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Top Pensacola Investment Real Estate Considerations

Top Pensacola Investment Real Estate Considerations

Are you looking for a solid Pensacola investment property? With economic factors in mind, it is more important than ever to do your research prior to considering a Florida real estate investment purchase. We’ve got some great tips for investors looking to purchase real estate investments in Escambia and Santa Rosa Counties in Northwest Florida.

Income Considerations for Pensacola Investment Property

First things first: you need to be sure the investment is profitable. Considering a Pensacola investment purchase? Check with our agents for a free market analysis on a monthly rental rate before going under contract or closing on a property. Even if your goal is to operate the rental as a short term rental, we always recommend analyzing your property as a long-term rental when considering cash flow projections, even if your goal is to operate the rental as a short term rental. Why is this important? With an oversaturated STR market in Pensacola, and in many other areas in the U.S., many short-term rental owners are not realizing their projected income and transitioning their properties to the long-term rental market, only to realize a loss. Unfortunately, many investors who purchased in recent years did not do this, and they have found their investment is not profitable in either the short-term or long-term rental market. 

Location Considerations for Pensacola Investment Properties 

The golden rule of real estate has and always will be, location, location, location. You can always make repairs and upgrades to the home’s components and features, but you can’t (usually) pick up your home and move it. It is important that the location is well thought out and desired by renters and future buyers alike. 

  • Choosing a property in a desirable area will ensure that your home will have the best chance to appreciate over time.  
  • A convenient and well-liked area will also help to lower the vacancy rate and the time on the market. 
  • Get to know the areas that potential properties are located in. Consider important factors such as crime rates and school zones for occupants of the property too as these important factors can make your investment that much more appealing. Santa Rosa county is known for its desirable school zones and lower crime rates. 
  • Pick a central location in the Pensacola area near employers and amenities, as this will add to the convenience of commuting times and provide easier access to employment, entertainment, schools and shopping.  Even utilities and amenities themselves can be a big factor for desirability.  Some renters or buyers may have to be in an area that provides high speed internet, or have a home that offers lawn care, if that tenant is not capable of doing it themselves.
  • Is your property in a flood zone? Florida flood zone insurance costs will increase your expenses and will increase your chance of loss down the road. It is best to avoid homes that fall into flood zones that require flood insurance for most single family real estate investments. 

Property Specific Considerations for Pensacola Investment Properties

There are also certain home features that tend to be better to reduce maintenance expenses over time.

  • How old is the property and how well has it been maintained? It's always a good idea to find out the age of all the major components of a home. By hiring a good qualified and licensed inspector, you should be able to get a detailed report on the home that will list the age and condition of major components in your home. Knowing the age of major mechanical components in your Pensacola home, like the roof, HVAC, kitchen appliances, and water heater, can also help you budget and plan for major expenses. As these items age, they can lead to leaking and expensive repair bills, high utility costs, as well as rising insurance costs.
  • We also like to recommend a home that is built with a concrete slab foundation. In Pensacola, off grade investment properties tend to fall victim to foundational issues over time and are more accessible to termites and other wood destroying organisms. 
  • What is the siding made of? Typically vinyl, brick or preferably hardy board is the best choice of siding for an investment. Wood siding causes more maintenance in the long run. You will have to pressure wash and paint the siding constantly to avoid rot and the wood material will always be more attractive to a termite infestation. 

Consider other problematic issues that can arise because of when the home was built. Here are a few things we look for when reviewing home inspections for Pensacola investors.

  •  During 1965-1973, aluminum wiring was popular. It has been shown to have a higher rate of fire issues. For that reason, most insurance companies will not cover it and it should be avoided outside of dedicated 220 strand circuits. 
  • Homes built before 1978 are likely to have some lead based paint in the home. The EPA has specific requirements for owners, vendors and property management companies when it comes to making repairs on homes built prior to 1978 that can increase your maintenance expenses. 
  • During 1978-1995, polybutylene plumbing was used. This type of plumbing eventually became a class action lawsuit. Because the pipes are subject to bursting, it’s also hard to secure Florida insurance with this material.
  • From 2001-2009, Chinese drywall was used in many home builds across the U.S. and especially in the Pensacola area after Hurricane Ivan in 2004-2005. This material corrodes and damages other aspects of a home, including electrical components.  As a result, homes with that type of drywall should be avoided, unless it can be replaced prior to ownership.  

Being that the most costly expense for your Pensacola investment property is the roof, this should be the first thing you consider in regards to condition and age of. These days, insurance companies are very picky and even if the roof is not damaged. Oftentimes, once it hits 15 years old, the insurance companies will not insure it. Age is not the only factor to consider here though. The slope and style of roof also contributes drastically to insurance and replacement costs. Many older homes were built with flat roofs. Flat roofs are much more expensive to insure and sometimes can be up to 3 times more expensive to replace due to newer Florida codes. We always recommend Pensacola investors to try and avoid flat roofs if an alternative can be found. 

By taking all of these factors into consideration when choosing the right investment property, you can give yourself peace of mind that your investment is going to have minimal future maintenance, less overall expenses, and lower vacancy in the long run. When margins are smaller than ever, this is crucial to keeping your investment profitable throughout your entire ownership. Our goal when selling Pensacola investment properties and providing Pensacola property management is to help lower your expenses and make your investment as profitable and desirable as possible. Reach out to our team to discuss your Pensacola real estate investment goals