Orlando is a Magic Kingdom for Multifamily Real Estate Investment

 

disney world's magic kingdom in orlando florida

 

Unlike many metros that experienced an unprecedented real estate surge during the COVID-19 pandemic in 2020, Orlando’s housing market didn’t really start heating up until this year. But the real estate market is moving quickly now in central Florida. Inventory levels are much lower than 2020, property value appreciation is higher than a year ago, and the number of days a property is on the market is considerably less.

Due to growing demand, Orlando, Florida’s home supply is reaching rock bottom, but its rental market is showing increasing signs of life.

 

Orlando’s Real Estate Market

The multifamily market in Orlando is booming, making it the hottest segment of the market for real estate investors, and making Orlando arguably one of the best places to invest in Florida for multifamily. Occupancy has increased from 94% to 96% over the past year, and there are 16,571 new units projected to be completed by June 2022. Currently, Orlando’s market ranks 12th out of 98 nationwide markets in multifamily development activity.

Orlando’s rental market remained relatively flat for a few years, but over the past few months, it experienced dramatic increases in price and demand. Currently, Orlando ranks 23rd of 53 large metros in the percentage of single-family rentals.

New construction in Orlando has picked up again as well. Overall new construction permits have increased 26% YOY. Single-family construction permits have increased 25%, while multifamily construction has increased 29%.

A great deal of investment dollars have been poured into Orlando’s construction industry, creating build to rent investment opportunities. Orlando’s build to rent, single-family rental, and new construction markets should continue to be a sound investment for real estate investors who are considering the city for investment opportunities.

 

Key Stats from Orlando’s Housing Market

 

  • The Orlando median home price has increased 18.5% YOY, from $270,000 in July 2020 to $320,000 in July 2021.
  • Orlando’s active listings are up 13% from 2020.
  • The average number of days on the market is 26 – down from 54 days in 2020.
  • Orlando housing inventory has dropped 76% over the past year.

The State of Orlando’s Rental Market

Home to the “Happiest Place on Earth,” Orlando is consistently ranked as one of the best rental markets in Florida. Tourism and job market growth in leisure and hospitality are creating a large share of renter households with population growth at 2.4% and household growth at 3.4%.

“The Great American Move,” a single-family housing market trend that stemmed from the COVID-19 pandemic, pushed people and businesses to move in all sorts of ways – to different geographies, from denser cities to the suburbs, from an apartment to a home, and, for some, back “home” to live with family members.

Orlando, Florida was no exception. The 2021 Emerging Trends in Real Estate® report labeled Orlando as an in-migration market. In-migration markets are those where it costs more to bring a U-Haul vehicle into that city than to take one out. The premium to bring in vehicles implies that more people are moving in than leaving.

Orlando’s 2021 population was calculated at nearly 3 million people, according to the report. In the last year alone, population growth in the Orlando metro area – made up of Orange, Seminole, Lake, and Osceola counties – increased 2.5%.

Since 2010, Orlando’s population has increased by more than 48,600 people. Orlando Economic Partnership estimates the region will add 1,500 people each week and reach a population of 5.2 million by 2030.

What Makes Orlando a Great City to Invest In?

 

theme park in orlando florida

 

There are a lot of things that make Orlando one of the best places to invest in Florida; The city is home to many of the country’s top-rated entertainment centers and theme parks, major colleges and universities, and the fastest-growing employment sectors.

Forbes ranks Orlando as the 23rd-best place for business and careers and the 6th-best place in the country for job growth. The city also boasts an unemployment rate of 5.2% – lower than the national average of 5.9%.

Over the past three years, Orlando’s job growth was 11% with nearly 129,000 new jobs added to the city’s economy. Over the next 10 years, nearly 500,000 new jobs are projected to be created in the Orlando metro area.  By 2030, Orlando’s average employment is projected to grow by 19% – nearly double the U.S. rate.

According to U.S. News & World Report, the average annual salary in Orlando is $48,526, which is below the U.S. average due to the high number of low-paying service and hospitality jobs –  good news for investors because these types of jobs help keep the demand for rental property high as the economy begins to recover.

Manufacturing, trade and transportation, financial sectors, and professional and business services are showing the fastest signs of recovery in Orlando. Lockheed Martin, General Dynamics, Mitsubishi Power Systems, Siemens, AT&T, and Boeing are some of the largest engineering, manufacturing, and aerospace companies in Orlando.

Disney’s Magic Kingdom, Epcot, Hollywood Studio, Universal Studios, Animal Kingdom, and SeaWorld Orlando are a few of the top-rated entertainment centers and theme parks in the Orlando-Kissimmee area, which help support nearly 41% of the region’s workforce at more than 463,000 jobs.

Nearly 75 million people visit Orlando each year, generating more than $75.2 billion in annual economic impact for Central Florida. On average, each visitor spends $1,000 per person, per trip. In 2018, tourism dollars accounted for more than $5.8 million in local state tax revenue, which was used to fund operations such as infrastructure projects, public safety, school construction, and more.

 

Orlando’s Multifamily Market is Booming

Orlando is ranked as one of the best places to buy rental property in 2021, based on key investment criteria such as cash flow, affordable property prices, and a growing population and job market.

The hottest rental market in Orlando is the multifamily sector. Nationally, the multifamily housing market has made a huge comeback post-COVID. During the pandemic, millions of people traded in apartment living for single-family homes in the suburbs.

Now that the country’s housing boom is driving rental prices and home prices through the roof, people are showing a renewed interest in multifamily housing.

Key Stats from Orlando’s Multifamily Market

  • In Orlando, FL, the average rent for a multifamily unit has risen from $1,358 in 2020 to $1,524 in 2021 – an increase of 12%.
  • Orlando ranks 31st of 98 markets in price, and the metro is currently 10th in sales volume.
  • Multifamily occupancy has increased from 94% in 2020 to 96% in 2021.

 

These stats indicate a very strong rental market, but experts believe there could be a slight dip in these numbers as the eviction moratorium expires over the next few months.

The leisure and hospitality sector was hit hard last year by pandemic-induced job loss, which negatively affected the performance of multifamily properties in Orlando. However, the market has rebounded exponentially in 2021.

Currently, Orlando ranks 12th highest for new construction and 11th highest nationally for investment. When it comes to Orlando’s new construction market, the city captured more than $2 billion in apartment investments in Q2 2021 – a 51% increase from 2020.

Orlando has consistently posted some of the strongest population and job growth figures in the nation, which prompted developers to build at a pace the metro has not seen in two decades. Following a period of uncertainty, investment activity escalated in Orlando during the fourth quarter of 2020 and has since further accelerated. By June 2022, the city is expected to have 16,571 new units completed.

Disney is also getting in on the action with an announcement that the company is moving hundreds of jobs from California to its new campus in central Florida. The company’s new regional campus is expected to be finished over the next year and a half, and it will house some of the theme parks, administrative offices, Imagineers cast members, and other company employees. The opening of the new facility, which is scheduled to be completed in summer 2023, is slated to provide several hundred to possibly thousands of new jobs, while directing tourism dollars back to the Sunshine State.

Investors who are focused on long-term buy-and-hold rental properties catering to middle-income families could see a spike in demand. And investors who already own rentals in the area may see an uptick in rental demand in early 2023, as Disney ramps up hiring and training new employees, with hopes for that demand to remain stable.

 

What Does Orlando’s Multifamily Market Mean for Real Estate Investors?

 

Orlando is a seller’s market, which means there are plenty of properties available for investors to snatch up. In May 2021 there were 2,822 homes on the market in the greater Orlando area  compared to 7,260 in May 2020, according to data from the Orlando Regional Realtor Association. That’s a 61% decrease YOY.

Despite record prices and low inventory, central Florida’s housing market may be reaching a cooling-off period. In July, 4,183 existing homes were sold – a decrease from the 5% from the number sold in June. Even with the decrease, homes sold at a faster rate. The average number of days on the market was 26, the lowest ever recorded by the Realtor association and down from 29 days in June.

 7 trends investors should watch in Orlando

  1. Population Growth
  2. Employment Growth
  3. Industry Growth
  4. Diversity
  5. Demographic Shifts
  6. Education
  7. Mobility

After a tough year because of the pandemic and its aftermath, Orlando’s real estate market is back on the right track. Home and rental prices are up and continuing to rise, the number of households has increased, and employment opportunities are everywhere. The extremely low supply of homes available is also impressive for Orlando — it’s definitely a popular, in-demand city full of opportunities for real estate investors.

While real estate inventory is tight in Orlando, Florida and across the nation, investors with strong real estate investment strategies can still profit. It’s now more important than ever to have a lender capable of helping you:

  • Secure a loan with the best price and maximum leverage for your next multifamily rental investment
  • Close properties quickly and certainly
  • Run your construction and rehab projects smoothly

If you’re interested in securing funding for your Florida investment property, contact Lima One to learn more. We are experts in multifamily financing, and we want to help you finance your Orlando real estate investment opportunity.

Our team of experienced professionals will help guide you through purchasing or refinancing multifamily properties in need of value-add rehab or currently turnkey ready. Get started today and scale your rental property portfolio with Lima One, the nation’s premier lender for real estate investors.