January 19, 2010 - Three areas in the sunshine state provide investors with the chance to get more bang for their buck: Port St. Joe, Pensacola and Fort Lauderdale. At the time of subprime mortgage meltdown, each area had price reductions up to 50 per cent.

This fact still holds true today, with prices dropping in the double digits. The recession is continuing to take its toll south of the border, meaning that there are still distressed properties creating buying opportunities for Canadian investors. Since people are still travelling to Florida, this means Canadians can purchase a property for heavily discounted prices and reap the rewards of rental revenue.

According to the National Association of Realtors (NAR), 2009 will continue to be the most affordable year to buy a property in a generation. Low mortgage rates are also a driving factor. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 5.03 per cent in the second quarter 2009; one year earlier, it averaged 6.09 per cent.

"Other buyers are taking advantage of low home values before prices turn higher," says Lawrence Yun, chief economist at NAR. "Nationally, the typical mortgage payment now takes less than 25 per cent of a middle-income family's monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable."

With building practically at a standstill (national housing starts are down 33 per cent from August 2008) the NAR believes prices should begin to stabilize and gradually edge higher over the coming year.

So for the Canadian investor, all of these factors mean you might want to get in now as the economy and prices are forecast to improve. Here, we look at all three areas in Florida, Port St. Joe, Pensacola and Fort Lauderdale, which are considered hot buys.
 
Port St. Joe

Rex Anderson, local Realtor at Coastal Realty Group in Port St. Joe says buyers are crawling all over the market looking for bargains - and finding them. "Most buyers are looking for good vacation rental home investments. It is possible to pick vacation rental homes that will cash flow as an investment."

Part of the Gulf County and situated on the northwestern coast, Port St. Joe covers 8.6 square kilometres and is still an investment hot spot. The region includes Mexico Beach, Beacon Hill and Cape San Blas.

Development is underway for Port St. Joe. A new international airport in Panama City, which is about 35 miles away, is due to open in May 2010 and expected to make it even easier for tourists to travel to the area.

"With the scheduled opening of the airport now less than one year away, we are accelerating our preconstruction activity and stepping up marketing outreach to global users who need ready access to the new airport," says St. Joe Company president and CEO, Britt Greene.

Additionally, the Sacred Heart Hospital, which is currently being built with plans for completion in March 2010, will further add to growth. The hospital is located along Highway 98 and will provide 19 private inpatient rooms and a 24-hour emergency department.

In terms of the real estate market, there have been 24 detached single-family home sales in south Gulf County since the beginning of the year. In addition, there were 35 detached single-family homes pending on MLS as of September 2009.

Beyond this, prices have been stabilizing. Homes with a pool and view are running in the mid US$500,000 range. Property prices in this prestigious area can range from US$500,000 to more than US$1 million depending on the proximity to water.

"One has the opportunity to buy waterfront or water view at affordable prices," says Meg Brown, local Realtor at Keller Williams. "Buying in these communities is a good investment, as prices are lower than three years ago."

However, it's the detached vacation property under the US$300,000 market that is considered the best buy for investors. One example is a property that listed in September 2009 is a 1,056 square foot home in Cape San Blas for $220,000 with three-bedrooms and two-bathrooms. This unit has community beach and bay access. Another example is a three-storey, three-bedroom, two-bathroom, 1,620 square foot home for $275,000. This listing comes with private beach access also in Cape San Blas.

For these types of purchases, rents during the winter average about US$650 per week and during the summer can be up US$2,500 per week depending on the proximity to water. "This area attracts Alabama, Georgia and Tennessee families during the summer, and snowbirds and retirees from Canada, Michigan and the northeast during the winter months," Brown says.

Anderson, who has several properties under his belt says each of his units bring in US$60,000 to US$80,000 per year in gross rental income. "My best investment advice for the neophyte real estate investor would still be to buy a vacation rental home with all the right amenities, and reap the rewards of a high-occupancy rental model," he says.

Port St. Joe typically only offers short-term rentals, with property management fees around 30 per cent. The few long-term rentals that are available have slightly lower property management fees, about 20 per cent. Canadian buyers are able to lock in 30-year fixed rates at five per cent.

"Our rental market in south Gulf County has never been stronger," says Anderson. "We've had very few vacant weeks across our stable of 18 vacation rental homes in 2009. The pet friendly status of our beaches and all of our rental homes is a huge draw and distinguishes us from most of coastal Florida."
 
Pensacola

Located in the Florida Panhandle, Pensacola has a population of 28,509 and is a transportation hub for the northwest coast with major airlines serving the Pensacola Regional Airport. Within the last year, foreclosure properties dropped in price from US$98,000 to US$90,900. Other homes for sale further declined in price as well, from US$169,900 to US$149,900, creating buying opportunities for investors.

The southern hospitality of residents, downtown charm of the inner city and natural beauty of the Pensacola beaches are what attracts tourists and buyers alike.

Gary Michaels, manager at Resort Realty, Pensacola, says that one of the best parts of the beaches is they are capped developments and thus will never become a row of condo towers. "Our beach is a quaint mixture of condos, hotels, private beach homes and commercial district that makes us unique."

Many buildings are solid concrete and steel with some gypsum board and foam. This makes them more durable so they can withstand harsh weather conditions. All new construction meets current hurricane and wind codes, adds Michaels. "These homes and condominium sky homes do extremely well with minimal damage."

According to James Pennington, local Realtor at Re/Max Horizons Realty, there are many deals to be had by investors today. In September 2009 there was a 2,300 square foot single-family home listed for US$184,900 centrally located in the Scenic Hills neighbourhood, just minutes from the country club and golf course. Pennington says a home of this sort could garner yearly rental income up to US$50,000.

Pennington says there are many more opportunities, including a two-bedroom, 600 square foot foreclosure property for $26,900. This property is walking distance to the beach and could rent for about $500 per month during the winter months and $800 per month during the summer.

"There are still so many foreclosure properties on the market right now that the choices are outstanding," he says. "Going forward I see prices beginning to rise by mid-next year."

Fort Lauderdale

Sometimes called the 'Venice of America' due to its canal system, Fort Lauderdale is a big city with a metro population of more than 5 million and about 185,000 inner city residents.

Over the last year, property prices have declined in the double digits. Homes for sale can now be purchased for US$299,000, from US$475,000 in August 2008. Foreclosure properties go for as little as US$185,191 in this vacation hot spot.

Tourists from all over the world visit the city in droves and this makes it fairly easy to accumulate rental income, says Dan Atkins, local Realtor at Prudential.

"Investors are well advised to purchase property now," says Atkins. "I don't foresee these types of prices lasting much longer because they're real bargains. Many of these properties were well over the million dollar mark and now they're less than half that."

People looking to buy-rent-hold could acquire an average rental rate of about US$1,800 per month for a three-bedroom, two-bathroom residence, and walking distance to the beach. Properties of this type can be purchased under the US$300,000 mark.

For example, in September 2009, there was a three-bedroom, three-bathroom, single-family home with a pool listed for US$299,000 in Deerfield Beach/Lighthouse Point. This neighbourhood is right along the coast of the Atlantic Ocean, and this type of unit could garner monthly rents averaging US$1,800.

Another example is a foreclosure property listed for US$220,000 with two-bedrooms and two-bathrooms in the Pompano neighbourhood, just east of Highway US1. This property is close to Pompano Beach and could generate monthly rents up to $1,400.

"There's no question that there are still plenty of pricey properties available for buyers who have the money," says Atkins. "Look for properties walking distance to the beach and near other amenities like shopping centres."

From the November 2009 issue of CRE