Best Places to Buy Florida Investment Property

Florida consistently ranks among the top five states for generating rental income, making it a smart choice for buying investment property. The charm of Sunshine State and its warm climate attract tourists, renters, and retirees year in and year out.

Average apartment rent in Florida increased by approximately 20-38% in all major cities from 2020 to 2024, according to Statista. Vacation rentals enjoy high occupancy rates, with tourists visiting the state both during and outside of peak season.

If you’re looking to buy an investment property in Florida, there are several markets you should definitely keep an eye on. The Florida real estate market is dynamic, with demand driven by both local and out-of-state buyers seeking sun-soaked properties and diverse communities.

Let’s explore some of the best places to buy rental properties in Florida.

Why Is Investing in the Florida Real Estate Market a Great Idea?

Here’s why investing in property in Florida brings some concrete upsides.

Tax Advantages and Fair Rental Regulations

Florida’s property taxes are generally lower than those in other states, although they vary by county or city. The average effective property tax rate of 0.98% is below the national average. Many people choose to relocate to Florida because this state has no state income tax, meaning individuals who live and work in Florida do not pay personal income taxes to the state government.

Combine these tax advantages with a strong, multifaceted economy spanning far beyond tourism, and it’s no surprise that the population continues to grow. Overall, Florida is considered a pro-landlord state. This means that several laws make life easier for landlords and real estate investors, such as streamlined eviction processes and the benefits of the 1031 exchange (which we’ll cover later in the article).

The Growing Stream of Tourists

In 2023, over 140.6 million people visited Florida, marking a 2.3% increase from 2022’s record-breaking numbers, according to Florida Governor’s data. Year-round demand for vacation rentals is driven by its hot climate and warm weather, natural springs, state parks, extensive coastline and pristine beaches, making it an ideal destination for vacation rentals.

It’s not just about summer vacations. The Sunshine State has a longer rental season compared to northern states, with water sports and outdoor activities available year-round. Major theme parks like Walt Disney World, SeaWorld, Universal Studios and Busch Gardens attract families with children. The state keeps improving its infrastructure and investing in hurricane protection systems.

Strong Property Appreciation

Over the past few decades, property values have followed a steady upward trajectory. Major cities and coastal areas have benefited from a combination of high demand and limited land availability.

Florida’s most sought-after regions, particularly along the coast, have limited space for new development. This scarcity creates strong competition among buyers, further driving up property home values. Florida remains a hot spot for buyers across the United States, especially those looking to relocate and become new residents, like young professionals. For many, it’s an ideal vacation home location. International buyers, particularly high-end investors, are also drawn to this state.

While coastal areas are well-developed with limited land availability, inland Florida cities and suburban areas continue to experience significant growth through new construction. From 2022 to 2023, this state became home to four of the nation’s fastest-growing metro areas, with Wildwood-The Villages, Lakeland-Winter Haven, Ocala, and Port St. Lucie seeing population increases of 3% to nearly 5%.

Best Places to Buy Real Estate Investment in Florida

If you’re looking to invest in real estate, Florida offers some of the best locations to buy rental property. With a booming tourism industry, the state offers diverse investment opportunities for both Airbnb properties and long-term rentals. Whether you’re seeking to expand your portfolio with vacation rentals or looking for a profitable investment property on sale as a first time investor, partnering with a knowledgeable real estate agent can help you navigate the market and find the ideal property to invest in.

Let’s take a look at some of the top locations for purchasing investment property.

Miami

The average home value in Miami is $580,297, with a median sale price of $601,667 (Zillow). The city consistently sees high demand for housing, whether for short-term or long-term rentals. Property appreciation has been strong, with values increasing by around 4% annually over the past five years. The large number of retirees choosing to settle in Miami contributes to housing scarcity, further driving up demand.

The city itself and its neighboring city, Miami Beach, are popular tourist destinations known for their vibrant ambiance, nightlife, cocktail parties, cultural diversity, Latin music venues, and cuisine. Popular neighborhoods for investing include Wynwood, Downtown Miami, Edgewater, Coral Gables, South Miami, and Pinecrest. The city is also landlord-friendly, with no rent control laws, no cap on security deposits, and a faster eviction process compared to many other states and cities.

Fort Lauderdale

Going north along the southeastern peninsula coast, you’ll find investment properties in Fort Lauderdale at prices similar to Miami. This coastal city has a promising economic outlook, with strong job markets in healthcare, finance, and tech.

Fort Lauderdale is a go-to tourist destination, and Airbnb properties can generate high rental income (AirDNA data). The average occupancy rate for vacation rentals is 53%, with an average daily rate of $299.80 and an average annual revenue per listing of $28,300, making this coastal city an ideal addition to an investor’s portfolio.

Orlando

Factors such as a population growth of over 20% in the past decade contribute to the robustness of the housing market in Orlando, which remains more affordable than Miami, with an average home value of $382,567 (Zillow).

Orlando is the theme park capital, hosting some of the most iconic attractions, including Walt Disney World Resort, Universal Studios, and SeaWorld Orlando. Real estate investment thrives on tourism, with an average daily rate on Airbnb of $238.20 and an average annual revenue of $23,100, according to AirDNA.

Cocoa Beach

Known for its beautiful beaches and surf culture, Cocoa Beach is an excellent spot for short-term rentals. With a whopping average occupancy rate of 60%, investors can expect a stable cash flow and an average annual revenue of $36,000 from short-term rentals.

The average home value in Cocoa Beach, FL is $490,150, down 1.6% over the past year. Since 2022, home prices have started showing a slight downward trend.

Tampa Bay

Situated on the western side of the peninsula, Tampa has emerged as a rising economic force, attracting a skilled workforce with its high-paying job opportunities.

Real estate investments in the Tampa Bay area are ideal for long-term rentals. However, the more than 9,700 total vacation rental available listings, along with an average daily rate of $183.60, highlight the touristic potential of this city and its surroundings. The average home value is $381,985.

Clearwater

On the other side of Tampa Bay lies Clearwater, with its stunning beaches (on one side facing the Gulf of Mexico). Investors can capitalize on short-term rentals, benefiting from higher average daily rates of $204.80.

When considering vacation homes as investments in this beach destination, it’s important to take into account the high income potential, cash flow, and the average home price of $370,480.

Jacksonville

Homes in Jacksonville are typically sold for $194 per square foot (Realtor), with the average home value at $297,741 (Zillow). This market offers a lower entry point, making it a good option for first-time investors.

A strong job market, business-friendly environment, and relatively affordable housing attract renters and investors in long-term rental properties. Some Jacksonville neighborhoods are appreciating and driving stronger demand than others, such as Downtown Jacksonville, Jacksonville Beach, Oakleaf Plantation, Bartram Park, etc.

The Florida Keys

Purchasing investment properties on one of the islands in this small archipelago appeals to numerous rental property investors. However, it’s important to thoroughly research local regulations. Many islands enforce strict rules, such as caps on new rental licenses and limits on how often or how long properties can be rented. These regulations are driven by concerns about environmental impact and preserving the local character.

Some of the popular destinations include Key West, Marathon, and Islamorada.

Key West is famous for high-end vacation rentals, where the average daily rate is $576, and the average annual revenue is $69,700. To buy a house, you’d need to shell out an average of $1,086,221.

How Can I Avoid Capital Gains Tax on Rental Properties in Florida?

Capital gains taxes are paid on the profits you make when you sell capital assets like real estate, bonds, and stocks. While Florida does not impose a state capital gains tax, you will still be subject to federal capital gains tax.

The tax rate you’ll pay depends on how long you’ve owned the property:

• Less than 12 months: You pay a higher tax rate (short-term capital gains, taxed as regular income).
• More than 12 months: You pay a lower tax rate (long-term capital gains).

One way to defer paying capital gains taxes is through a 1031 exchange. Under this section of the tax code, if you sell a rental property and reinvest the proceeds into a similar property, you can defer capital gains taxes. This allows you to avoid immediate tax liability while growing your real estate investments.

The second option is that if you sell your primary residence in Florida and meet the IRS “ownership and use test” by owning and living in the home for at least two of the past five years (don’t need to be consecutive), you can exclude a significant portion of capital gains from your taxes. Other specific conditions may also qualify you for a partial exclusion.

How Much Do I Need to Put Down on an Investment Property in Florida?

The amount of money you’ll need to put down to buy an investment property depends on the lender. You can go through traditional lenders (banks) or borrow private money from real estate lenders.

Typically, you’ll need to put down 20% to 25% for an investment property in Florida. Keep in mind that purchasing an investment property usually requires higher down payments and comes with higher interest rates compared to primary residences.

If you plan to turn your real estate investment into an Airbnb-style vacation rental, iGMS can help you manage your property on the go. With the iGMS mobile app, you can access your channel manager, manage your team, guest communication, and income reports, keeping everything organized and running smoothly.