What is the expected rate for return for multi-family and/or student housing in Florida?

Looking for info on what investors are seeking as a rate of return, ideally for a new construction project.
In Market Conditions - Asked by Henry D. - Mar 15, 2011
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Answer(s)

WC Equity G.
Owner/Investor
Tampa, FL

Henry,
Excellent question in this market. Typical rate of return for multifamily properties in Florida is going to be between 8-12% annually. Multifamily properties are advantageous in that occupancy levels are usually kept high; whereas single family student housing must be tenant occupied to be lucrative. Our firm offers both, multi and single family properties at over 15-20% annual rate of return. I'd be happy to assist.

Mar 15, 2011
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Sean M.
Broker/Agent
Winter Park, FL

Hi Henry,
Investors will demand higher returns for new construction than for existing multifamily. You should expect an equity investor to ask for a preferred return in the 7% to 9% range, plus a large share of the development profit - enough to reasonable generate a projected return on equity in the mid 20%'s + range for their money.
This is because a new project will have construction risk, market/lease-up risk, etc . . . so they will be facing a series of unknowns instead of buying a future stream of existing proven cash flow.
Existing, stabilized multifamily property will generally sell for cap rates in the 6% to 9% range, depending upon age, quality, and so on. But that spread is how you make money developing new projects; budget and build it out to a projected 10% to 12% cap rate and sell it stabilized at a 6% to 9%.

Mar 15, 2011
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Real Estate P.
Listing Administrator
Houston, TX

Great question, I buy at 10% CAP and above only.
Make sure it's ACTUAL numbers vs. "Pro formas". New construction unless your doing it for tax credit purposes, just buy an existing performing new multi-family piece if equity & cash flow are your goals.
You can always also purchase a half occupied complex, move people to 1 side & play new remodel construction on the other side. This way the project has eyes & income to assist with the shortening of return time for investors. Higher rate of return of course the faster the projects are complete.

Mar 23, 2011
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