Opinions requested regarding SoWal real estate pricing...

Alas, but once again this is based on an assumption to support your point of view and you aren't "thinking outside the box" . Your are assuming that the buyer would be taking out a 30 year mortgage. If, after researching and doing one's homework, the buyer feels confidant that the property will stagnate for a few years (and remember, not one person here knows what is going to happen), there are options to accomodate for that out there (differnet types of financing, more cash invested (again, I'm not judging to say this is good or bad - if the buyer thinks it is a good idea, it's a good idea), etc.).

That is what is frustrating, a lot of pessimists here have no peripheral perspective. No one sitaution is the same - there are ALWAYS ways to make things work in every market, up and down and why some win and some lose in this game.

Again, just my opinion.

It isn't? :idontno: Tell that to the sellers who profitted around $1 million dollars on a $4.1M investment, of which I am sure wasn't paid for with 100% cash, on the sale of the property at 260 Blue Mtn Rd. It was purchased in April 05 while the market was still high in price. It recently sold in Aug 06, in this "down market" to which you guys keep referring. Let's say for our example that they put 10% down on $4 Million ($400,000). They paid interest on the balance of $3.6 million for 1.5 years at 6% per year, equalling $324,000. Add that to their costs of downpayment and you have a total cash out of pocket of $724,000. Oops, better throw in taxes and insurance. Assessed value being at $1.56 million would bring the taxes to around $15,000. Insurance? I have not idea the costs. Lets say its a crazy number of $50,000. So when we add those numbers to that total cash out of pocket in the investment, we get a total of $789,000. To receive the $1,000,000 return on the investment of $789,000, you get a before tax return on investment of 126%. Divide that by 1.5 years and you receive an avg annualized rate of return of 84%. Show me that CD that pays that.

...and this sale is in a "down market" for a property which was originally purchased in the peak.

There are plenty of example on both sides. My point is that if you shop, you can find a property which may work for you today.

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You are able to deduct up to $25k of rental losses against normal taxable income with a Schedule E. Your are not limited to deducting $25k of expenses against your total rental revenue. Please see your CPA to verify.

Rental Agencies - Personal experience. I have used 3 different rental agencies. Marketing, renting, and maintaining multiple rental properties on your own is much easier and lot less expensive. Please talk to other rental home owners about there experiences.

Realism is much different than pessimism.

Beach Dad,

Sorry this thread has taken on a life of its own. The best 2 pieces of advice I ever received in life.

1. Surround yourself with good people.

2. Buy when no one else wants to buy , sell when no on else wants to sell.


I am sure you will make the best decision for you and your family, see you at the beach.

You are referring to the sale of land to the very desperate owners of Redfish Village that had to get a plot of land in order to get a beach access for all the condos they sold (see separate thread). I can quote 15 recent severe losses on sale to every gain on a recent purchase that you can quote. You should know better as a realtor that the market IS falling and falling hard. For you as a realtor to state anything to the contrary is a shame. Are you actually claiming that we are not in a down market??:confused: :confused: :confused:

Your math is bad too. In order to calculate return on investment, you need to compare the original cash outlay to the final cash inflow (you also need to consider the time value effect of cash outlays in between as for property taxes, but that calculation is too complex for this board).

So, here is the proper analysis. If they sold at $5.045 million, they netted $4.742 after a normal 6% commission. Then, they will pay from $110k to $150k in capital gains taxes on the sale. Subtract from that the after tax interest expense they paid of about $210k, the property taxes of $15k, closing costs of say 1.5% on the original purchase or about $60k, minor closing costs on the sale of say $15k. This will net the seller a profit of about $200k at closing (again ignoring the time value of money on the cash outflows between the purchase and sale dates). The annualized return on investment is around 30% (actually less if you do the real math including the time value of money on all of the other cash outflows between the purchase and sale date). Certainly a great return, but nowhere near where your interesting calculations went. Plus, lets call a spade a spade, these people got extremely lucky. A desperate buyer paid a lot of money to get a beachfront lot that they needed to try to placate a large number of potentially angry condo purchasers.

This situation is an anamoly and you know it as a real estate agent. You mention that there are lots of similar examples of great returns on property bought a the peak and sold during the bad downturn (which you imply doesn't really exist). There are 20, 30, 40 or more losses to go with every (this might be the only one as far as I can tell) gain that occurred on property bought at the peak in 2005 and sold mid to late 2006. I have seen losses of up to 45% on some transactions (and that return doesn't include carrying costs, closing costs, property taxes, etc).

Fisher,

Thanks for your two bit advice; but I have great lawyer, a great CPA, and awesome broker. Maybe you do not know as much as you claim to. My only advice on this board is to get advice from a professional.


FYI, see below.


If you or your spouse actively participated in a passive rental real estate activity, you can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.

If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income.

The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. See Phaseout rule, later.

Example ? Deducting Passive Income and Losses
Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and less than $100,000 of modified adjusted gross income. She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages).

:roll: I'm living out my lifelong dream of relocating my family here from Tx June 1st and am working through the pros and cons of the current market conditions. I'd love to hear from some of you regarding an objective view of pricing. I'll admit my mindset has become very jaded due to a number of factors. Side note: If you live in Rosemary Beach, don't even bother reading further, you are either retired, independently wealthy, or mortgaged out the wazoo and this lengthy post will bore you.

I'll preface this by saying I don't think I've ever seen so many real estate agents in one particular locale than I've seen here. And with all due respect, I don't expect any one of them to voice anything but optimism about how pricing and demand is right on the verge of taking off. (I'm very skeptical due to the fact that I read that there are over 11,000 listings right now along the Emerald Coast - supply is considerably higher than demand.)

I want someone to tell me what they would tell their son, friend, or business aquaintance they would do, if they were in my shoes. Not try to sell me on the area, just talk honestly about how to get the best value for my housing dollar.

That being said, I think that I am a great prospect for a home purchase. My income is above average, my credit excellent, and my job allows me to live anywhere along the Panhandle. My preference is to live as close to water as possible (and know that waterfront is out of the question). I don't want to have to drive across the causeway or Mid-bay bridge to get to the beach. Bluewater Bay is nice, but not my cup of tea.

However, it now seems that every mudhole with a trailer in this area has been listed at $300K. And I've been coming down here for 40+ years and I've never seen that kind of seller optimism. The number of homes in the $300K to $400K range is disappointing. And my view is that if I'm going to spend $500K for a 3 bedroom 2+ bath home here, I'll definitely build what I want, not buy a 70's home that somebody is trying to flip for a big profit because their agent has convinced them they can get it.

Am I the only guy in the grit eating world that thinks that a price correction is still yet to come? I understand that there is a lot of money coming into this area, but with homeowner's coverage and property taxes rising, I've got to believe that there are a number of folks in Atlanta, Bham, Memphis, etc, who have overextended themselves. If your taxes and insurance are $700/month, that can seriously impact your monthly mortgage note (escrow).

Am I nuts in my thinking? Is this California? I hope this area has not become unaffordable for the average family fortunate enough to live in this incredibly beautiful area. I'm seriously considering renting for a year to watch and wait. I'd love to hear what you would do if you were in my shoes. Thanks for allowing me to type this novel.

No-one here has a crystal ball despite many people thinking they do. No-one can predict to what degree prices may or may not fall or if they will go up or stay stable - do your research, stay informed and enjoy Sowal regardless of whether you chose to rent or buy!

Not a problem. Nothing wrong with a little spirited discussion. Hey, we are all passionate about something. I guess the key to debating is to remember to attack issues, not people. And that goes for all of us, particularly on message boards. As I used to tell my sales reps, don't use email (or posts) as a club to beat people over the head. Use discernment in what you say.

As mentioned earlier, I really appreciate the feedback. And I thank all who chose to email me directly and to reply.

Can we all agree that living here is awesome? Think I'll send my friends a postcard with some white sand taped to it. 🙂

Not a problem. Nothing wrong with a little spirited discussion. Hey, we are all passionate about something. I guess the key to debating is to remember to attack issues, not people. And that goes for all of us, particularly on message boards. As I used to tell my sales reps, don't use email (or posts) as a club to beat people over the head. Use discernment in what you say.

As mentioned earlier, I really appreciate the feedback. And I thank all who chose to email me directly and to reply.

Can we all agree that living here is awesome? Think I'll send my friends a postcard with some white sand taped to it. 🙂

The key in your quote is actively participated in the passive rental income activity. In my example, I mention using a real estate manager to handle the renting of my property. In that case, the losses are not allowed. If in your example, you are totally mananging the rental property activity and not using an agent, then you can deduct up to $25k. If you use a management company to handle your rentals as the majority of folks do, then you do not qualify for the exemption.