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Camp Creek Kid

Christini Zambini
Feb 20, 2005
1,272
118
50
Seacrest Beach
A gulf front house (dump) closed for 1.6m in Dune Allen. Does that qualify? There is gulf front under 2m presently listed that isn't selling.


Gulf front property is not nearly as desireable as it was 2 years ago. The risks are huge with possilbe hurricane and insurance is almost impossible to get. Gulf front property seems to been its own micro-market and a lot of people aren't touching it. Don't use gulf front property as a benchmark for the entire 30-A area.
 

BlueMtnBeachVagrant

Beach Fanatic
Jun 20, 2005
1,289
375
The area is primarily rental property. Most real estate investors (not investulators) expect their property to return a reasonable rate on their investment, generally through rental with a modest increase in value figured in. The properties in SoWal currently do not. With no upside for some time on pricing the investment value is not there. The area is certianly beautiful but when I visit in the spring and fall all the homes around mine are empty and they all have rental company signs in the front. If you are saying the property there is all for second homes or primary residences then your theory of value makes sense. The homes aren't used in that way but the theory is interesting.

"Most real estate investors expect their property to return a reasonable rate..." - I agree. But "Most" can mean, let's say, 90%. That still leaves 10% of buyers to purchase a property based on desire and financial ability, not rate of return. Ever hear a buyer of a new Porsch say it was a great investment? Maybe an emotional investment.

Let me give you another example... on Lagrange Bayou, a bayfront home just recently sold for 1.5 million (cost basis was probably around $700,000 about 4 years ago). It took a couple of years to sell, but it did sell. Again, someone WANTS to live in the home and was willing to pay a good price for the waterfront experience. Could the owner rent that house for $12,500 per month (based on the 120 factor)? Not a chance in hell.

If anyone who owns a coastal home on this board can honestly say they haven't said it was a "great investment" I'll pucker up. I bet you can rent that 7 million dollar house in Rosemary. After all it was also an investment:funn: . I would guess someone who paid that for a house there in this climate really could care less about the return. I asked months ago if anyone has ever figured a cap rate on a rental property there, a t-bill returns better.
Again, not all future purchases of prime real estate will be based on rental return. There are a lot of rich baby boomers ready to retire soon. Believe it. They have made their money and will buy what they want.

"Perception is reality" is a term my partner used to use and I never thought much of the idea until I saw what the real estate market has done in the past few years. I don't think the concept applies to solid long term planning but in a world where people keep houses for 2-3 years and sell stocks every 6weeks it works.
Again, not all purchases will be based on immediate rate of return. Some will simply buy for themselves driving up the price of the more desirable properties. This won't happen overnight however. I've said before, those properties that I consider not to be prime, will be in trouble for a while if they were purchased at the pre-Hurricane Dennis prices, IMHO.
 

BlueMtnBeachVagrant

Beach Fanatic
Jun 20, 2005
1,289
375
Gulf front property is not nearly as desireable as it was 2 years ago. The risks are huge with possilbe hurricane and insurance is almost impossible to get. Gulf front property seems to been its own micro-market and a lot of people aren't touching it. Don't use gulf front property as a benchmark for the entire 30-A area.

You may be right about the "micro-market" gulf front part. We'll see. There are undeniably some psychological issues associated with gulf front now. Hopefully another year or two without hurricanes and beach renourishment will change perceptions. I'm not claiming that gulf front will be any safer though.

However keep in mind that the MAJOR cost of insurance is now wind coverage. You should know that it doesn't make a big difference if you're gulf-front or if you're a 1/4 mile inland. The increases in wind premiums have affected everybody by similar percentages.
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
Gulf front property is not nearly as desireable as it was 2 years ago. The risks are huge with possilbe hurricane and insurance is almost impossible to get. Gulf front property seems to been its own micro-market and a lot of people aren't touching it. Don't use gulf front property as a benchmark for the entire 30-A area.

431509_133820.jpg

You mean this one may wash away?
 

spinDrAtl

Beach Fanatic
Jul 11, 2005
368
2
Can anyone come up with sales at pre-'04 pricing?

Not a sale but I had an appraisal done in July 2003 when I refinanced my condo (at 5.0% 30 year fixed). High Pointe in Seacrest Beach, 2BR/2BA poolside 2nd floor with view was 390k so I am sure there were comparable sales in the complex. If I can find my appraisal, I could post the comps that were used.

FYI, asking prices during the peak for other same floor/same plan units were around 850k. Asking prices are now around 725k, I think. Not sure of recent sales, but that is about a 15% drop in asking price.
 
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Pirate

Beach Fanatic
Jan 2, 2006
331
29
"Most real estate investors expect their property to return a reasonable rate..." - I agree. But "Most" can mean, let's say, 90%. That still leaves 10% of buyers to purchase a property based on desire and financial ability, not rate of return. Ever hear a buyer of a new Porsch say it was a great investment? Maybe an emotional investment.

Let me give you another example... on Lagrange Bayou, a bayfront home just recently sold for 1.5 million (cost basis was probably around $700,000 about 4 years ago). It took a couple of years to sell, but it did sell. Again, someone WANTS to live in the home and was willing to pay a good price for the waterfront experience. Could the owner rent that house for $12,500 per month (based on the 120 factor)? Not a chance in hell.


Again, not all future purchases of prime real estate will be based on rental return. There are a lot of rich baby boomers ready to retire soon. Believe it. They have made their money and will buy what they want.


Again, not all purchases will be based on immediate rate of return. Some will simply buy for themselves driving up the price of the more desirable properties. This won't happen overnight however. I've said before, those properties that I consider not to be prime, will be in trouble for a while if they were purchased at the pre-Hurricane Dennis prices, IMHO.

I agree, some of the buyers for properties in SoWal are not interested in rental or returns or anything but enjoying the beach and the area. I am primarily an investor and my feeling is that the market there is driven by other forces and many owners count on the income from rental. The rents from vacation property generally will not create cash flow with a typical mortgage. The cash on cash return from rental is usually awful as well but at current asking prices it ranges from 1-5 percent which is laughable. I don't consider a quick "flipping" type of return when I buy a property. I buy and hold properties until they no longer make sense to hold. One nice thing about owning beach property as an investment is the ability to "check your property" and have a margarita at the beach at the same time.

I look at property every time I visit and the numbers still look ugly. If (when) the prices go down enough I will buy more, they just aren't even close yet.
 

ecopal

Beach Fanatic
Apr 26, 2005
261
7
I agree, some of the buyers for properties in SoWal are not interested in rental or returns or anything but enjoying the beach and the area. I am primarily an investor and my feeling is that the market there is driven by other forces and many owners count on the income from rental. The rents from vacation property generally will not create cash flow with a typical mortgage. The cash on cash return from rental is usually awful as well but at current asking prices it ranges from 1-5 percent which is laughable. I don't consider a quick "flipping" type of return when I buy a property. I buy and hold properties until they no longer make sense to hold. One nice thing about owning beach property as an investment is the ability to "check your property" and have a margarita at the beach at the same time.

I look at property every time I visit and the numbers still look ugly. If (when) the prices go down enough I will buy more, they just aren't even close yet.

Good points.

I am curious, at what price level would you be buying?
 

BlueMtnBeachVagrant

Beach Fanatic
Jun 20, 2005
1,289
375
I agree, some of the buyers for properties in SoWal are not interested in rental or returns or anything but enjoying the beach and the area. I am primarily an investor and my feeling is that the market there is driven by other forces and many owners count on the income from rental. The rents from vacation property generally will not create cash flow with a typical mortgage. The cash on cash return from rental is usually awful as well but at current asking prices it ranges from 1-5 percent which is laughable. I don't consider a quick "flipping" type of return when I buy a property. I buy and hold properties until they no longer make sense to hold. One nice thing about owning beach property as an investment is the ability to "check your property" and have a margarita at the beach at the same time.

I look at property every time I visit and the numbers still look ugly. If (when) the prices go down enough I will buy more, they just aren't even close yet.
No reasonable person on this thread can really disagree with anything you've said on this particular post, especially the margarita part!!

But let me ask you this regarding your comment re: "cash on cash return". How's this "1-5 percent" defined? Honestly I don't see how anyone can make any short term or cash flow "profit" by buying a property at today's prices, no matter which way you slice it.

Thanks for the reply.
 
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