Developer looking to enter SoWal market

[waldendev]

Hi everyone,

I've enjoyed reading many of the posts on this board since discovering this site a few days ago. I'm a partner in a Georgia-based real estate development firm and we're thinking of entering the SoWal market. Specfically, we're looking at two possible residential developments, one in Santa Rosa Beach (~1 mile from the beach) and the other is in Inlet Beach (just north of 98). My question for the people who know the area well is this: in your opinion, is this a good/bad/decent/horrible/etc. time to enter the market? We plan to offer residential lots under $300K that are in the 35-40' x 80-100' size. So far I've seens lots of inventory, but not that much that's relatively close the beach and priced under $300K. Any insight will be greatly appreciated.

Thanks,

Alan

 

[Paula]

Hi everyone,

I've enjoyed reading many of the posts on this board since discovering this site a few days ago. I'm a partner in a Georgia-based real estate development firm and we're thinking of entering the SoWal market. Specfically, we're looking at two possible residential developments, one in Santa Rosa Beach (~1 mile from the beach) and the other is in Inlet Beach (just north of 98). My question for the people who know the area well is this: in your opinion, is this a good/bad/decent/horrible/etc. time to enter the market? We plan to offer residential lots under $300K that are in the 35-40' x 80-100' size. So far I've seens lots of inventory, but not that much that's relatively close the beach and priced under $300K. Any insight will be greatly appreciated.

Thanks,

Alan

Alan. You'll most likely get some useful responses from realtors and locals soon. There's a lot of good information and discussion on this board (Shelly generally provides a more negative perspective and some comic relief). Ideally, you'll get different perspectives, perhaps some useful contacts, and ideally more in response to your question. I'm not a local (I'm someone who bought two cottages here in 2003 and 2004 that are now rentals and that we'll spend more time in at some point in the future). I recommend coming here yourself to see the area, see what's being developed, and talk to a lot of people who can give you different perspectives (even the realtors don't all agree with each other, which is good because the differences in opinion will give you more things to think about).

I hope people on this board can give you plenty of useful insights (but, again, seeing it first hand and having indepth discussions as you know will be most useful).

Again, welcome and I hope you get many useful comments and food for thought!

 

[beachmouse]

The quick money to be made in the area came and went in 2004-05. Inventory is high, and keeps getting higher. So much of what was bought and sold last year was flipped without anyone having an intention of actually building on a lot or using a house.

I see the next five years as somewhat rough and murky for someone just getting into development in the area now. What happened with the condo market the last couple of years in Panama City Beach is not sustainable, and there are going to be a lot of people dumping units there as cheaply as they can afford to in the next 2-3 years. (So many of the buyers were flippers with no plans to hold, and now they can't find a greater fool to sell the property to) And the kind of vacation home/condo overbuilding we're talking about could push prices down from there to Perdido Key.

Still, I think there will still be room for good new single family developments. Population continues to grow in the area, and the people aggressively marketing the area are doing a good job. The question is what kind of a community you're going to be building, and what you're doing to make it stand out from the McDevelopments elsewhere in the area.

 

[Camp Creek Kid]

If your developments are going to succeed, you need to be satisfied with a smaller profit margin than was possible in the last 3 years. Also, you need to focus on developments that will be comfortable for full-time residents. You should design in such a way that there is maximum privacy as well as covered parking/garages and outside storage. Most developments that are geared toward vacation home owners lack these things. The lot size you are proposing won't accomodate privacy and covered parking unless you do something with zero lot lines (and good luck getting that approved because the county is not looking favorably at such developments).

Be aware that the approval process through the county takes a minimum of one year.

 

[imasunbum]

Maybe you should test things by buying my lot at Seacrest and developing it

 

[Smiling JOe]

If your developments are going to succeed, you need to be satisfied with a smaller profit margin than was possible in the last 3 years. Also, you need to focus on developments that will be comfortable for full-time residents. You should design in such a way that there is maximum privacy as well as covered parking/garages and outside storage. Most developments that are geared toward vacation home owners lack these things. The lot size you are proposing won't accomodate privacy and covered parking unless you do something with zero lot lines (and good luck getting that approved because the county is not looking favorably at such developments).

Be aware that the approval process through the county takes a minimum of one year.

Wise words from CCK. Also, be aware that if current zoning needs changing for your development, there is a hold on all zoning changes until at least Aug '06 and the projects already on the list, will most likely not come up for discussion until mid '07. So, you are at least 1.5 years before you would be looked at if you already own the property, and as CCK states, add at least another year on top of that to get it under way.

 

[DBOldford]

The real value in the South Walton market will be in the next five to nine years, I believe. We were overdue for a market correction back in 2004. This phasing period will allow absorption of the overbuilt market for condos and new lots and will hopefully present a more positive and realistic historic outlook relative to storm activity, since 2005 was the worst year in recorded history for hurricanes. The new airport will also introduce a whole new perspective for the area in terms of vacationers and second home owners. As the area becomes discovered by coastal people from outside the southeast, it will again seem a bargain. For example, our home at Grayton would sell for five times its current value on a CA beach and our beaches are not nearly as hospitable as those at South Walton.

Distinctive properties (Gulf view/proximity homes and well conceived small enclaves with common amenities) will continue to hold their value fairly well and appreciate, albeit at a less aggressive annual rate than in the past. In my estimation, the big market for South Walton properties in the future will be small enclaves of properties designed for the permanent resident (we're on the cusp of the Baby Boomers buying their retirement homes in nicer areas) and development opportunities for affordable housing specialists. (Yes, it can be done well and for a reasonable return.) There will always be a healthy market for the upper-end product that has Gulf proximity and views, as this is the segment of the economy that is typically less vulnerable to economic downturns than the middle and upper-middle class folks. That said, spec housing will always be just that...speculative.

I am a native of Walton County and have resided in CA for the past 25+ years. We own a second home at Grayton Beach. My career has been as a consulting urban planner for developments such as The Irvine Company and others, although I sold my company and now master plan for wineries and small resorts in the Napa Valley, exclusively. I do keep up with real estate market trends in coastal areas and other location/location/location areas, however, for investment purposes.

In summary, it's a wonderful area, but not for the faint of heart! Spend lots of time talking with the County planners and visit with local officials before you make decisions. Most importantly, meet with the people who live in the area to find out what they hold dear and what needs protecting. Aim for fitting into the environment and the design vernacular of the area, instead of bringing your own taste and synergy. Work with your neighbors before and during your planning process. In other words, be a good neighbor before you become a neighbor. Good luck!

 

[hi n dry]

The real value in the South Walton market will be in the next five to nine years, I believe. We were overdue for a market correction back in 2004. This phasing period will allow absorption of the overbuilt market for condos and new lots and will hopefully present a more positive and realistic historic outlook relative to storm activity, since 2005 was the worst year in recorded history for hurricanes. The new airport will also introduce a whole new perspective for the area in terms of vacationers and second home owners. As the area becomes discovered by coastal people from outside the southeast, it will again seem a bargain. For example, our home at Grayton would sell for five times its current value on a CA beach and our beaches are not nearly as hospitable as those at South Walton.

Distinctive properties (Gulf view/proximity homes and well conceived small enclaves with common amenities) will continue to hold their value fairly well and appreciate, albeit at a less aggressive annual rate than in the past. In my estimation, the big market for South Walton properties in the future will be small enclaves of properties designed for the permanent resident (we're on the cusp of the Baby Boomers buying their retirement homes in nicer areas) and development opportunities for affordable housing specialists. (Yes, it can be done well and for a reasonable return.) There will always be a healthy market for the upper-end product that has Gulf proximity and views, as this is the segment of the economy that is typically less vulnerable to economic downturns than the middle and upper-middle class folks. That said, spec housing will always be just that...speculative..........

Wow Donna; that just about sums it up!

Dear Waldendev,

I will add my contribution to this interesting discussion.

We are retirees and moved here from up north. We now live here.

When we initially looked for property about 10 years ago we had a list of must haves in a retirement home and location. The following is that list plus some revision based on our experience here.

1. lot with high elevation.

2. walking distance to beach: no more than about 1/4 mile to beach access

3. at least 30 feet above sea level for protection from storm surge

4. no build out time

5. low association fees

6. natural vegetation

7. We would want a development where we could pick our own builder, not one provided by the developer.

8. Association covenants that would not be so fancy and restrictive that it would unnecessarily raise my building costs. This problem might apply to some planned communities like Watercolors.

9. We would want a lot big enough to allow some privacy. The absolute minimum size we would consider would be 50 by 100 and that would depend on the lot.

10. On 30A with all its parks and nature areas and bike path (Inlet Beach is close enough if on south side of 98).

I realize you couldn't meet all those criteria, but hope it helps .

Good luck.

 

[Rita]

waldendev!

Interesting perspectives on this question.

 

[Cork On the Ocean]

Hi Waldendev,

You've gotten some good thoughts from some of the earlier posts. I would add that resale of land parcels are the slowest sector right now and will probably continue to be for some time. It's a wonderful time to enter the market from a purchasing standpoint because inventory is so high. You would need to be able to sit on that land for an undetermined amount of time and should not count on selling it quickly. The bulk of mid range investors (which would be your target market with $300K lots) is overinvested in this area right now and are selling not buying. Today's buyers appear to be looking for completed structures and not interested in speculative building. Builders have slowed down. In Seacrest Beach, until this week, we haven't had a new home submitted for approval in several months. If you're goal is to park some money, it would be a definite consideration.

If you are looking to develop something to sell in the next couple of years, I would recommend developing commercial or affordable housing. The commercial would be prime for South Walton. The affordable housing would be better suited to North Walton or Bay County.

But it's definitely a good time to buy. The question to ask yourself is can you afford to sit on it.