Exploring the Opportunities in West Palm Beach Real Estate: A Guide for Potential Investors
Table of Contents:
UNDERSTANDING THE WEST PALM BEACH REAL ESTATE MARKET
- Area Overview
- Common Misconceptions
- What About Rentals?
THE COST OF INVESTING IN WEST PALM BEACH
- Average Price
- Will Prices Drop?
- What Does This Mean For Short-Term Rental Investors?
WHAT ARE THE RULES FOR INVESTING IN WEST PALM SPRINGS, FL?
- What are the Housing Types?
- Risks and Rewards of Investing in a Short-Term Rental Property
HOW DO I GET STARTED?
West Palm Beach, Florida is a colorful, lively and popular hub for work and play on the southern east coast of the United States – and how you feel about it might depend on your reasons for visiting. A high school or college student might hear “West Palm Beach” and envision a spring break destination. A working artist might hear “West Palm Beach” and see a vibrant community of up-and-coming artisans. For those who have a desire to invest in homes for sale, however, “West Palm Beach” should be a name that stands out in a special way.
Between an innovative workforce and a demand for tourist housing that lasts all year long, West Palm Beach is becoming a very competitive, attractive place for investors. Palm Beach County has always been a hotspot for guests, but in recent years, the number of visitors has skyrocketed. So has the demand for short-term housing.
As a potential investor, location matters. It’s important to feel secure in the city that you choose to enter as a homeowner. West Palm Beach is a fantastic fit for many first-time renters. Keep reading to see if it might be a good fit for you.
UNDERSTANDING THE WEST PALM BEACH REAL ESTATE MARKET
West Palm Beach is located on the southeastern tip of Florida, about an hour north of Fort Lauderdale and three hours southeast of Orlando. It’s a town with “waterfront appeal” – many of the town’s hotels and apartments are built within walking distance of its famous beaches.
According to the World Population Review, there are 117,500 people living in West Palm Beach, Florida in 2023. Since the city covers about 58 miles, that gives it a population density of 2,184 people per square mile. It’s less densely populated than New York, but just as big of a draw for many people looking to have a good time.
The US Census Bureau lists the median family income in Palm Beach County as $68,874, which is almost $30,000 higher than the national average.
Florida is full of stereotypes, and West Palm Beach is no exception. Between crazy “Florida Man” headlines, jokes about snowbirds moving south, and the spring break antics of high school and college students, this city is often dismissed as a place where the extremes go to play golf, retire, or party.
However, that is not the full picture. West Palm Beach is home to luxurious tourist locations, historic points of interest, a growing space for working artists, and even long-term residential neighborhoods. The city is also home to beautifully-preserved old mansions, some right on the waterfront, that have been carefully preserved.
Certain regions, such as the northwestern district of West Palm Beach, are higher in crime and are not ideal for investors to choose. However, some of the city’s most appealing areas are neighborhoods that give guests access to the beaches, downtown, and parts of the city’s rich history.
Here are a few of the most popular neighborhoods in West Palm Beach:
- Flamingo Park. This neighborhood is known for beautiful architecture and its great location. Residents of Flamingo Park are a short drive away from downtown West Palm Beach (a hotspot for shopping, eating out, and nightlife) and the beaches.
- El Cid. A highly affluent area, homes in the El Cid community often sell in the millions. This district is known for great schools, comfortable family life, impressive architecture, and its proximity to Flamingo Park.
- Southend. This neighborhood, also nicknamed SOSO, is a versatile spot for homeowners. It boasts everything from modestly priced single family homes to opulent waterfront mansions.
- Prospect Park. This is one of the most historic neighborhoods in West Palm Beach, Florida. Properties are not only beautiful, but often include larger plots of land than other parts of West Palm Beach County. It is less densely populated, which means houses often sell at higher prices.
- Lands of the President. For avid golfers moving to West Palm Beach, this neighborhood provides privacy and great access to some of the region’s finest golf courses. It is a gated community with a great reputation. It also boasts a variety of housing options, including high rises, single family homes, and condos.
- Northwood. This neighborhood is a hybrid of history, urban progress, nightlife, and quiet areas. It is about 100 years old and has similar “bones” to Flamingo Park and El Cid, but it offers an array of house types for buyers in the $400,000 to $3,000,000 zones.
- Grandview Heights. For buyers looking for low-price areas with high return, Grandview Heights might be the most appealing neighborhood on this list. In 1999, Grandview Heights was admitted to the National Register of Historic Places. It is close to Downtown West Palm Beach and the waterfront, and homes begin in the $300,000s. Price factors can include sqft and distance to amenities.
What About Rentals?
Since tourists visit Palm Beach County for many reasons, the most successful type of investment property in any West Palm Beach neighborhood is a short-term rental. The city has “peak seasons” for guests who want to visit the beach, but it also boasts many tourist attractions that draw visitors all year long.
For instance, the beaches tend to attract tourists in the spring and summer (April through September). However, downtown West Palm Beach is home to nationally-ranked art museums, zoos, Palm Beach gardens, concert venues, and nightclubs – so there are lots of reasons for people of all ages to visit in the “off seasons” as well.
Real estate in West Palm Beach ranges from reasonably-priced to high society, meaning that investors with many different budgets can be successful there. And short-term rentals in a neighborhood with a heavy tourist component give the homeowner unique control over their calendar, rental rates, and relationships with their tenants.
Many of the guests who need short-term rentals are in Florida for vacations, but not every guest wants the kind of vacation that we stereotypically associate with southeast Florida. Because of that rental properties can find great success in almost any part of West Palm Beach.
THE COST OF INVESTING IN WEST PALM BEACH
On average, a home in West Palm Beach costs about $400,000. Again, since the city has everything from modest condos and single-family homes to elaborate historic mansions, the median tends to settle a little higher than the U.S. average.
The cost of living in West Palm Beach is also high – almost 90 percent higher than living in the rest of the state. For that reason, it is a very popular place to visit, but not often a place where people choose to live long-term. That makes short-term rentals a very strong presence in the West Palm Beach housing market.
Housing is also a hot commodity in West Palm Beach at the moment – and that does not seem to be changing any time soon. A February 2023 article stated that Palm Beach County homes went up by almost 25 percent in value this year, and that trend looks like it will continue. West Palm Beach in particular saw a rise in prices and decline in the number of houses sold.
Will Prices Drop?
Palm Beach real estate is expensive because it’s an attractive place to live and vacation, but doesn’t have enough housing to meet demand. The island is full of activity, but it’s quite small. That means that many people want to stay, but there are very few places to put them. This, in turn, hikes up the cost of purchasing a house.
According to an article published in February 2023, long-term home sales in Palm Beach County have declined in the past year. The number of homes sold in January 2023 dropped over 30 percent, compared to sales in January 2022. In that same window of time, the average cost of a house in Palm Beach County increased by about 30 percent in 2023.
The current metrics suggest that the average cost of real estate in Palm Beach County will not decline any time soon. The West Palm Beach region is experiencing many of the same pains that we see in the nation-wide housing market.
What Does This Mean For Short-Term Rental Investors?
The last year in West Palm Beach has not been easy for many homeowners looking to sell. However, for someone looking to enter the short-term rental arena, the current climate is actually a great situation. Palm Beach welcomed over 9 million tourists in 2023 – a record breaking year for the area. In other words, the long-term housing market has suffered, but more people than ever before are coming to West Palm Beach for short-term vacation stays.
The short-term investor has a strong upper hand in the West Palm Beach real estate market. Purchasing a home for short-term rental is not only a strong business move, but a fairly low-risk move. As West Palm Beach becomes a more and more attractive tourist destination, the need for short-term housing will only grow. Short-term rentals not only provide security for the investor, but they meet an ongoing need for the city’s tourist community – a population that literally keeps the rest of the city in business.
Where Should I Purchase My Short-Term Rental Property?
The list earlier in this article is not exhaustive, but it does target seven West Palm Beach hotspots that seem to draw visitors all year long. Investors should consider location first. If your plan is to target beach-bound families, a short-term rental right on the island is probably a smart place to land. If you are seeking to attract young adults with an interest in nightlife, something closer to Flamingo Park or Grandview Heights might be wise – both of these areas are short driving distances from Downtown West Palm Beach and the waterfront.
Here are a few other factors to consider when choosing the location of your investment property:
- Crime Rates and Safety. The northwest district of West Palm Beach has the highest crime rate. Consider looking for an investment property closer to Downtown West Palm Beach or the beaches on its east coast. You might also want to think about the driving distance to other popular South Florida spots, like Riviera Beach, Lake Park, Wellington, Miami, Boynton Beach, Royal Palm Beach or Fort Lauderdale.
- Public Transportation and Accessibility. If your property is on the island with a waterfront view, the renter probably isn’t too concerned about travel. However, many of West Palm Beach’s main draws do require a vehicle to reach. Does your short-term rental come with some form of transportation? If not, is it close to a business that rents bikes or cars? Is there a bus station nearby? You can also consider proximity to amenities like a country club.
- Local Economy and Job Market. Many of the short-term jobs available in West Palm Beach are tourist-driven. Places like hotels, restaurants, and entertainment centers get especially busy in the summer months. Research the job market in your investment property’s area. It will give you many clues about wise places to find tenants.
- Short Term Rental Considerations. If you are going to invest in a short-term rental, it is very important to do your homework. Make sure you know the local government’s rules and regulations regarding realty. Realtors can be a huge help on this front!
WHAT ARE THE RULES FOR INVESTING IN WEST PALM SPRINGS, FL?
All short-term rental properties are subject to a local business tax, which starts with a rental license application. More information about the tax and license can be found on West Palm Beach’s website.
There are also guidelines for the property’s interior and exterior that must be obeyed for the property to keep its license. Most of these regulations are to protect the health and safety of a short-term tenant. For instance, every window needs to have a window screen, and the property cannot show signs of an insect or rodent problem.
In some cases, occupancy limits and vehicle limits might also apply to homes for sale. Those will vary based on the type of home and the nature of the rental property. Investors also need to be savvy when it comes to local rules, such as HOA agreements, that might impact their property in some way.
What are the Housing Types?
Based on West Palm Beach guidelines, there are three main types of residences that can be registered as short-term rentals with licenses.
The first kind is an owner-occupied residence. This is a single-family home, multi-family home, townhouse or duplex that is shared by the owner and the short-term tenant. This can happen two ways, for FL real estate: the owner can live elsewhere, but claim ownership and residency of the property for some of the year, or the short-term tenant can live on property while the owner is home. For the second situation to work, the owner must prove that the tenant has one full bedroom as private space and at least one shared bathroom.
The second kind of housing that qualifies is a non-owner occupied residence. This is a single-family home or townhome that the owner does not live in and has no residential claim on. The short-term tenant has access to the full unit, and there are no other parties present while the short-term tenant is living there.
The third category is non-owner occupied multi-family. This kind of property is typically an apartment or smaller unit in a multi-family building. The owner again does not have residency, and there is never a scenario where the tenant and owner would live there at the same time. The tenant has full access to the entire unit during his or her stay.
Risks and Rewards of Investing in a Short-Term Rental Property
Every investment comes with its challenges and rewards. As a disclaimer, here are the most common risks that an investor might face when purchasing FL real estate in West Palm Beach:
- Market fluctuations and changes in demand. The past two years of housing, nationwide, have been volatile. Market trends can change on a dime. What favors the buyer today might favor the seller tomorrow, and vice versa. Crisis can also impact tourism. A great recent example of that is the 2020 pandemic.
- Economic Downturns or Recessions. The most recent example of this would be the Recession of 2008 – a situation that housing played a key part in. If the economy does poorly, one of the first things to go for many households is vacation. Tourist towns like West Palm Beach tend to suffer when the overall economy suffers.
- Maintenance and Repair Costs. Every house requires a certain level of upkeep, but short-term rentals often need it more because so many people are coming and going. It’s a space that gets used intensely in short bursts of time. Also, you need to consider the potential for natural disasters in a place like southeastern Florida. If a hurricane blows through, that could result in a costly repair bill for your new construction.
- Changes in Zoning or Property Laws. Applications and renewals often have fees attached to them. If Palm Beach County decides to update its bylaws, that could result in new charges for realty. The township can also make changes that impact a short-term renter’s clientele. For instance, if a law is passed that changes the capacity limit on a single-family home of a certain square feet, that could impact who is interested in your property and how much you charge them to stay.
Investing can also be a rewarding experience. Here are a few ways that a short-term rental owner might benefit from deciding to enter the market:
- Potential for Appreciation and High Return. Real estate, even in a bad year, is often a good investment. It holds value and appreciates with time. The selling price down the road is almost always higher than what you paid for it.
- Ability to Generate Rental Income. Again, West Palm Beach is a tourist area. Most short-term renters are prepared to pay a high price for a good experience. If your property is in a strategic location and caters to a vacation mindset, you can more or less name your price and find success. Once you have made your initial purchase, the property is a hard asset.
- Diversification of Investment Portfolio. Real estate is an attractive asset to have in your corner. Again, there will always be some risk involved, but there is also a pleasantly high change that it will be of economic benefit to you.
- Ability to Enjoy the Area’s Lifestyle and Amenities. Remember, it’s your property first – even if you choose to rent it out for most of the year! You now own an attractive home in a prime location. For short-term rental property owners in West Palm Beach, that means you get to enjoy the beaches, shopping, nightlife and culture without doing what your clients do: paying to stay. In fact, the rental business funds your own visits to West Palm Beach!
HOW DO I GET STARTED?
For many investors, the first step is to find a trustworthy real estate agent or brokerage. There may be Palm Beach homes for sale that you don’t know how to find. Get someone in your corner who knows the area, understands what properties are worth, knows where to find current real estate listings, and will walk you through the process with honesty and support. Rove Travel has great resources available to help Florida investors get started.
Make sure you understand your financing options. Make sure you understand the difference between conventional, private, hard money and government-backed loans. Realtors will be able to walk you through the differences if you don’t know already.
Lastly, you need to find someone who can help you strategize. Consider attending open houses in the area or taking a virtual tour of new listings in the neighborhood that interests you. Be sure to consider the pros and cons of buying a new construction versus an older property, and who knows the ins and outs of consumer protection. Rove Travel has a history of helping investors navigate short-term rental ownership in Florida. Get someone in your corner who can help you network, research, and make smart professional decisions in the Palm Beach county Region.
Takeaways for Investors
West Palm Beach is an exciting area with strong appeal. It’s also a great fit for investors who want to join the ever-growing ranks of short-term property rentals. If you’re ready to take your first steps towards owning a short term rental in West Palm Beach, Rove Travel is here to help. Check us out to get started today.