Southwest Florida Real Estate Investing
Cap Rate Methodology
For those considering Southwest Florida real estate investing, there are varying methodologies of calculation investors typically use to determine how to get the most bang per buck. One formula is the capitalization rate (also know as cap rate). This is a fairly easy formula to figure out which involves NOI / Price + Rehab Cost (if any).
NOI , or the Net Operating Income, is the net derived after all expenses, excluding any debt service if any. Now Price – let’s say you were to purchase a property for $300,000, but then have to put $50,000 into it, in order to get it to a rentable standard. Then you MUST include your rehab cost.
So, for example, your NOI = $35,000 and your property cost is $350,000. 35,000 / 350,000 = 10% This would be a 10% cap rate which as many eyes would see is a good investment (depending on the product, location, etc).
If your Southwest Florida real estate investing strategy involved, say, Bonita Beach Homes For Sale and you came across a back water, single-family home for $600,000, rent ready and the net income was $42,000. You can quickly figure a 7% cap rate. Now, this is a lower cap rate. However that Bonita Beach home you acquired was an A+ vacation property, it maybe ideal for the investor who doesn’t want certain headaches and also a property to use when not leased. A win win scenario.
Institutional investors may seek A+ properties at 5% and other investors in lower income areas may seek no less than 18%. It ALL depends on the investor, their risk tolerance, geography and more.
Having an office on Bonita Beach has allowed us to analyze many Bonita Beach Homes with our vacation rental department thus finding properties in the 7% cap rate range. Some higher closer to 10% in the Fort Myers Beach area as well.
If you are ever looking for guidance on your Southwest Florida real estate investing strategy, feel free to reach out to Maxim Realtors Broker & Investor Steve Daria by phoning 239-221-8777 or simply submitting the contact form below. Also, be sure to keep a look out for future posts on more formulas to use in your real estate investing endeavors!
Current Homes for Sale in Southwest Florida
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New$108,000
Riverwoods Plantation
Courtesy of Keller Williams Elite Realty
2 BEDS2 BATHS812 SQFTShare this Property- Email this listing
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New$225,000
Fountain Lakes
Courtesy of Realty World J. PAVICH R.E.
2 BEDS2 BATHS1351 SQFTShare this Property- Email this listing
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New$34,900
Poinsettia Park Mobile Home Co-op Inc
Courtesy of Keller Williams Elite Realty
2 BEDS1 BATHS672 SQFTShare this Property- Email this listing
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New$147,500
Imperial Harbor
Courtesy of Domain Realty.com LLC
2 BEDS2 BATHS1152 SQFTShare this Property- Email this listing
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New$569,000
Wildcat Run
Courtesy of Premiere Plus Realty Co
3 BEDS4 BATHS3080 SQFTShare this Property- Email this listing
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New$569,900
Pelican Landing
Courtesy of Downing-Frye Realty Inc
3 BEDS3 BATHS2078 SQFTShare this Property- Email this listing
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New$299,000
Pelican Landing
Courtesy of Domain Realty.com LLC
3 BEDS2 BATHS1410 SQFTShare this Property- Email this listing
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New$215,000
Shadow Wood Preserve
Courtesy of John R. Wood Properties
3 BEDS2 BATHS1916 SQFTShare this Property- Email this listing
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New$365,000
Meadowbrook
Courtesy of Premiere Plus Realty Co
3 BEDS2 BATHS2309 SQFTShare this Property- Email this listing
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New$398,000
Pelican Marsh
Courtesy of Downing-Frye Realty Inc
3 BEDS