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Frequently Asked Questions

What is a Cap Rate?

Cap rate is the return on investment, “The net income a property yields.” Higher rate means more profit.

How do you calculate a cap rate?

To calculate a cap rate you take the yearly income a property is generating (Gross income) and subtract the gross income from the yearly expenses. Once you have the net income, divide net income by price which gives you the properties cap rate.
Example: A subject property is generating $95,000.00 per year from rent plus $5,000 on the laundry room. The taxes is $10,000.00, management $4,000.00, trash $4,000.00, lawn service $3,000.00, insurance $6,000.00, reserves $5,000.00, maintenance $5,000.00 are your yearly cost. The price is $600,000.0
Gross income $100,000.00
Total expenses $37,000.00
Net Income is $63,000.00
Divide price     $600,000.00
Cap rate is 10.5%

How do you calculate Vacancy Rate?

You don’t. The vacancy rate is a geographical figure which is based on the number of possible rentals vs vacant units. These figures are typically opinions and are not fact driven.

How will the South Florida real estate market perform in 2015?

In my opinion the market will continue to increase. The interest rates remain low and new construction is taking place due to the lack of inventory. We should see a healthy market this year with prices rising around 5% to 8%. Rents are increasing as well in the rental market. 2015 should be a good year for buyers, sellers and investors.

How will the South Florida Real Estate Market perform in 2016?

2016 will be an interesting year in the South Florida real estate market. There have been talks of the Interest rate increasing. We are seeing inflation happening and no one is talking about it. Oil prices are plummeting due to oversupply and increased pumping throughout the world. The global economy,” like China” is in shambles. The American dollar is strengthening. We have an election year; moreover, Wall Street is showing it’s volatility as we get closer to the election. So how will our local real estate market perform? “South Florida Real Estate” “Martin County Real Estate” “Palm Beach County Real Estate” “Treasure Coast Real Estate”.
Contrary to other professionals in our market place, I believe the local real estate market will see strong growth this year. There is too much volatility in the global market place and uncertainty in our next regime in the White House to raise interest rates this year. The effect of the continued low interest will inspire buyers to continue investing in real estate. I’m not saying the rates won’t go up eventually but this will not be the year for the increase. If you want to trade up, Invest or simply purchase your first home do it this year! When the rates start rising next year it will happen quickly; furthermore, each ½ point the rates rise will decrease the buying power by 5% or more.
2016 South Florida Real Estate Market
Mel Robinson
1/22/2016

How will the south Florida Real Estate Market perform in 2017?

In 2017 the market will remain strong with growth in the commercial and residential sectors. New construction will continue due to banks funding on construction loans. The population will continue to grow due to South Florida being one of the most economical places to live.
The down side to this growth is investors will find it harder to get their desired return on investment. Investors will have to settle for less profit but will find more stability, “less turnover on rental properties”. The increase in rental pricing will slow down until job pay rates increase.  The job rates should increase in 2018-2019 as the job supply improves making demand for qualified personal increase. The effect will increase in salaries and wages for qualified employees.  
If you are a seller, sell now! Pricing is high and buyers have confidence in the market place.  Interest rates are increasing as stated in last year’s projection; furthermore, will continue to increase in the years to come. Inflation is happing slowly and not be overlooked with the improving market place.
Demand is good, supply is low, increase in pricing is gradual, defaults are low, consumer confidence is good thus making 2017 a healthy market to buy, sell and trade.
Mel Robinson

How will the South Florida Real Estate Market perform in 2018?

2018 is off and running! We have new tax codes, the stock market is at an all time high, interest rates are on the rise, wages are increasing across the board, banks are lending money and new construction along with lower priced homes are in demand. What does this all mean?
The new tax code enables corporations to receive a 15% tax break which will increase margins and bottom line earnings. Large corporations which have money stockpiled overseas will only be taxed at 14% in porting capital back to USA. This will incentivize corporations to re invest money in the US economy. The savings and re-investment should boost employment, create jobs and incentivize employers to increase salaries. The overall trickle-down effect will be grand and will increase consumer spending along with investing in real estate.
The new tax code will affect buyers and sellers in high tax states like NY and California. These buyers and sellers will look to re locate to states like Florida with no state income tax. Thus, sells will increase in $500,000 to 1.5 mill properties given the thresh hold of 750k maximum interest write off.  In my opinion we will start seeing a surge in water front sales.
New construction sales will continue along with lower priced homes as the demand is high and will continue to remain strong. Lower priced homes and new construction are attractive to lenders; moreover, qualified borrowers will find funding with good interest rates.  I recommend locking in your rate and move forward as the rates will continue to increase. 
Investment properties will increase in sales this year. As investors sell off current investments they will be willing to accept lower returns in the 1031 exchange program. We will also see investors cashing in on stocks and investing in real estate. As interest rates increase the stock market will preform corrections; hence, investors invested in stocks will exchange to real estate. Rents are continuing to rise in multi-family, single family and commercial. This trend will continue on a steady rise this year; however, not the same rate as the two previous years.  Luxury rentals will level off as there is supply in this sector. We are seeing investors exchanging there investment portfolios from other states like NY and CA to Florida. The answer is simple, lower taxes, lower price per SF, lower price per unit, weather and the return on investment is profitable.
I recommend in taking full advantage of this healthy real estate market. Buy, Sell, trade, and if you’re not raising your rents, start now!  I find investors which own investment properties for a long period of time are typically behind in the current rental market. Tenants will accept the increase as the inventory is limited; furthermore, the relocation cost doesn’t make sense. Retail space should continue with the attractive move in incentives; however, healthy increases in rent throughout the term of the lease is paramount.
Mel Robinson

How will the South Florida Real Estate market perform in 2019

 

Interest rates are on a continued increase, the new tax plan will take effect, international trade wars, a bumbling stock market, lower unemployment rate, increase in wages, leveling in rental increases, so what is in the horizon for 2019 South Florida real estate market?
Buyers will see there buying power continue to decease due to the continued increase in interest rates. For ever point interest rates increase effects the buyers buying power by 9%-11%. The current Avg interest rate on a traditional 30 year fixed is 4.75%. In December of 2017 the avg rate was 3.93% which is an increase of .82% over a one year’s span. We will continue seeing an increase in 2019 and possible at an even more aggressive rate. Commercial interest rates are traditional 1% to 1.5% higher than the traditional single-family home rates with a 15 year term and 5 year adjustments. I would recommend if your adjustment is nearing to renegotiate with your lending institution in efforts of locking in your rate as-long-as possible.
The new tax plan takes effect this year which should flood the public markets with new capital. Large corporations will be infusing money into the market due to the tax breaks creating a bull market. The effect should be grand if your invested in stocks/ bonds and or commodities. Employers will be increasing salaries across the board, thus, creating more capital to offset inflation.  As projected, sales will continue to increase in 1 mill + properties. Negative effects of the new tax bill in high tax states like NY and California will incentivize property owners to re locate investment and primary real estate to Florida.
The trade war, “tariff war” will effect the majority of larger cost items in real estate such as AC systems, water heaters, roofs, electrical wiring etc. All of these items have increased in cost from Jan 2018 and will continue to increase through out 2019. Property owners which are not prepared for these major repairs could create an uptick in pre-foreclosures. Warranty/ service plans are available to offset these costly repairs. Some insurance companies offer, “Gap Insurance” which will pay the deductible on a home owners policy in the event of hurricane damage.  If you find yourself with limited reserves I would recommend budgeting accordingly and implementing gap insurance along with a warranty/ service plan.
The stock market 4th quarter in 2018 has been its worst in years. Investors are starting to lose confidence in the market place even though the gains since 2016 have been tremendous. As stated earlier, the corporate capital injection in 2019 will be unprecedented, thus, rebounds are soon to come.
Due to the lowest unemployment rate in recent years and Increase wages has consumer confidence high and will continue in 2019. Consumers are spending more on activities, dinning out, travel and home purchases. All though consumer confidence is high we will start seeing lower increases in property values. Inflation and the rise in interest rates will effect buyers ability to purchase homes at last years appreciation rate. Also, new construction has immensely helped with the inventory shortage creating stabilization in pricing.
Rents in investment properties will level this year as pricing is almost at its top. We are still finding under rented properties; however, analyzing a properties true rental potential is paramount for profitability. Even though wages are increasing the cost of living is as well. Proper management is key in staying competitive in todays’ market; furthermore, insuring your investment remains at market pricing for maximum return.
2019 we will see major changes in our local real estate market. This year commercial and housing sectors will start seeing leveling in pricing; however, the sales market will remain strong. We will still have strong demand but inventory will increase due to rising interest rates, inflation and new construction. Investors in publicly traded markets will see rebounds and will bring new money in investment real estate. We will not see 2018 gains in pricing but the market will remain strong; thus, the time on market will increase to procure a buyer.

How will the South Florida Real Estate market perform in 2020

2020 we will continue to see strong growth in the South Florida real estate market. Unemployment is low, banks are lending, interest rates will remain low, supply is low in all real estate sectors, construction is continuing, investors are investing and it is election year.
2020 will be a positive year in real estate and we will continue to see gains in all sectors.

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