortgage
Rocket Mortgage stands out as a viable option for investors working with limited capital. Their conventional loan products feature down payments starting at just 3%, coupled with competitive interest rates. This low entry point can be particularly appealing for those looking to enter the real estate market without a substantial upfront investment.
Rocket Mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac, which means they have established loan minimums that vary depending on the type of property. For larger investments, they offer jumbo loans with a maximum of $2.5 million. This range allows investors to consider properties across various price points. By operating in all 50 states, they provide opportunities for real estate investment to Americans throughout the country.
5. Defy Mortgage
Defy Mortgage is bringing some bold, innovative energy to the mortgage game for non-traditional borrowers. Their experienced team specializes in helping real estate investors build their empire and establish their legacy with tailored loan solutions customized to meet each investor’s unique needs. They break down barriers for both buying and refinancing, making the process smoother and more secure.
That cookie-cutter, one-size-fits-all approach? Not their style. Defy knows that access to the right mortgage can make or break a project. They’ve seen firsthand that the banks are rigid – many of Defy’s employees worked there for years. It’s why Defy was started – they are driven by a passion to challenge the status quo and create a new era of lending that puts the power in the hands of borrowers. Talk about setting new standards in the industry.
Defy’s CEO, Todd Orlando, is an experienced banker who isn’t afraid of defying the traditional in the financial services space. Recognizing that the number of self-employed individuals is at an all-time high, Defy offers 75+ creative loan programs to help non-traditional borrowers achieve their goals – and that includes DSCR, fix & flip loans, construction loans and more. And the best part? They close fast and make it easy.
Remember: each lender may have programs, rates, and qualification requirements for Florida investment property loans. It’s always a good idea for Florida property investors to shop around and compare offers from multiple lenders to find the best fit for their specific Florida real estate investing needs and financial situation.
Florida Investment Property Loans FAQs:
- What is an investment property loan?
An investment property loan is taken out with the intention of purchasing an investment property. There are three types of investment properties: residential, commercial, and raw land. Investment property loan options including conforming, non-conforming, jumbo, and government-backed programs.
- Who are Florida investment property loans for?
Florida investment property loans are great for real estate investors, property developers, landlords (for both short- and long-term leases, foreign nationals, and first-time homebuyers/self-employed individuals who want to purchase an investment property. Florida real estate investing is a market open to individuals of all backgrounds.
- What are the pros and cons of investment properties in Florida?
Investment properties are great forms of extra income. Property values tend to increase; because the real estate market is separate from the stock market, investment properties are a good portfolio diversification. They are also a hedge against inflation. However, the property market can be risky, and capital gains taxes can be costly. Depending on the investment property type, investors may have to dedicate lots of time and money to maintain the property.
- Are Florida investment property loans only Non-QM?
No! Florida investment property loans are both QM and Non-QM. Florida real estate investing is accessible to borrowers of all circumstances.
- How much does my down payment need to be Florida real estate investing loans?
Good news: it’s possible to get low down payments for Florida investment property loans. We actually have another blog post on this topic. Note that down payment requirements depend on the type of loan and vary by institution.
- Where can I get an investment property loan in Florida?
There are many options to get Florida investment property loans, including: Wells Fargo, loanDepot, Chase Bank, Rocket Mortgage, and Defy Mortgage. Note that lender requirements vary, so be sure to research each company before taking out a loan.
- How do I make money from Florida real estate investing?
There are four main ways in which Florida property investors profit from their investment properties. They are: long-term rental income, short-term rental income, investment property value appreciation, and house flipping.
- Why should I purchase an investment property in Florida?
Florida’s tax benefits, high real estate demand, booming tourism industry, and affordable prices are all great reasons to join Florida real estate investing. This is why so many people are taking advantage of the market with Florida investment property loans!
- Can Florida property investors refinance their investment properties?
Yes! Florida property investors can refinance their investment properties.
- What are the requirements for Florida investment property loans?
Requirements for Florida investment property loans depend on the type of loan, type of property, lender, and borrower circumstances. Buyers should consult with professionals to determine which loan program is best for them.
- What are the interest rates for Florida investment property loans?
Interest rates for Florida investment property loans vary based on financial institution requirements. In general, investment property loan interest rates are slightly higher than conventional mortgage rates. This is because investment property loans are riskier for lenders.
- Are Florida investment property loans limited to seasoned investors?
No! Florida property investors range from seasoned experts and novice entrepreneurs.
- Is Defy Mortgage licensed in Florida?
Yes! Defy Mortgage is licensed in Florida. Defy Mortgage offers both conventional and non-conventional Florida investment property loans. Programs include bank statements, profit and loss statements, foreign national, and DSCR loans. Defy Mortgage provides a custom approach for each borrower and real estate investor to ensure success and the best service possible. We’re eager to help achieve your Florida real estate investing goals!
