What should you be thinking about as a real estate investor in Tampa this year?
At Hoffman Realty, we’ve been thinking a lot about what 2025 is going to look like in our market, and we have some trends that we want to share with you so you can best position your investments to succeed as the year marches on.
Here’s what we can tell you.
Reeling from a Busy 2024 Hurricane Season
Two major hurricanes swept through the Tampa area in 2024, and we’re starting the year with continued repairs and clean-up from those events. Hurricane Helene and Hurricane Milton left a lot of property damage throughout Tampa, and with the help of FEMA and local and state resources, homeowners have been making repairs and bringing their properties up to code.
The strength of these storms left people wanting stronger properties. That’s a huge trend that we’re expecting for 2025. When it comes to buying or renting, consumers are looking for windows and roofs and structures that can withstand high winds and potential floods. Those waterfront properties are no longer so desirable.
Insurance in Florida’s Real Estate Market
With these hurricanes came a lot of insurance claims, and we’re waiting to see if that volume of claim activity is going to drive up the cost of insurance a little bit.
For a while, insurance was actually getting easier. Laws were passed making it more difficult to sue an insurance company. A lot of fraud was exposed, and things were looking far more manageable. We expect the insurance situation to continue improving; there are more carriers moving into the state, and getting a good homeowners or landlord policy is much easier than it was a couple of years ago.
Last year, a handful of new insurers were approved to begin selling property and casualty insurance in Florida. These are: Ovation Home Insurance Exchange, Manatee Insurance Exchange, Condo Owners Reciprocal Exchange, Orange Insurance Exchange, Orion180 Select Insurance Company, Orion180 Insurance Company, Mainsail Insurance Company, and Tailrow Insurance Company.
Flood insurance will always be more expensive, and that’s another reason that buyers and investors are moving away from wanting waterfront properties and instead are thinking about minimizing risk.
Condos and Townhomes are Trending
Community associations are more popular, especially as owners and renters are more interested in low-maintenance properties. There’s also a much higher interest in condos and townhomes. Affording a single-family home in Tampa is not easy. Prices have increased rather dramatically, and the local market is not as affordable as it once was. The cost of entry is much higher than we’ve ever seen, and that’s what happens to be driving people towards condos and other attached spaces.
Relocation is Slowing
While there have been a lot of new residents to Tampa and to Florida over the last four or five years, that trend is slowing. We expect to have fewer people relocating to the area in 2025 than in previous years.
At Hoffman Realty, we found that in 2022 and 2023, we were mostly selling homes to people who were relocating from New England or the northern states. People were escaping cold winters, higher taxes, and rising prices.
This slowed in 2024, and it should continue to show into 2025. That’s because prices have risen so dramatically here, too. While we still have the benefit of warm weather and no state income tax, people are measuring those benefits against the risk of tropical storms and the cost of entry in Tampa and surrounding areas. There’s also the traffic and the congestion which has really become problematic in a number of neighborhoods, where the capacity to support a swelling population really struggles to meet the needs of those new residents.
Rental Values in Tampa
Rents have dropped for investors with rental properties in Tampa, and this definitely stings a bit. There’s a lot more inventory on the market, and that’s making the pricing more competitive when it comes to quality rental homes. We have seen a lot of new construction apartments come up all over the market. These are large companies, able to offer specials and lower deposits. It’s a different risk profile than the average investor has. Apartment communities can take risks that most individual investors cannot. Charging a $200 security deposit or lowering credit standards at application time is easier for them.
But as an independent landlord, you cannot afford a risky tenant. You cannot afford to not have a full security deposit. If your tenant disappears or causes property damage, you don’t have dozens of other units to cover you while you conduct repairs and make things right.
In 2025, we don’t necessarily expect rents to continue declining. There will be a stabilization and perhaps even a slight increase, depending on the economy and the demand.
Avoid Short Term Rentals
We know these were popular for a while, and it’s definitely attractive when you begin to think about the per-night rate that you can earn. But you have to furnish and maintain these properties and keeping them occupied year-round can be time-consuming and difficult. While the short-term furnished rentals were popular during and right after COVID, they’re less appealing to investors, now. Those long term rentals are going to make more money for you over time.
These are some of the biggest and most unavoidable trends that we see for the Tampa real estate market in 2025. There may be some surprises that we’re not prepared for. We’re watching what the interest rates do, because those impact mortgage rates and the affordability of buying homes. We’re working to make people aware of the Community Development District (CDD) fees that are showing up more and more in the market. And, we’re watching to see what happens with demand, new construction, and the shift from accommodating short-term and vacation guests to looking for stable, long-term residents.
The market trends we’re talking about will impact each investor a little bit differently. Your approach to 2025 depends on your investment goals, your portfolio, and your plans for the future.
We’d love to talk about those things with you. Please contact us at Hoffman Realty.