With gorgeous beaches and well-maintained parks, Key Biscayne is paradise on earth for travelers and a bonafide real estate destination for savvy investors. If you’re considering snapping up a few properties in the area, here is the ultimate beginners’ guide to real estate investing.
Table of Contents
AN INTRODUCTION TO REAL ESTATE INVESTING IN KEY BISCAYNE
It’s never too late to start investing in the Key Biscayne housing market. If you’re new to real estate investing, here’s what you need to know about this practice and increasing your chances of success.
What Is Real Estate Investing?
Real estate investing is the practice of acquiring choice properties, either residential or commercial, to generate passive income, build wealth, and diversify your investments. Unlike other investment types, such as stocks and bonds, real estate investing involves tangible assets.
Property investors typically generate income from rental payments, property appreciation, or both. Unlike stocks and bonds, real estate investments can be physically utilized, improved upon, and effectively managed to make them more lucrative.
An investment property is meant to be used to generate income or make a profit rather than as a primary residence. Many investors own multiple properties, one of which serves as a primary residence while the others serve as rentals or resale homes that net a tidy profit through improvements and price appreciation.
A Gallup poll found that more Americans perceive real estate to be a better long-term investment than stocks, bonds, gold, savings accounts, and certificates of deposit (CDs). To be more specific, 34% of respondents chose real estate over other investment types..
Types of Real Estate Investing
There are various types of real estate investments, each with its own potential returns. This ultimate beginners’ guide to real estate investing covers some of the most common types:
Residential Properties
Residential properties are meant for tenants to live in, such as single-family homes, multi-family properties, townhomes, condos, and villas. Choosing the right residential property will largely depend on your financial goals and preferences.
Single-family homes are detached homes meant for one family, and they typically generate income through long-term rentals. Multi-family properties such as duplexes and apartment buildings that consist of several individual living units and have the potential for higher returns due to multiple tenants.
Vacation properties and short-term rentals are rented out on a short-term basis, usually several days or weeks, to travelers. These properties have the potential for higher rental income depending on location, nearby amenities, and seasonality.
Commercial Properties
Commercial properties are designed for business use and occupation. These properties include offices, retail space, and industrial warehouses. There is potential for high returns depending on the specifications of the property as well as its location.
Office buildings house various types of companies and service providers, generating income through tenants’ rent. Retail properties typically include shopping centers and standalone stores, which earn income through lease and rental agreements.
Industrial properties include warehouses and manufacturing facilities. These properties generate income from tenants that operate in logistics, manufacturing, storage, and similar industries.
Real Estate Investment Trusts (REITs)
REITs are companies that own and manage income-producing properties. These companies make it possible for individuals to invest in a diversified real estate portfolio without having to directly own or manage them.
- Publicly traded REITs are listed on stock exchanges. Investors can buy shares and generate income through dividends and appreciation.
- Non-traded REITs are not listed on stock exchanges. These have the potential for higher returns but also increased illiquidity compared to their publicly traded counterparts.
- Mortgage REITs (mREITs) include mortgages, mortgage-backed securities, and other property-related debt. These allow investors to generate income from the interest.
Why Real Estate Investment Matters
Real estate offers numerous opportunities for investors to build wealth, increase income, and diversify their investment portfolio. The financial gains and relative stability of real estate investments compared to other asset classes make it an appealing option for many individuals. Since housing is a basic need, there will always be demand for it. The potential for gains largely depends on location, property type, and its overall condition.
Unlike most intangible assets, property investors have some level of control over how a piece of real estate performs. They can make improvements to the property and ensure that it is effectively managed to have it perform better in the market and make it more lucrative.
How much money to spend on a property largely depends on your budget and risk tolerance. Your time horizon is also an important thing to consider when committing to a major acquisition or investment. As with other kinds of investments, it is crucial to have an exit strategy and clear goals for real estate investments.
THE BENEFITS OF REAL ESTATE INVESTING
This ultimate beginners’ guide to real estate investing covers the numerous benefits of acquiring Key Biscayne real estate for investment purposes. From growing your wealth to diversifying your investments, there are many advantages to property investing.
Building Wealth
Savvy investors who know to choose and time their acquisition can look forward to capital gains as property value increases over time. Capital gains refers to the difference between the purchase price and the sale price of a property, which translates to profits for investors. However, investors can only enjoy capital gains when they successfully sell the property for the correct price.
Supply and demand play a role in capital gains in real estate. In general, home prices have increased dramatically over the last few decades as demand for housing has increased. If there are fewer available homes in a given area, property prices usually tend to appreciate, assuming that all else remains equal.
Diversification
The ultimate beginners’ guide to real estate investing emphasizes diversification as a key aspect of investments. As a tangible asset and relatively stable one at that, real estate can play an important role in diversifying your investment portfolio. It is common practice for investors to diversify, or include a wide range of asset classes, to spread risk and potentially reduce any impact that a poor-performing asset may have on their overall wealth and financial well-being.
Tax Advantages
The tax implications for investment properties are often different from those for residential real estate. While homeowners may deduct their mortgage interest and property tax from income tax, there are generally more tax benefits when acquiring investment property.
For instance, investors may deduct the costs of repairs and maintenance, depreciation expenses, and other property management-related expenses. This can help ease the financial burden of owning, managing, and maintaining a rental property.
Moreover, property investors may defer capital gains taxes with a 1031 exchange. This can come into play when a property investor sells one piece of real estate and purchases another.
In general, Florida is an attractive market for investors who want to buy a rental property or second home. Florida famously does not have state income taxes. It is also home to world-class attractions with stunning beaches and a pleasant climate.
Passive Income
Investors typically buy real estate with the goal of generating a steady stream of income, or multiple sources of income. Tenants pay rent and other associated fees each month until their lease of rental agreement expires. Investors can also decide the level of involvement they wish to have. If they want to free up their time for other activities, they can get a property manager to attend to their residential or commercial real estate investment.
The revenue stream that comes with a well-managed property investment can provide a stable income for retirees and other individuals looking for alternative sources of income aside from a fixed paycheck or income from bonds or stocks. Passive income from real estate investing can also serve as a hedge, or a form of protection, against downturns in the stock market or the rising prices of consumer goods.
WHY INVEST IN KEY BISCAYNE REAL ESTATE
The Miami-Dade area has long been considered one of the world’s most desirable tourist destinations. Many tourists and new residents are drawn to Key Biscayne for its beaches, natural scenery, and relaxed pace of living.
An island village located in Miami-Dade County, Key Biscayne encompasses over four miles to the south and east of downtown Miami. It connects to the Magic City via the Rickenbacker Causeway, making it highly accessible to those who want to enjoy its famed nightlife and arts scene.
Local attractions include Bill Baggs State Park, which offers canoeing, fishing, birdwatching, and manatee and dolphin sightings just off the coastline, which Conde Nast Traveler considers one of the best beaches in the United States; and Crandon Park, an eco destination with a two-mile beach, tropical hardwood hammocks, and golf and tennis facilities.
Key Biscayne also provides access to a coastal barrier reef, which features soft corals and colorful fish in crystal-clear waters. It holds the distinction of being the nation’s only federally recognized underwater archaeological trail.
The tourism industry attracts large numbers of potential tenants, which require a suitable place to stay. In 2019, Biscayne National Park welcomed more than 700,000 visitors, who spent over $46 million in the surrounding businesses and supported about 600 jobs in the area.
More recently in 2022, Florida tourism reached record numbers with over 104.5 million visitors, up 15.3% increase over the same period in 2021, according to Visit Florida. The Sunshine State had 35.1 million tourists in the third quarter of 2022, exceeding pre-pandemic levels.
In addition to over two miles of pristine beachfront, impeccably-maintained parks, golf courses and tennis courts, the village is home to the University of Miami’s Rosenstiel School of Marine and Atmospheric Science. This prestigious university attracts students and educators from all over the state, which also contributes to the demand for rentals and housing.
Key Biscayne’s location is unbeatable. The village is located roughly nine miles from Miami, making it a desirable destination for those who want to get away from the hustle and bustle of city living without being too far from all the action.
The nearest airport, Miami Airport (MIA), is just 10 miles away. Other airports in the area include West Palm Beach/Palm Beach (PBI) and Fort Lauderdale-Hollywood International (FLL) . This makes the village easily accessible to tourists and seasonal residents.
The island’s history dates back to 1513, when Juan Ponce de Leon discovered fresh water here, called it Santa Maria and claimed it for the King of Spain. In later years, it became a coconut plantation and experimental fruit groves. Starting in 1950, it was partially developed by the Mackle brothers into homes marketed to veterans with attractive financing. Key Biscayne incorporated as a village in 1991 and celebrated its 30th anniversary in 2021. Today, it is a vibrant community that attracts residents from all over the world.
While the housing market has stabilized, home prices and rental rates remain high. The median listing price was $2.3 million in November 2023, up 15% year-over-year. The median sale price was $1.3 million, according to data from Realtor.com.
Home to more than 14,000 residents, Key Biscayne’s population grew by 12.9% from 12,867 to 14,530 between 2020 and 2021. The median household income also increased from $166,667 to $167,990, according to Data USA. Population and income growth can help contribute to housing demand.
TYPES OF REAL ESTATE INVESTMENTS IN KEY BISCAYNE
The Key Biscayne housing market offers a wide range of properties for investors to consider. You can choose from a wide selection of property types, architectural styles, and layouts depending on your investment goals. Available properties include:
Residential real estate
- Single-family homes
- Multi-family homes
- Apartments
- Townhomes
Commercial real estate
- Office spaces
- Retail properties
STEPS AND STRATEGIES IN REAL ESTATE INVESTING
Creating a Real Estate Investment Strategy
- Long-term vs. short-term investments – Long-term and short-term real estate investments have different investment horizons and objectives. Long-term investments typically have a holding period of five years or longer with the goal of significant capital appreciation and steady income through rental fees.
- Fix and flip vs. Buy and hold – The fix-and-flip strategy involves purchasing a property at a lower price, making improvements or renovations, and selling it quickly at a higher price. The buy-and-hold strategy, by comparison, looks at long-term capital appreciation in a stable and steadily appreciating housing market.
- Strategies for passive investors – Passive investors who don’t want to actively manage properties may look into REITs or property management companies.
- Exit strategies – Investors need a clear strategy for selling the renovated property, selling for long-term capital gains, or selling a rental based on the income it generates.
Short-term real estate investments, on the other hand, have a holding period of less than five years. The goal is to make quick profits due to short-term market trends and fluctuations in home prices, or flip distressed properties to sell them for a higher price.
Tools and Resources for Real Estate Investors
If you’re new to real estate investing, there are several resources and professionals to help you jumpstart your real estate ventures in Key Biscayne:
- Real estate agents and brokers
- Property management services
- Real estate investment software
- Online real estate communities
LOCATE YOUR NEXT INVESTMENT IN KEY BISCAYNE
Get the ultimate beginners’ guide to real estate investing when you work with Great Properties International Realty. For more than 20 years, we have helped investors find properties with remarkable potential. Our dedicated team assists clients from all over the world, providing exceptional service and personalized attention. Our in-depth knowledge of the local market and fluency in various languages allows our team to serve diverse clientele.
Contact Great Properties International Realty at 305.215.1686 or send us an email today!
With so many promising properties in the market, we help investors find some of the finest luxury properties and waterfront homes in the area. Our job is to streamline the search process and provide access to listings that meet your expectations.
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