Why Is Florida So Popular for Investors?
With an abundance of affordable land and a relatively low cost of living, Florida has been attractive to investors for generations. Coupled with the tax advantages, the Sunshine State offers invaluable assets to the investor.
Florida properties have a diverse range of atmospheres. There are beautiful beaches with oceanside homes and cities with nightlife that rivals that of New York City’s.
For those who want to escape the claustrophobic feel of living in suburbia, there is vast countryside waiting to be explored. On the other hand, there is an astounding number of condominiums and retirement communities for those who want to live as part of a social circle.
The savviest of investors are wisely purchasing Florida properties. Here are some of their reasons.
Taxes Are Less Harsh
Those who work in Florida need not worry about paying a state income tax. How does this help investors specifically? Well, it creates a large demand for housing. People flock to Florida from high-tax states to escape turning over a percentage of their hard-earned wages to the state government.
Florida also does not allow income taxes from counties and municipalities. Now more than ever, after the COVID-19 crisis has ravaged the finances of so many, people are hoping to buy or rent homes in Florida. This is great news for those who own Florida investment properties.
Florida does not tax the income generated by investments. This includes real estate investments (if you are a sole proprietor or partnership) and rent income (the first six months of a rent income is taxed at Florida’s 6% sales tax). In other words, you keep more of your profits.
As of 2005, Florida also has no estate tax. If you build a real estate empire in Florida, you can feel confident that your legacy will be passed down to your beneficiaries without the added stress of taxes.
If you choose to live in your Florida investment property as your primary residence, there are even more advantages thanks to the Save Our Homes Assessment Limitation. If your Florida property is your permanent home or the permanent home of one of your dependents, it will not be subject to the usual increases in taxable value.
After the first year of claiming a homestead exemption, the assessment for each subsequent year cannot increase by more than 3%. All investors hope that their investments will steadily increase in value, so to not be taxed on the additional value created is a major selling point for Florida’s real estate. In addition to this great benefit, the Florida homestead exemption reduces the taxable value of your home by up to $50,000.
These are just a few of Florida’s tax advantages. There is a plethora of others, depending on unique individual circumstances. There are advantages for veterans, surviving spouses of first responders, caretakers who intend to house older family members, limited income seniors, and so many more.
Before purchasing a Florida investment property, make sure you are educated about all the various tax breaks and factor in your unique set of circumstances and intentions for the property.
High Demand for Housing
According to World Population Review, Florida is the third most populous state in America, and its growth shows no signs of slowing down. The Herald-Tribune states that there are around 1,000 people moving to Florida every day. As people travel here from all over the world to visit, vacation, and live, they often need places to rent.
With so many people looking for housing in Florida, apartment buildings, condominiums, and duplexes are popular. Multifamily properties are some of the more lucrative investments to buy if you are hoping for a steady stream of passive income, and Florida is an ideal place to buy them.
Any building that has separate dwellings for more than one family is considered a multifamily home. Each dwelling could hypothetically bring in its own cash stream. Properties with five or more units are considered commercial property, and they come with their own set of rules and regulations.
Owning a multifamily property in an area with a lot of tourist traffic gives you an abundance of options when it comes to tenants. You will have long-term renters who work in the tourist industry and need long-term housing, and you will also have the option for short-term rental agreements for vacationers and people staying for a season.
In highly trafficked areas of Florida, it is unlikely that a well-kept unit will ever sit empty for long.
When looking for tenants, a huge demographic to pay attention to is senior citizens. Florida has an abundance of them, and in many ways they are your ideal tenant. With the chaos of youth behind them, they are known to be reliable with paying their rent on time. They are not known to party and trash their homes, and they don’t have loud and messy children.
Senior citizens come to Florida to escape the monotonous routines of their former working days and to settle into a relaxing new life where they can enjoy their hard-earned freedom. The winter can be harsh for seniors. While Florida has mild seasons and a climate that seems to pleasantly stop time, the north has very bleak falls and winters that mark another year gone by and another year older.
Arthritis and vitamin D deficiencies can also be an issue in the cold weather. Some senior citizens are unable to shovel their sidewalks or drive on icy roads. They come to Florida with their savings, perfect background checks, and impeccable credit, ready to rent a condominium from you.
Vacationers and short-term renters are another fantastic demographic. Month-to-month leases give the investor the freedom to change the rent amount at any time. They also allow the landlord to charge a higher rent, as the renter is paying for the luxury of not being locked in for a fixed term.
Airbnb and Vrbo open up the possibility of renting per night or per week. You could live in your Florida investment property for most of the year (claiming the permanent home tax benefits) and then rent it out to vacationers for a season to generate income.
Florida Is the Place to Be for Smart Investors
After the devastating shock of the COVID-19 crisis in 2020, all states are reconfiguring their former ways of life. Economies, events, and work life will never be the same. We are all rethinking the way we used to do things.
For investors, Florida is only becoming more of a hot commodity as people realize that they can work their jobs from anywhere. The Palm Beach Post pointed out in April that there is “an unprecedented housing shortage in Palm Beach County,” and Palm Beach County is not alone in its high demand for rentals. It’s clear that those who own Florida investment properties are going to have the upper hand for quite some time.