NAPLES — With baby boomers retiring and moving in droves, real estate investors are increasingly looking to go where the greybeards go.
According to a new report by Irvine, Calif.-based data firm RealtyTrac, Naples is No. 2 on its list of 15 “retirement hot spots” — that is, cities that are likely to grow over the next few years that have at least a third of the population age 65 or older.
The company looked at 40 cities across the U.S. and based its ranking primarily on year-over-year price increases of single-family detached and attached homes as of May. By that measure, Naples — with an average annual increase of 26.8 percent — was bested by Dunnellon (between Tampa and Gainesville), where prices rose 31.4 percent.
Another factor that the company considered was each city’s average capitalization rate.
The capitalization or “cap” rate is a measure that investors use to determine their return on investment. It’s the ratio of a property’s yearly income divided by its total value.
By this metric, Dunnellon again beat Naples, with a 10.3 percent cap rate, compared to Naples’ modest cap rate of 3.8 percent.
“With that sort of return you get in Naples, you might do better putting your money in another investment, like the stock market,” RealtyTrac vice president Daren Blomquist said.
However, he added that the reason the cap rate was lower was because Naples’ home prices are relatively high compared to the rents that can be commanded.
Blomquist cautioned that while Naples’ fast appreciation rate earned it a top spot on the list, it would be better both for residents and outside investors if prices simmer down.
“This was a good shot in the arm for Naples, but it’s not healthy for that to continue,” he said. “That would mean that the city is in full speculation mode.”
Besides Naples and Dunnellon, five other Florida cities made the hot spots list: North Fort Myers, Punta Gorda, Sun City Center, Venice and Orange City.
Blomquist pointed out that North Fort Myers might be a better choice for investors looking purely for a rental investment, both because the average price is lower — $84,500 — and the cap rate of 9.4 percent is better.
But some investors are attracted to Naples for more than just rental returns.
Lorraine Walls, 57, a retired director of nursing who lives in Midlothian, Va., owns 10 modestly priced houses in Lehigh Acres. But some have been expensively trashed by tenants — one even took an ax to the walls and a sledgehammer to the kitchen and bath.
So she’s looking for homes to buy in the $500,000 to $800,000 range in Naples that she can fix up and flip.
“There’s a better profit margin there,” she said.
Besides Florida, six other states were represented in the top hot spots list. The other cities mentioned were, in order of ranking: Hot Springs Village, Ark.; Douglassville, Pa.; Sun City, Ariz.; Rancho Mirage, Calif.; Florence, Ore.; Green Valley, Ariz.; Seal Beach, Calif.; and East Hampton, N.Y.
RealtyTrac also compiled statistics on the cities’ costs of living, average temperature and annual chance of sunshine, although those factors didn’t affect the rankings.
Significantly, though, for retirees’ aching bones, all of the places on the list had average annual temperatures of 51 degrees or higher.
-Naples Daily News
I was born and raised in a suburb right outside of Chicago, IL. I have always been around different types of businesses throughout my life. This is what made me pursue my career in real estate. I have decided to work my most familiar markets to me including Naples, Florida and Chicago, IL.