Any investment scenarios that make sense?

I'm curious, in this market, are there any investment opportunities along 30-A that would at least break even in a rental scenario? I recall the days when people let vacation renters buy their condos/homes for them and even made money. But during the craze I heard investors comment that appreciation was the new game, which obviously hasn't worked out. Can you actually buy a condo, townhome or beach home at today's prices that would break even with rental demand offset by expenses? If so, what properties fall into that category -- gulf-front condos, condos/townhomes/homes in planned communities with deeded access and amenities, private beach homes?

At the current prices, with falling values, and with increasing costs, I'd say no.

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The days are long gone where breaking even or better was the standard. But there are now some deals out there where it can happen.

The days are long gone where breaking even or better was the standard. But there are now some deals out there where it can happen.

I think anyone can "make it happen" on paper...but there are a bunch of folks on here, even those who've bought before the frenzy, find that with the increasing costs and increased competition--it just ain't so.

The only way I can imagine it working would be for someone to purchase a multiple dwelling (say 8 units)in good shape at a foreclosure price and renting out the units to full-time service workers. Vacation/full time rental condos or single units are not going to break even at these prices.

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The only way to make it break even or make money at this point is to inherite it from Granny.

I think anyone can "make it happen" on paper...but there are a bunch of folks on here, even those who've bought before the frenzy, find that with the increasing costs and increased competition--it just ain't so.

The only way I can imagine it working would be for someone to purchase a multiple dwelling (say 8 units)in good shape at a foreclosure price and renting out the units to full-time service workers. Vacation/full time rental condos or single units are not going to break even at these prices.

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I am seeing condos at 50% off the peak. I suppose it depends on your loan. Remember substantial downpayments?

I'm curious, in this market, are there any investment opportunities along 30-A that would at least break even in a rental scenario? I recall the days when people let vacation renters buy their condos/homes for them and even made money. But during the craze I heard investors comment that appreciation was the new game, which obviously hasn't worked out. Can you actually buy a condo, townhome or beach home at today's prices that would break even with rental demand offset by expenses? If so, what properties fall into that category -- gulf-front condos, condos/townhomes/homes in planned communities with deeded access and amenities, private beach homes?

Breaking even is possible I think. Big returns don't look too plausible. I came into this hoping a return of 10% or more was possible on a $500,000.00 vacation rental house, but so far I'm just not seeing it. Long term rentals on single family homes in nice communities like Sandestin look more promising. The big problem with vacation rentals here I think is the short rental season - I see a lot of property sitting idle for months in looking at some of the management company's web sites.

I am seeing condos at 50% off the peak. I suppose it depends on your loan. Remember substantial downpayments?

Problem is at the "peak" these properties were 100% overpriced.

With substantial down payments you've gotta include the missed opportunity costs of the money you put down. That $20,000 one puts down on a property is taken away from some other investment opportunity...add to that the fact that's it is being invested in a depreciating asset and it can be lost altogether in the coming months.

The trick to making money on real estate is to use none of your own money; buy into an underpriced market that is on a tear; and having the wherewithal to take your profits off the table....we all know that boat has sailed. That being said--the way to really lose money in real estate is to do the opposite.

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Check out the Watersound West Beach VRBO

I'm curious, in this market, are there any investment opportunities along 30-A that would at least break even in a rental scenario? I recall the days when people let vacation renters buy their condos/homes for them and even made money. But during the craze I heard investors comment that appreciation was the new game, which obviously hasn't worked out. Can you actually buy a condo, townhome or beach home at today's prices that would break even with rental demand offset by expenses? If so, what properties fall into that category -- gulf-front condos, condos/townhomes/homes in planned communities with deeded access and amenities, private beach homes?

I know I've talked about it many times before, but I think you should look at the Watersound West Beach house that is VRBO on the pool. JOE gave us a great deal on the lot with approved plans and Beach Club Membership. We built and sold the house quick with numerous buyers in line. We sold it to a second home party who has it booked solid through VRBO. Check their rates and bookings and compare it to our sales price of 750,000.

That's 1 transaction that I think is real worthwhile and even in the down market Bank of America has the appraisal at a little over 900,000. I don't think I'm breaking confidence as this is all information in the public domain.

Breaking even is possible I think. Big returns don't look too plausible. I came into this hoping a return of 10% or more was possible on a $500,000.00 vacation rental house, but so far I'm just not seeing it. Long term rentals on single family homes in nice communities like Sandestin look more promising. The big problem with vacation rentals here I think is the short rental season - I see a lot of property sitting idle for months in looking at some of the management company's web sites.

I think the only ones who should be buying into the market are folks who love the area and want to reserve their piece of the beach. This is not a suburban Dallas rental house -- cash flow is not the main reason to buy here. I have learned firsthand that even a decent rental season results in very little after all is factored in. Increased supply has actually driven many rates down. It is what it is.

If you really want to buy, then buy! Don't invest, be an end user. If you don't want it bad enough, then buy a suburban Dallas rental house and become a landlord.

If investments here (in the Internet age where everybody knows everything about everything) were cash flow positive, EVERYBODY WOULD BE BUYING HERE! If everyone wanted to buy here, then prices would go up. Prices are always going to be high for precious coastal real estate.

We have our piece of the beach and are very happy about it. Some people value different things. Those people should not buy.

And hey, if the only people who buy are end users, values are bound to go up, because no one will want to sell!

The intangibles of living at the beach are the only reasons to buy now. Until the income, replacement, and comparable sales approaches come into some alignment, informed buyers are going to be wary. If you want to rent out your property, you may be able to get a premium if you offer a lease-option to purchase. Be sure to build in the option price the accumulated loss (after tax) from the rental vs break even expenses. If you're able to build in some appreciation, that would be gravy. Rarely do renters ever exercise this option, but in the meantime you have received a premium rent.

Problem is at the "peak" these properties were 100% overpriced.

With substantial down payments you've gotta include the missed opportunity costs of the money you put down. That $20,000 one puts down on a property is taken away from some other investment opportunity...add to that the fact that's it is being invested in a depreciating asset and it can be lost altogether in the coming months.

The trick to making money on real estate is to use none of your own money; buy into an underpriced market that is on a tear; and having the wherewithal to take your profits off the table....we all know that boat has sailed. That being said--the way to really lose money in real estate is to do the opposite.

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I guess I learned my real estate investing rules too long ago. Maybe they've changed. I still think in terms of long term. But I do understand the power of leverage. I guess in the recent past too many folks' idea of leverage was zero.

Lot 2, Watersound Bridges, Jonathan Roberts

Take a look at Lot 2, Watersoound Bridges, Lakefront below 500,000. Anyone who chose could hire any builder and be in a new home on that lot for under 1,000,000 and either have positive cash flow from rental or capture a 40% return on the sale. Agree or Disagree?

BTW, It's not my property, it's a competitors, and I have nothing to gain by seeing it sold. In fact if I could raise the cash today, I'd buy it.

I guess I learned my real estate investing rules too long ago. Maybe they've changed. I still think in terms of long term. But I do understand the power of leverage. I guess in the recent past too many folks' idea of leverage was zero.

There are properties that will cash flow if bought at the right price. I have a property I bought for 510k that did 49k rental and after expenses netted 32k. With a 80% mortgage it would profit well over 10%. I have seen a few comporable deals. Of course this is a wonderful cash return. Gulf front and an immaculate property are the keys to maximum rental.

There are properties that will cash flow if bought at the right price. I have a property I bought for 510k that did 49k rental and after expenses netted 32k. With a 80% mortgage it would profit well over 10%. I have seen a few comporable deals. Of course this is a wonderful cash return. Gulf front and an immaculate property are the keys to maximum rental.

I'm curious, was the net rental income 49K on average, or is that a peak in income? I've heard of numbers like this, but it's usually a one time "great year" number, not the average.

Take a look at Lot 2, Watersoound Bridges, Lakefront below 500,000. Anyone who chose could hire any builder and be in a new home on that lot for under 1,000,000 and either have positive cash flow from rental or capture a 40% return on the sale. Agree or Disagree?

BTW, It's not my property, it's a competitors, and I have nothing to gain by seeing it sold. In fact if I could raise the cash today, I'd buy it.

Let's see, 450K for the lot, and what, 400 sq/ft build out? That's 1.5 mil. We used to have a lot of "millionaires" around here who could afford such a place but those days are over. I think we either need to see a re-adjustment to the realities of the situation, or SoWal will have to convert to a high end, low volume sales market.

I can't predict this stuff of course, we're all just guessing. I have no idea what SoWal's market and valuations will look like in 10 years. I'm dieing to find out though.

There are properties that will cash flow if bought at the right price. I have a property I bought for 510k that did 49k rental and after expenses netted 32k. With a 80% mortgage it would profit well over 10%. I have seen a few comporable deals. Of course this is a wonderful cash return. Gulf front and an immaculate property are the keys to maximum rental.

I'm just curious if that factors in utilities, maintenance, and long term maintenance?

1,000,000 total

Let's see, 450K for the lot, and what, 400 sq/ft build out? That's 1.5 mil. We used to have a lot of "millionaires" around here who could afford such a place but those days are over. I think we either need to see a re-adjustment to the realities of the situation, or SoWal will have to convert to a high end, low volume sales market.

I can't predict this stuff of course, we're all just guessing. I have no idea what SoWal's market and valuations will look like in 10 years. I'm dieing to find out though.

Sorry I wasn't clear enough. When I said someone could hire any builder and be in a new home on that lot I meant all in. 500,000 for the lakefront lot with rare views and 500,000 for the house. Three appraisals would net 3 results 1,750,000 - 1,950,000 and 2,200,000. The quick sale would fetch 1,600,000. If I'm wrong I'm wrong, but I would bet 1,000,000 today that I am correct if I could raise the cash by tomorrow.

That's a project that would cash flow on rental and/or provide 40% return on sale.

If someone is quoting you 40% return on sale, walk---no run as fast as possible the other way clutching your wallet in a death grip.

Sorry I wasn't clear enough. When I said someone could hire any builder and be in a new home on that lot I meant all in. 500,000 for the lakefront lot with rare views and 500,000 for the house. Three appraisals would net 3 results 1,750,000 - 1,950,000 and 2,200,000. The quick sale would fetch 1,600,000. If I'm wrong I'm wrong, but I would bet 1,000,000 today that I am correct if I could raise the cash by tomorrow.

That's a project that would cash flow on rental and/or provide 40% return on sale.

John....how big a house could be build for 500k on that lot in Bridges ?

I think the only ones who should be buying into the market are folks who love the area and want to reserve their piece of the beach. This is not a suburban Dallas rental house -- cash flow is not the main reason to buy here. I have learned firsthand that even a decent rental season results in very little after all is factored in. Increased supply has actually driven many rates down. It is what it is.

If you really want to buy, then buy! Don't invest, be an end user. If you don't want it bad enough, then buy a suburban Dallas rental house and become a landlord.

If investments here (in the Internet age where everybody knows everything about everything) were cash flow positive, EVERYBODY WOULD BE BUYING HERE! If everyone wanted to buy here, then prices would go up. Prices are always going to be high for precious coastal real estate.

We have our piece of the beach and are very happy about it. Some people value different things. Those people should not buy.

And hey, if the only people who buy are end users, values are bound to go up, because no one will want to sell!

Unfortunately, some of us don't have the luxury of reserving our piece of beach without it making financial sense. Not really interested in suburban Dallas . . .

Unfortunately, some of us don't have the luxury of reserving our piece of beach without it making financial sense. Not really interested in suburban Dallas . . .

I used suburban Dallas because that's where my SIL lives, and where she and her ultra-fiscally conservative husband purchased a house and became landlords a couple of years ago. It is cash flow positive. They are happy with it.

We're not interested in that kind of thing either, but I would not equate owning a piece of the beach as always being a "luxury." It is a cash-sucking vortex, actually, but long term it is where we want to be, so we made it work. My point was just that, barring a complete rearranging of our economic system (peak oil, etc.), coastal real estate is always going to sell at a premium. If it gets to a point where you can afford what you want, and you feel the compelling need to not let the opportunity go by, by all means jump in, even if you know you won't be making a profit on it anytime soon. I do agree that watching the trends carefully is very important. Keep an eye on those 30-A Shopper Charts ?.

Unfortunately, some of us don't have the luxury of reserving our piece of beach without it making financial sense.

Renting a vacation place at the beach makes more financial sense than buying. If you take into account the PITI and monthly maintenance costs, utilities, HOA fees and management costs, one can rent a palace year-after-year for several weeks in the summer (and much longer in the off-season) for much less that it would cost to purchase a 1/1 condo box. (Just for starters: 400K w/20% down--that's 80K off the bat, 30 year @6% fix =$1870 per month PI +$300-400 monthly HOA + Taxes + Utilities)

Renting also gives you the flexibility to take your cash and go to another area of the US, or the world, if you choose--and never worry about hurricane season.


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John....how big a house could be build for 500k on that lot in Bridges ?

I already posted a couple weeks ago that we are not looking for custom home jobs at this time. We have had 5 customer jobs go into 1 form or another of mortgage loss mitigation in the past year and I'll stick to building homes that we own for sale.

There are more builder's than just us who would build you a home in Watersound for 500,000. They are hungry for your business. This is what I will do when our next home sale is finalized if someone doesn't pick up this opportunity first.

Buy lot 2, Watersound Bridges lakefront for + or - 499,000. Build a 2 story, 2500 square foot 4 bed/4 bath. I'd put the living upstairs. You can see the beach and the lake from standing on the ground. I'd put a screened dining porch on the 2nd floor SouthWest with a wood burning fireplace. I'd put the living on the SouthEast 2nd floor with a wall of glass. I'd locate a wide open kitchen behind the living. You can't build a Tower on that lot per the Patterns Book. Maybe the house would be an amplified version of the Cooper Robertson plan that JOE gave us for Watersound West Beach. You can put in your kayak in your backyard from a boardwalk.

The only thing blocking your unobstructed view of the beach is a coastal dune lake. I boomed up on the lot with my bucket truck and took extensive panoramic photo's. Camp Creek Point to The Crossing's condo's is the view corridor. The only home for sale on that row is someone we all know well with a similar home for 3.5.

SkeetSkeet, please remember this day in 2 years and tell me if I was incorrect. A person can be all in for 1,000,000. By the way, that 40% was 40% on total project cost, not 40% on down payment for those of you who play margin. I'm not that bold. Keep it simple.

I'm curious, was the net rental income 49K on average, or is that a peak in income? I've heard of numbers like this, but it's usually a one time "great year" number, not the average.

I bought it in November 2006, so that was the first 12 months number. It loks like it is going to do a tick over 50k for the second 12 months. Other properties I have usually ramped up after the first year but this one ran out of weeks in the year.

www.vrbo.com/114195

I'm just curious if that factors in utilities, maintenance, and long term maintenance?

It does. No mortgage of course but you can do those numbers many different ways to check cash flow.