No longer an owner!!!!!!!!

[Miss Kitty]

You did take a chance, happyrenter, posting among a bunch of rabid beach-lovers (the SoWal kind are the worse ) saying that you're happy you sold! But you presented the facts very openly and fairly, and even left the door open with item # 5. So how can anyone not be glad for you?

I will admit that there's much that I agree with. We've found out over the three years we've owned our condo that it's not a money-making proposition. We're fortunate that we're in the position to wait out the bad economy but I will never speak ill of someone who is able to cut their losses, or even better, make a profit. Owning in SoWal is not for everybody. Whenever we sell, I can't say for sure that we will buy again and it's for a very greedy reason. We will never make enough profit to buy the luxury I'd like--yet, if we don't own, we can rent someone else's luxury. Not a bad proposition in my eyes.

It's a pity, though, that you felt tied down by your property. I thought similarly in the first year of ownership--that I couldn't vacation anywhere else when I already owned a vacation (like it was wasteful or something), but I've long since tossed that idea out. The world is too big and wonderful not to explore! Loving other places doesn't mean that you love SoWal less. In fact it's kind of comforting to come home to your own piece of the beach after having been elsewhere. There's nothing like appreciating what you have, and when you've reached that conclusion, you'll be ready to buy once more.

Why does Mermy always have the right words? This was brilliant...and it was YOUR story!

 

[ClintClint]

Congrats!! The pride of ownership, security from rent increases, and the forced savings aspects of home ownership need to be the rewards you seek. The fear of loss of your home in legal/divorce settlements may even alter behavior in a positive way. But believe me, the numbers just don't work out for ownership versus renting in the long run. I know that sounds like heresy in sowal and the real estate agents may disagree, but a careful analysis will show this to be true.
The continued price decreases, holding costs increases, and prospects for tax changes after our elections, will continue to put pressure on the ownership equation from strictly a numbers perspective.

 

[Miss Kitty]

Congrats!! The pride of ownership, security from rent increases, and the forced savings aspects of home ownership need to be the rewards you seek. The fear of loss of your home in legal/divorce settlements may even alter behavior in a positive way. But believe me, the numbers just don't work out for ownership versus renting in the long run. I know that sounds like heresy in sowal and the real estate agents may disagree, but a careful analysis will show this to be true.
The continued price decreases, holding costs increases, and prospects for tax changes after our elections, will continue to put pressure on the ownership equation from strictly a numbers perspective.

An honest question...can you really speak to everyone's situation? I did enjoy your post!

 

[ClintClint]

Thanks Miss Kitty!!! Heck no, I can't speak for everyone's situation. I strongly agree with most people that ownership is preferrable. But that is from a perspective of the benefits to a family unit and the development of stability in the family that the mortgage obligation creates.

 

[Here4Good]

Thanks Miss Kitty!!! Heck no, I can't speak for everyone's situation. I strongly agree with most people that ownership is preferrable. But that is from a perspective of the benefits to a family unit and the development of stability in the family that the mortgage obligation creates.

I think this was a second home which was sold, in this particular case. I am guessing that the person who started this thread (and who now probably deeply regrets it) owns their primary home.

 

[dunefrog]

Congrats!! The pride of ownership, security from rent increases, and the forced savings aspects of home ownership need to be the rewards you seek. The fear of loss of your home in legal/divorce settlements may even alter behavior in a positive way. But believe me, the numbers just don't work out for ownership versus renting in the long run. I know that sounds like heresy in sowal and the real estate agents may disagree, but a careful analysis will show this to be true.
The continued price decreases, holding costs increases, and prospects for tax changes after our elections, will continue to put pressure on the ownership equation from strictly a numbers perspective.

I have to respectfully disagree with you Skeet. What you say will be true for some, but not for all.

I agree that if you are talking about the annual cash inflow/outflow only, then a second home, even if rented, will most likely suck money out of your wallet every year.

But other factors like your mortgage interest rate, initial purchase price, property appreciatiation rate, and tax bracket/savings, can work together to give you a nice investment return and a great Sowal home to stay in on occasion.

For example, say you found a post-bubble pre-foreclosure property, bought with mortgage at a low interest rate, rents well through VRBO, property appreciates at the average rate of the last 20 years, and you are in a high tax bracket and need a tax shelter. Under these circumstances, rare as they may be, a second home can be a decent investment, returning over 10% (IRR) per year at resale.

My point is that a "careful analysis" depends on the situation and the assumptions built in to the analysis. For some people the numbers work, for others they won't.

 

[30ashopper]

I have to respectfully disagree with you Skeet. What you say will be true for some, but not for all.

I agree that if you are talking about the annual cash inflow/outflow only, then a second home, even if rented, will most likely suck money out of your wallet every year.

But other factors like your mortgage interest rate, initial purchase price, property appreciatiation rate, and tax bracket/savings, can work together to give you a nice investment return and a great Sowal home to stay in on occasion.

For example, say you found a post-bubble pre-foreclosure property, bought with mortgage at a low interest rate, rents well through VRBO, property appreciates at the average rate of the last 20 years, and you are in a high tax bracket and need a tax shelter. Under these circumstances, rare as they may be, a second home can be a decent investment, returning over 10% (IRR) per year at resale.

My point is that a "careful analysis" depends on the situation and the assumptions built in to the analysis. For some people the numbers work, for others they won't.

I've yet to find a vacation rental property like that in SoWal post the current bubble. Prices still seem too high, and may never come down far enough to make a positive rental investment financed through typical methods feasable. I think SoWal is going through a substantial change right now, the old business model which relied on appreciation is largely obsolete.

 

[dunefrog]

I've yet to find a vacation rental property like that in SoWal post the current bubble. Prices still seem too high, and may never come down far enough to make a positive rental investment financed through typical methods feasable. I think SoWal is going through a substantial change right now, the old business model which relied on appreciation is largely obsolete.

I agree with you 100% that buying a property that is a huge cash drain because you expect it to appreciate rapidly is a huge risk. This is gambling, not investing.

But I'm really curious. Are you saying that you don't think that within 5 years the appreciation rate will revert to the 20-year mean for beachfront property in the region. I'm thinking that mean is around 6% per year (values doubling every 12 years or so)? Is my 6% too high in your opinion? What would you suggest as an alternative?

Obviously we are currently seeing negative appreciation, playing catchup for all the silliness that took place from 2002-2005. Please correct me if I'm wrong, but I see a valuation drop of 30% from the highs, and this takes property values back to pre-bubble days. At some point intrinsic value kicks in and property values rise at a reasonable, historically-valid rate. The demand for beachfront properties, though dampened in the short-run by credit issues and economic problems, will continue to be strong over the long run, no?

 

[scooterbug44]

You own a vacation home instead of renting one for a variety of reasons, but IMO financial gain isn't one of them.

If you can make the $ work, more power to you, but I think most of the benefits are intangible. It's certainly much nicer to arrive to your bed, pj's, furniture, and decor, but you have to spend quite a bit of time there before it is "cheaper" than a rental a couple weeks a year.

 

[30ashopper]

I agree with you 100% that buying a property that is a huge cash drain because you expect it to appreciate rapidly is a huge risk. This is gambling, not investing.

But I'm really curious. Are you saying that you don't think that within 5 years the appreciation rate will revert to the 20-year mean for beachfront property in the region. I'm thinking that mean is around 6% per year (values doubling every 12 years or so)? Is my 6% too high in your opinion? What would you suggest as an alternative?

Obviously we are currently seeing negative appreciation, playing catchup for all the silliness that took place from 2002-2005. Please correct me if I'm wrong, but I see a valuation drop of 30% from the highs, and this takes property values back to pre-bubble days. At some point intrinsic value kicks in and property values rise at a reasonable, historically-valid rate. The demand for beachfront properties, though dampened in the short-run by credit issues and economic problems, will continue to be strong over the long run, no?

Well, you have to get 6% or more when you sell and you have to generate good rental income every year for the life time of the investment. Also the house can not experience any major damage from a storm. That's a lot of 'ifs'.

I guess it comes down to what you like to invest in and what ancillary gains you might get from your investment. For example, like a lot of folks down here, maybe you plan on retiring in the house at some point. This is the type of market I think we are back to now - you buy for reasons other than appreciation and income.

Myself I'm looking for steady, reliable income flow - I don't think vacation rentals are well qualified to provide that. You might be looking for something else.