“Identify and follow the trends in your industry. Don’t fight against the current of change. Instead, recognize these as an opportunity and seize the advantage.” — Becky Sheetz-Runkle
If you buy in the right market, you can make some mistakes and still make a lot of money.
But how do you define what a good market is?
We look for three things.
1. Population growth
2. Job growth
3. Income growth
Notice a theme?
It all comes down to one word: growth.
If we’re seeing growth in a market, we know that’s going to be a great market.
One market we absolutely love is in Jacksonville, Florida.
We have 1,500 multifamily units there.
What we love about Jacksonville is the phenomenal amount of growth.
It’s honestly my favorite market in the country.
Today, I’ll get into why I love Jacksonville, what’s happening in the market, and some stories of things we’ve done there.
1. Why Are People Moving to Jacksonville?
It’s been said that a rising tide lifts all ships.
If you invest in the right markets or in the right location, you can do really well.
We like buying in areas where we see population growth, job growth, and income growth.
Florida is a booming place.
There’s no state income tax.
There’s warm weather.
The average price of a single family house in Jacksonville is currently $311,000.
That’s about 4x cheaper than where I live in the Los Angeles area.
A $300,000 home in Jacksonville is the equivalent of a $1.2 million home in LA.
The first thing we talked about is population growth.
The population in Jacksonville has grown 1.3% to 1.5% in each of the last three years.
That means 1,500 people are moving there every single month and there’s not enough housing.
We’re about 95% to 97% occupied with all the available housing units.
People either have to share a place or not have anywhere to live.
That is a very positive thing because it means more people are moving.
Job growth is the next thing we look at.
We have seen a 1.6% job growth rate over a two-year period.
These numbers are very similar to what we’re seeing in other hot growth markets like Phoenix, Arizona and Raleigh, North Carolina.
The last thing that we look for is income growth.
Jacksonville is number two in median income growth.
There’s a lot of industry in Jacksonville, including a booming healthcare manufacturing industry.
After figuring out the three areas of growth, the question becomes:
Why are people moving to Jacksonville?
What is the draw?
A lot of people come down from the North.
People who experience harsher winters may want to move somewhere warmer.
You can buy a great house in a warm area for a reasonable price.
Definitely much cheaper than you get in Orlando or Tampa!
Or if people pay a similar price, you get a lot more for your money.
For every person that moves to Jacksonville, there are people who are needed to support them.
The people who move to a new area need restaurants, retail, and automotive services among many other services.
Migration is a huge factor when it comes to seeing growth in rents and growth in population.
Another great benefit to the Jacksonville market is no state income tax.
You can be saving thousands or even tens of thousands if you live in Florida.
This is true if you’re a retiree or if you work!
When LeBron James left Cleveland and moved to Florida, people predicted he would make $5 million more per year just because he wasn’t paying state income tax.
That’s the kind of tax break we’re seeing as well.
2. Our Strategy
We’ve had some real home runs with multifamily in Jacksonville.
We bought a property there in March 2021 for $27 million.
We had planned to hold it for six years, but ended up selling it 10 months later for $37 million.
That was a huge return for our investors.
It was close to a 90% or higher IRR.
Why did that happen?
We buy in the right markets.
When there’s no more housing, rents have to go up.
We also use the value-add approach.
This is different from buying a new apartment or a place that’s fully renovated.
We go into places that are a little bit older and do renovations.
We bought another property in October 2021 when the average rent was $1,320 in Jacksonville.
In May 2022, the average rent jumped to $1,460.
Rents went up $140 a month just from what’s happening in the market.
In August 2022, the average rents rose again to $1,566.
That’s a 19% increase in 10 months.
There are two types of appreciation that really illustrate these gains.
We’ve got market appreciation, which is the rising tide raising the ships.
We also have forced appreciation.
Let’s get into an example of how we force appreciation:
A property we bought had average rents in the area around $1,000.
We put in around $6,000 in per unit to upgrade floors, kitchen, paint – nothing too dramatic.
After those modifications, we saw the average rent go up to $1,566.
That’s a 57% upside in the market.
Now, I look at a lot of deals all over the country.
I don’t know any market that has a 57% rent upside when you’re putting in modest value-add renovations!
3. Buying Below Replacement Costs
There are so many upsides to investing in a Jacksonville property when compared to other areas like Phoenix, Arizona.
In Phoenix, you would pay around $300,000 for a value-add property.
In Jacksonville, we’re paying around $155,000-$165,000 for the same type of property.
Even in Phoenix, $300,000 is at or maybe even above replacement cost.
You could build a brand-new apartment for less!
In Jacksonville, it could will cost upwards of $200,000 to build rather than the $165,000 we’re paying now.
This is mostly due to construction costs, which are crazy right now.
If we can buy older stuff, we can renovate it.
We’re getting a great deal.
We’re buying at or below replacement costs.
We’re seeing the value-add upside.
You can see why I love Jacksonville!
We have the growth, opportunities for value-add appreciation, and incredible population demand.
Now I want to hear from you!
Have I convinced you to invest in Jacksonville?
What other locations are on your radar for growing your investment portfolio?
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.
