Tampa’s Real Estate Boom

As a new investor, you’re looking into the Tampa or west central Florida and seeing opportunity to grow your wealth, retire early, or maybe you have more humble goals of first time ownership or househacking. You can’t just buy anything and expect cash flow anymore, but that’s a good thing! With that, comes appreciation.

I’d like to help you figure out the Tampa market.

Looking for your next rental property in Tampa Bay and value my insight? You can schedule your initial conversation with me one on one below.

Tampa, a Hybrid Market

The midwest is known for its cash flow and low, stagnant appreciation. Listen, if you’re after cash flow, go there. “Cash flow is king” is a phrase often used on Bigger Pockets and by many investors.

However, another common phrase is “cash flow doesn’t make you wealthy”. Not everyone is after wealth. Some have good, steady jobs and they want to secure their retirement and live comfortably and humbly. It’s admirable. Others have ambitious goals of retiring early or covering their living costs so they can start a new business with their freed up time.

The west coast is known for its high appreciation over time. You’re almost guaranteed to be cash flow negative, so investors take annual losses but makes hundreds of thousands through appreciation when they sell.

The data is pretty clear. While appreciation heavily outweighs the gain of cash flow, most investors can’t survive the holding costs for extended periods of time, so reserves become necessary. But check any podcast from Ken McElroy, Robert Kiyosaki, Meet Kevin, or BiggerPockets and you’ll notice the seasoned investors didn’t grow because of cash flow, it was appreciation.

If you value appreciation but can’t survive significant holding expenses indefinitely, I think Tampa is one of your top markets. Tampa has progressed over the last 3 years to more of an appreciation market with cash flow on the side. Why? Tampa has a 1-2% population growth every year. It’s the 3rd largest metro in Florida, and Florida has had a positive net migration each year for the last two decades.

History of Tampa

Tampa's rich history from 1824 to 1950 is a story of transformation and growth, marked by developments and challenges. We’ll summarize it quickly. Beginning with the establishment of Fort Brooke in 1824, Tampa was initially a military outpost. The town's incorporation in 1855 laid the foundation for its urban development, though progress was slow due to poor transportation, conflicts with the Seminole tribe, and health crises like yellow fever outbreaks.

The late 19th century brought significant change with the arrival of the railroad by Henry B. Plant (his house now a museum in Tampa) and the booming cigar industry in Ybor City, attracted a diverse influx of immigrants and sparked rapid growth. By 1900, Tampa had become a prosperous city with strong economic foundations in cigar manufacturing and phosphate mining. The early 20th century saw further expansion, like the first commercial airline service and the establishment of major cultural events like the Gasparilla Pirate Festival. Despite a pause during the Great Depression and World War II, Tampa's population and area continued to expand by introducing better transportation links, solidifying its status as a major urban center in Florida by the mid-20th century.

Tampa properties just 10 years ago were considered stagnant and offered more cash flow than appreciation. What changed? Within the last 14 years, Tampa has caught the eye of developers, businesses, and migrants from other states and countries looking for a higher quality of life because of the revitalization of its urban core, the waterfront areas, steady job growth in valuable industries and low cost of living. These industries include technology, health care, military, exports of phosphate/fertilizers, and financial services.

You’ve decided on Tampa as your preferred market to either live in or invest. Great choice! But what’s the plan? Let’s talk about possible investments next.

Househacking

If you don’t have any properties yet, your goal should be househacking. If you’re married or don’t want roommates, I recommend you find a multifamily property. There’s a cool new 5% down FHA option for multifamily under 5 units now.

Househacking in Tampa will not net you free rent. You’ll have your mortgage subsidized substantially. This is the best way to get started if you don’t have a primary yet hands down. There’s almost no downside as you’ll accumulate equity over time while maintaining a very low cost of living.

Long Term Rental

These types of rentals are the standard. However, buying a property now brings about cash flow concerns when attempting to leverage 20% down. Tampa is a hybrid market, but not if your interest rate is above a 7 for this rental strategy. Several factors affect cash flow like high insurance and interest rates. We’re in a weird spot in early 2024, but expect that to change soon.

My take on long term rentals is they have consistently gone up alongside, but faster, than inflation. There will eventually reach a breaking point when wages have to increase due to unaffordability, or rents may stay stagnant. It’s impossible to predict when that will happen because even the housing experts get it wrong (or lie to us).

Multifamily investments such as duplexes or quadplexes have limited inventory. That keeps this market strong and competitive, but it will likely produce better results than a single family, condo, or townhome.

If you own a property already, this might be the way to go. Your older mortgage is likely an asset that will allow you to cash flow positive when you rent it out.

If you have money to park and want a headache free exposure to equity growth, this might be the way to go. Expect 40-100% down for positive cash flow.

Padsplit

Also known as co-living or room sharing, these are investments that have living rooms, bonus rooms, or garages converted into additional bedrooms to maximize cash flow and offer a smaller but much more affordable place to live for many working jobs that don’t support a 1100/mo studio or 1400/mo one bedroom condo in Tampa. These investments offer higher cash flow and in better areas that normal long term rentals.

A fantastic and lucrative choice for investors who are willing to try something new before the herd.

Airbnb

There’s a lot of competition so doing it right with hosts and professional designers is extremely important for the long haul. Airbnb has revolutionized the way people travel and experience new destinations affordably. Starting one, you should consider if your property will provide value to travelers to Tampa and always think what can you do to improve the aesthetics to keep your vacancy as low as possible.

Consider locations and properties that have alternate rental strategies if airbnb shows poor results.

Development and Flips

This is a choice for the more those willing to take on a little more risk and financially savvy enough to handle holding expenses, picking the right finishes, buying lots in the right locations and with vision.

Next Steps to Invest

If you’re not sure what’s best for you, let’s set up a call to talk. What’s your financial situation? Are you low on capital? Have enough to buy cash but want to maximize your purchase power?

I don’t recommend anyone buy a property without sufficient reserves, capital, or a steady job. Set yourself up for success by saving your money, working more hours, and then finding the right deal.

Tampa is a hybrid real estate market, but I project it to become a more appreciation-based market in the next 5-10 years considering our strong consistent growth from jobs to population and development. Even taking a small cash flow hit every month is negligible if equity is set to increase 100k in 5 years.

Real estate is cyclical. We can’t predict the exact timing or effects of events like Covid, but if you hold long enough, market trends and inflation will nearly guarantee your success in Tampa.