Honestly, we weren't counting on getting another deal this year - and definitely not in Florida. But when you spend four years trying to find a good deal in Florida and one finally pops up, we call that a window of opportunity. As I've said before, I think we're in the middle of a 6-12 month window of opportunity where there are select opportunities to acquire quality properties in phenomenal locations at a 15-20% discount. Combine that with this being the last year of 100% bonus depreciation and it's a win-win for long-term real estate investors.
As a whole, Florida has been incredibly popular for job growth and new data points come out on a regular basis supporting why we see Florida and the Orlando market as a multifamily real estate investment hotspot. Remember, over the long run, multifamily is driven by JOBS. Here's just a few of the numbers we've been tracking.
According to the U.S. Census Bureau, Florida’s population growth through the last decade was 14.6%, the highest of all states.
Salaries in the state increased by 9.7% from December 2020 to December 2021, the second biggest increase in the U.S. (Remember wage growth is key to driving rent growth).
Florida continues to see population increases that are roughly equivalent to adding a city the size of Orlando each year!
Speaking of Orlando, here's an unbelievable statistic. According to Orlando Economic Partnership, Orlando has been welcoming more than 1,000 new residents a week.... for the last 60 years. In addition that that, the demographic of folks moving to Orlando is not what you expect. Nope, not just the typical snowbirds, empty nesters and retirees. Surprisingly, only 12% moving to Orlando are over the age of 65. Now, add an unemployment rate that is sub 3% and an employment market that has been adding more private sector jobs than any other metro, and you've got yourself a great market to invest in. I believe the weather, beaches, and lifestyle will attract a growing younger demographic in part driven by the latest move to remote work.
The deal specifically has some great upside and built-in stress testing:
- $400-600/month rent upside (about half from better management and half from renovations)
- We're modeling an exit at a 6% cap rate (B-class properties in Orlando like this haven't traded that low since the Great Recession)
- The area around Esplanade is in the path of progress and we believe over the next 5 years will continue to transform dramatically as higher quality residents flock to the area. We're already seeing multiple Class-A developments going up around us.
- We're assuming a 16% loss factor year 1 as we turn the property and upgrade units.
There are a lot of other unique upside opportunities here as well that we would love to share.
