As home sales soar, rental market is in demand in Jacksonville
While it’s getting harder and harder to buy a home these days on the First Coast, it’s becoming just as difficult to rent a single-family home, even as more are being built day by day.
Alex Sifakis, president of JWB Real Estate Capital in Jacksonville, said his company now manages 4,300 single-family rental properties in the city and owns another 400. Sifakis said there are few economic opportunities like the single-family rental market.
“Since 2011 or 2012, institutions have been increasingly interested in single-family rentals. Because of [Great Recession] stock market crash, these big institutions … were able to buy a lot of properties at a discount, rent them out and make money,” Sifakis said.
“It’s going to continue to grow because these institutional owners see they can get a great return on single-family properties,” he said.
Home repairs:First Coast home renovations face delays and material shortages after pandemic
Real estate:The first coast housing market is the hottest it has ever been
JWB also builds new rental homes. The company has built 500 homes and renovated another 100 this year, all with the goal of renting them out or selling them to landlords who rent them. After the sale, JWB manages the properties for the new owners.
This is an upward trend as the home buying market continues to move towards higher and higher prices on the First Coast and across the country.
Jacksonville continues to set records amid the pandemic, with the median home price rising to $325,000 in November, according to the Northeast Florida Association of Realtors.
Meanwhile, as it becomes harder to buy a home, the rental market is also tightening. Over the past five years, the number of homes built exclusively for rental has increased 30% across America, according to the National Association of Home Builders. New single-family homes under construction represent 5% of the national market, the organization reported.
U.S. single-family rent growth has risen 8.5% nationally since July, marking the fastest year-over-year increase in 16 years, according to the CoreLogic Index Single-Family Rent.
Florida is the place to be
While the numbers are garish for rentals nationwide, Sifakis said Florida and the Jacksonville area in particular are becoming more lucrative in the market.
“In Jacksonville and Florida, we’re seeing a huge influx of people from all over the country,” he said. “…We think that’s likely to continue. We think COVID has accelerated some long-term trends that were already happening.
“We’re going to see continued immigration, which is a huge driver of demand…which means higher rents and higher house prices going forward,” Sifakis said.
He added that other big Florida markets, such as Miami, didn’t have a lot of building space left, while the First Coast had miles of undeveloped land. And current residents of northern states have realized they can work remotely wherever they live, as the coronavirus pandemic has forced professionals to operate out of their homes, hence the increase in migration to the Florida.
Jacksonville ranked fifth among major metropolitan areas for buying rental property in the United States, according to new research from Stessa, a web-based platform for real estate investors. The study is based on key factors real estate investors consider when evaluating a market: the gross rent multiplier, recent and projected house price growth, effective property tax rates and population growth.
The Tampa-St. The Petersburg-Clearwater area ranked first.
Jennifer Filzen, a JWB client since 2012, owns three rental properties and plans to acquire a fourth and a fifth. His mother owns five and his grandmother has loan investments in Jacksonville.
Housing market:Which parts of Northeast Florida have the fastest rising house prices? Who climbs the least?
Filzen lives in California, where she runs her own marketing business. But she’s a Jacksonville native with longtime connections here. She admitted it was a sentimental connection. All of its rental units are in Jacksonville with two properties on the Westside in the Lakeshore area and then downtown with rents ranging from $1,100 to $1,400 per month.
“I live in Monterey, California with my husband and it’s extremely expensive,” she said. “Jacksonville Market is something I know because I grew up there. My family has been in Florida for five generations.
“I saw that in the Jacksonville market, I could own properties that were in the neighborhood my dad grew up in and I own properties where families can afford to live. And that’s cash flow positive.
Compared to markets such as other parts of Florida or California, Oregon or Washington State, its investment in the first coast is accumulating a nest egg.
“It’s really my retirement,” she said. “I don’t come from a big job that makes me lots and lots of money. I’m self-employed. My husband and I are very middle class. We saved and saved to put a down payment on each of our houses. We are not rich people rushing to buy things.
But buying rentals through JWB and letting the company manage its properties makes investing much smoother, Filzen said.
“I don’t have to worry about anything,” she said. “I just sign the papers. If something happens they let me know and I make a decision and we go along with it. The stress of owning rental properties with JWB is so low, it’s fantastic. I don’t I don’t have the nightmares that people report when owning and managing their own rental properties.
Application for rental properties
Nate Day, vice president of residential real estate development company H. Smith Inc., which primarily builds single-family homes and develops neighborhoods with infrastructure, is also chairman of the government affairs committee of the Northeast Florida Builders Association.
“I hear about them [builders] that it increases in terms of activity,” Day said. “…You see a lot of institutional and national build-to-let developers trying to get into the Jacksonville market.
Jacksonville has always been low-cost for renters and there’s normally a shortage of rental housing in the form of single-family homes, Day said.
He said it takes time to prepare new land for construction, which has caused delays in supply and intensifies demand.
“I think demand in general is outstripping supply,” he said. “There are a lot of things that have come out of COVID that have made Jacksonville a desirable market. There are a lot more people who can move to Jacksonville and Florida in general. Jacksonville is still more affordable than Tampa or Orlando .
Day said the amount of demand is high because there’s a much larger market here.
“A lot of that demand is potential rental demand,” he said. “Because there is not enough land for a ready development, you see both rental and traditional single family [homes] compete for the same good.”
Buyers remorse:Jacksonville home affordability worst in 15 years, median price hitting $307,230
Day added that the First Coast area is in the heat of a drastic market and it may take years to catch up with demand, especially for rentals. But he added that local municipalities will eventually have to deal with the problem.
“The market response is an interesting question,” he said. “Some say we need to limit the number of builds for rent because it hurts affordability for first-time home buyers. That’s something I’ve heard. I don’t think you can prioritize a type of resident rather than another, like the buyer rather than the tenant. When you move, you become a tenant first. So we have to have that.”
The issue will eventually need to be addressed with forward-thinking urban planning and zoning, Day said.
“Let’s try to create places in the city where we want that demand to be met, and then make some changes to zoning and land use. …so the unknowns go away and you can really increase that supply,” he said. “Costs are going up because they’re competing for so few properties out there that aren’t really ready at the moment.
Sifakis said he doesn’t see demand decreasing anytime soon. On the investment side, he said he simply couldn’t keep up with investors wanting to pour money into single-family rental properties.
“It seems to be almost insatiable at this point,” Sifakis said. “Ten years ago, people didn’t think single-family properties belonged in the institutional asset class. Those people were wrong.”
There is a huge demand there.
“We see it growing minute by minute,” he said. “I probably get two calls a week from institutions that have fundraised or are trying to deploy funds and want to do so in single-family rental properties.”