New York-Based Multifamily Investors Flock to South Florida

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MIAMI—There is a wave of investors who are currently selling their New York-based properties to invest in the South Florida area. Why? Mainly because of the recent rent control law and its negative impact on returns on investments. It has been estimated, for example, apartment property values dropped 20%-30% as soon as the laws went into effect. Some investors are now mainly focused on getting their money out of New York and are looking to invest in properties that will produce better yields—specifically in non-regulated rent control markets, such as South Florida.

Why South Florida

“There is zero incentive for New York multifamily investors to purchase a building and spend money on renovations if they can’t raise rents in these rent-controlled environments. Florida has always been a market with attractive yields. This is why most NY investors are choosing South Florida,” says Rafael Fermoselle, managing partner of Eleventrust Real Estate. “They either have their New York properties under contract to be sold, have already sold them, are in 1031 exchanges, or in some cases looking for diversification.”

Investors are selling their assets in New York and reinvesting in deals that yield more and ideally, are located under one roof. However, since Miami’s inventory is compressed with a lot of smaller multifamily properties and it’s difficult to find buildings with high unit counts under one roof, investors are turning to multifamily portfolios that are comprised of 4 – 8 buildings totaling 50-120 units. Although not all under one roof, investors are finding the 100+ units they are seeking with room to add value.