Ocala Florida, located in Marion County, has gained a great deal of attention in the residential real estate investor community over the last few years. Most investor’s stumble on the Ocala market when looking for investment opportunities in the state of Florida. Most out-of-state investors are familiar with the larger markets; Miami, Orlando, Tampa, Jacksonville, etc, but very few have even heard of Ocala. This makes sense, as Ocala is a small metro when compared to these larger metros. However, as investors evaluate the numbers in the larger markets, they find that it is challenging to achieve the returns they seek as home prices in these areas have appreciated faster than rental rates and this squeezes cash flow and yields. This leads the investor to seek out markets like Ocala. If this describes the process through which you came to know about Ocala, this article will help you know more about Ocala and the fundamentals driving investor interest.
Ocala is located in an area known as North Central Florida. Ocala is north east of Tampa, north west of Orlando, and south west of Jacksonville. The city is approximately a 90 minute drive from either Orlando or Tampa. When flying to or from Ocala, most people fly-in to either Orlando or Tampa airports.
I-75, a major east coast artery, runs along Ocala’s western border. The Florida Turnpike, which runs from northwest to southeast, originates just south of Ocala and effectively connects Miami to the rest of the country. As we will discuss in more detail later. This central location and unique access to both I-75 and the Florida Turnpike are some of the main reasons for Ocala’s recent explosive growth and make it a premium distribution location for manufacturers and retailers.
Ocala’s population within the city itself, as of 2021, is just under 62,000, with just over 365,000 residents in the greater metro area. The Ocala metro is one of the fastest growing areas in the country, ranking number 6 in the nation on U-Haul’s 2020 Growth Cities Rankings (See Here). The median age is 47, however, this is somewhat deceptive. The median age is heavily skewed by the large number of people over the age of 65 living in one of Ocala’s many active adult communities. The age segment experiencing the largest growth is people between 30 and 39 years of age, growing over 12% since 2016. Current estimates are that 120 people a week are moving to Marion County. That will mean over 6,000 new residents in the area just this year.
Ocala is one of only 6 metros of the 400 nationwide that had positive job growth in 2020. Ocala’s job growth rate is higher than anywhere in the state of Florida. In the time since the Great Recession, Ocala has broadly diversified its employment base. Since 2011, Ocala has added over 7,000 jobs in the area of Trade, Transportation and Utilities. Approximately 5,000 education and health services jobs, with 18,000 jobs added overall. The current labor force in Ocala/Marion County is 108,000. Median household income in the area is just under $46,000 per year. With low property taxes and no state income tax, cost of living is very low compared to national and statewide averages.
The biggest driver of job growth in the Ocala/Marion County area is due to an increase in the number of distribution facilities added in the last 5 years. This includes Fedex – (430,000 square feet, employing 350 people). Chewy (600,000 square feet, $40 million, employing 300 people). AutoZone (450,000 square feet, employing 350 people). Amazon (617,000 square feet, $50 million, 165 jobs). Dollar Tree (total $200 million+, total of 700 jobs phase 1 – 500,000 square feet, phase 2 – at least 1 million square feet).
The Ocala Chamber of Commerce recently announced plans for another 5 million square feet of warehouse space within the next year (source article). Why? What is the attraction to Ocala for these businesses? From the article – “Marion County is a prime location for these two employment sectors (distribution and manufacturing) because of its close proximity to major highways, including Interstate 75, the Florida Turnpike and U.S. 301, allowing for quick movement of goods statewide”
Ocala boasts one of the lowest unemployment rates in the state of Florida at 5.5% as of March 2021.
Ocala – Horse Capital of the World
You read that correctly, Ocala claims the title of Horse Capital of the World. The equine industry brings over $2.6 billion annually to the Ocala area. The following is an excerpt from the Ocala Chamber of Commerce thehorsecapital.com website:
Florida’s Thoroughbred farms and training centers have produced 50 National Champions, 6 Kentucky Derby winners, 7 Preakness Stakes winners, 6 Belmont Stakes winners, 26 Breeders’ Cup champions, and 6 Horses of the Year. Thoroughbred breeding and training farms cover more than 70,000 acres of Florida’s prime, mineral-rich pastures. Florida is home to some 600 Thoroughbred farms and training centers, with more than 75 percent of these located near Ocala in Marion County. Ocala is also home to the Ocala Breeders’ Sales Company, which stages major bloodstock auctions throughout the year. OBS also operates an ITW simulcasting theater and each March hosts the annual Week of Champions races. The concentration of the Thoroughbred breeding and training industry in the Ocala/Marion County area is strongly supported by a network of equine services, such as veterinarians, feed and tack retailers, blacksmiths, equine dentists, and major horse transportation companies. All these factors make Ocala one of only four major Thoroughbred breeding and training centers in the world.
World Equestrian Center
Completed in late 2020, the World Equestrian Center (WEC) is a showcase. Describing it as an equestrian facility doesn’t do it justice. WEC is the largest equestrian complex in the United States and features a horse competition center with 22 rings and four indoor fully climate controlled rings. There are also 4 restaurants and a hotel on site. WEC will host events like weddings, graduations, and large meetings. The World Equestrian Center raises Ocala’s already high profile with the equestrian community, attracting additional wealth to the area. Further, WEC will add jobs and demand for housing in the area around it, in North West Marion County.
Real Estate Market Stats
As mentioned in the beginning of this article, real estate investors either know of or are quickly learning about the Ocala/Marion County area due to the strong locational appeal. The forecasted growth and investment execution. As of February 2021, the median home price in Ocala was $188,000, a 9% increase from the prior year. The bigger headline number is the inventory. In a balanced market, active listings would exceed 3,000 listings. Current active inventory is 884 homes, or just 1.6 months worth based on current demand.
The rental market is equally as active, with rental prices increasing significantly, as represented on the graph below, pulled from zumper.com (source link):
According to Zumper, an online rental aggregation tool, the median price for a 3 bedroom home in Marion county is $1,450, representing a 12% increase year over year and close to a 50% increase over the last 5 years.
Based on these numbers (median home price of $188,000 and median rental price of $1,450) the gross yield on a 3 bedroom home in Ocala Florida is 9%, with estimated net yield of 6%. With a traditional 30 year mortgage and 20% down, your cash flows would be approximately $200 per month.
The current market is ridiculously competitive. Like many parts of the country, properties listed in Ocala are selling well above list price with multiple offers within days of a listing going active. It is a challenging environment for investors to compete as you are competing against owner-occupants who do not have to be as rational in their pricing decisions. Investors interested in buying in Ocala will have to be patient and disciplined to avoid making a bad buying decision in this frenzied market.
Ocala Florida offers real estate investors a lower cost of entry to the competitive Florida real estate market with attractive yields and cash flow. The employment base is stable and growing and housing supply is limited and not currently keeping up with demand. This will continue to put upward pressure on home values and rents, and drive new construction, which point to continued success for real estate investors.