Market Spotlight: Orlando, FL

Breneman Capital has developed a predictive appreciation model we’ve dubbed our “Market Outlook Model” for multifamily values. The model’s primary purpose was to focus on the fundamentals - understanding how each market has performed historically and why it behaved the way it did. The model references historic multifamily appreciation rates from 2000 to 2022 and is backtested with an array of statistics spanning Economic, Demographic, Affordability, New Supply, Apartment Fundamentals, and Single-Family Home data. Through this analysis, we determined which data points are predictive of multifamily appreciation over the past 22 years and which are not. Moreover, we can precisely pinpoint the specific indicators that are the primary drivers for each market’s performance. Each market is ranked by the sum of its indicators, weighted by their actual correlations and statistical significance with appreciation. 

Our model comprises the 37 largest markets across the country, 16 of which were determined to have had above-average appreciation rates for 2022. In the coming months, we will release new articles profiling our model's results and the benefits of investing in each market.

In this article and in our analysis, “Orlando” refers to the Orlando-Kissimmee MSA (Metropolitan Statistical Area).

Orlando landed the #3 spot in our Market Outlook Model. All the scores in our model at the end of 2022 point to a rosy future for Orlando. 

Breneman Capital has chosen not to invest in Orlando, though. Its economic concentration in tourism and poor performance during the 2008-2009 Global Financial Crisis led us to this decision. As a firm, we seek to minimize risk while maximizing returns. However, this does not mean Orlando would not be right for you to invest in.

Orlando is a thriving MSA and home to world-renowned theme parks, beautiful beaches, and vibrant nightlife. But this Central Florida city is not just an amazing place for tourists – it's also a very fast-growing place for permanent residents.

The MSA includes both Orlando and Kissimmee – two cities located on the I-4 corridor that offers investors a great opportunity. Both regions have seen incredible growth in recent years, with more people moving to the area and businesses expanding. This has resulted in an increased demand for housing, which makes multifamily properties a great investment opportunity.

In this article, we'll take a look at why investing in either Orlando or Kissimmee could make sense for you.

1) Market Outlook Model Findings

Orlando came in nationally #3 overall in our score of Economic and Demographics which consisted of the average score in 5-Year Population Growth [2000-2022], 5-Year Job Growth [2000-2022], 5-Year GDP Growth [2006-2020]. 

Only Austin and Raleigh scored ahead of Orlando in this metric, putting Orlando head and shoulders above the rest of Florida in terms of economics and population growth which are highly correlated with multifamily appreciation.

2) Economic stability (except when tourism slows)

The region is a tourism powerhouse often ranked as the #1 travel destination in the US and clocking in 75+ million visitors a year with Disney World, Universal Studios and SeaWorld all located within the region. 

There are numerous other businesses such as healthcare providers and technology companies that provide employment opportunities for local residents. Orlando has diversified its economy greatly over the past decades boasting large employers such as Advent Health, Orlando Health, Publix, University of Central Florida, Lockheed Martin, JP Morgan Chase and others.

However, in 2020 Orlando took a hit from Covid and it dropped from being far above average in economic scores to below average in our Market Outlook Model. While it was nice to see our model is finely attuned to determine a hit like this, it was not a positive for Orlandlo and future potential tourism or economic shocks. This needs to be kept in mind when investing in Orlando.

3) Population growth

The Orlando-Kissimmee MSA is one of the fastest-growing regions in the United States. According to recent estimates, its population is expected to grow by more than 2% each year between now and 2060. Naturally, this means there will be an increasing demand for housing over time – something that investors can capitalize on with multifamily investments.

Not only is the population growing, but it's also diverse. The region has a large Hispanic population as well as a significant number of retirees and young professionals who are moving to the area for jobs or educational opportunities. All these people need somewhere to live, so investing in multifamily properties is a great way to meet this demand and generate consistent returns over time. 

4) Rent Appreciation

The demand for housing in the Orlando-Kissimmee MSA has driven up rental rates, and investors can benefit from this trend. According to recent data, average rent prices in the region are around $1,900.

Investing in multifamily properties here can generate strong returns over time as rents continue to rise with the strong population growth and economic and demographic scores.  

Florida was the top state for net migration move-ins (in raw totals). With the recent influx of Florida immigration, except continued positive pressures on prices and rents. That means that investing in multifamily properties now can be a profitable move for investors looking to make a long-term commitment and ride this trend.

5) Accessible financing and tax incentives

There are also numerous options for financing available when it comes to investing in multifamily properties in the cities. Local banks and credit unions often offer attractive interest rates and terms on mortgages, making it easier for investors to get the money they need to purchase these types of investments. 

While not unique to just Orlando, there are also a number of government programs that can help make multifamily property investment more accessible. For example, Fannie Mae's Small Multifamily Loan program offers up to $5 million in financing with low interest rates and flexible repayment terms – perfect for investors looking to take advantage of Orlando’s great real estate opportunities. 

Finally, investing in multifamily properties in the MSA can be beneficial from a tax perspective. The state of Florida offers numerous incentives for investors and landlords, including property tax exemptions and reduced sales taxes on some purchases. Plus there is no state income tax.

These incentives can help reduce your overall costs when it comes to purchasing and maintaining multifamily properties – making them even more attractive as an investment option. Furthermore, they also encourage people to invest in the area – something that helps fuel economic growth and development across the region. 

Final thoughts on investing in the Orlando, FL

Orlando is an attractive destination for multifamily property investment. With strong population growth, a diversifying economy, and growing rental rates, passive investors can benefit from these tailwinds over time and enjoy no state income tax. 

However, when investing in region, focus on protecting the downside in your investments. Avoid properties with tenant concentration with those working in tourism. Focus on assets that pull tenants from the region’s more stable employers such as medical, university, and government workers.

About Breneman Capital

Breneman Capital is a private real estate investment management firm specializing in the multifamily property sector.  Breneman Capital employs a deliberate investment approach, leveraging data analytics and proprietary technology to generate superior risk-adjusted returns for investors.

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