Rental Investment Questions

[fisher]

It's terrible if calculations are based on stale data from a time when everyone in the US was employed; credit was falling like mana from heaven; homes were ATM machines that magically produced money for vacations, cars, and flat screen TVs; inflation was non-existent, baby boomer stock portfolios were soaring in value; and unicorns were munching on jellybeans and pooping rainbows.

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I don't think the calculation are too far off. I think on the example above, you would be in the hole from $15k to $25k per year (the maintenance costs per year are way low considering furniture, electronics, etc replacements on a rental property). If this person really, really wants the second home, they can afford to a take a loss on the property value, and they can easily absorb some annual losses, go for it.

It's a bad financial deal, but if it's good for the emotions and the losses don't bother you or hurt you. No problem.

 

[baky]

Clearly this is a case of "My mind is made up don't confuse me with the facts."

I recommend you go on, give it a shot, and report back about your success.

Oh,...and to save you the time--all Realtors you contact will tell you "Now is a great time to buy" <same as 2004-2008>.

BTW, my ex's 2nd cousin with 5 kids and 3 dogs will be looking forward to taking advantage of those "aggressive" price drops.

You are cracking me up.......my mind is sort of made up, if it doesnt rent at all I can easily afford it but thats not what I want to do....I want to make it cash flow itself. I was just trying to find out at what point do people think a condo facing 30a and steps from the beach would cash flow.....and my aggressive price drops dont have to be that low....i guess you arent into horse racing the difference between the winner and 2nd place is sometimes only inches.

 

[melscuba]

Doesn't HOA cover taxes too on condos?

Insurance and taxes are points I just don't know much about with regard to condos. My husband and I are have been focused on single family homes, so I honestly don't have those pieces of info. I hope I made that point when I gave the sample.

 

[fisher]

You are cracking me up.......my mind is sort of made up, if it doesnt rent at all I can easily afford it but thats not what I want to do....I want to make it cash flow itself. I was just trying to find out at what point do people think a condo facing 30a and steps from the beach would cash flow.....and my aggressive price drops dont have to be that low....i guess you arent into horse racing the difference between the winner and 2nd place is sometimes only inches.

A condo in Watercolor won't cash flow-period (assuming you don't pay cash and forego the return on the capital invested).

However, if cash flowing isn't the issue and you aren't looking for an investment but instead a second home, go for it and enjoy (but you might want to wait another 6 to 12 months for prices to fall further and rent in the meantime).

 

[baky]

A condo in Watercolor won't cash flow-period (assuming you don't pay cash and forego the return on the capital invested).

There obviously has to be a point where they will cash flow......at what point does everyone feel a condo in WC would break even....matter of fact even break even AFTER the 20% down payment.

 

[fisher]

There obviously has to be a point where they will cash flow......at what point does everyone feel a condo in WC would break even....matter of fact even break even AFTER the 20% down payment.

I think you would get close to breakeven at a $275k purchase price with 20% down ASSUMING rental rates did not fall along with real estate prices.

 

[SHELLY]

...i guess you arent into horse racing the difference between the winner and 2nd place is sometimes only inches.

My bad...I thought you were interested in "investing" in real estate--not "gambling."

I prefer to do my gambling in Vegas and not at the track (or in speculative RE plays)--in Vegas you can drown your sorrows in free booze.


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[baky]

My bad...I thought you were interested in "investing" in real estate--not "gambling."

I prefer to do my gambling in Vegas and not at the track (or in speculative RE plays)--in Vegas you can drown your sorrows in free booze.


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I meant in the sense that my aggressive price drops would only be a little less to attract renters. Im just trying to figure out buying a 500k condo putting 100k down and not expecting a return on that down money and trying to come as close to cash flowing the rest as possible....worst case I would pay for it myself but like to try to figure out everything and scenarios before pulling the trigger. In the scenario someone presented above I would be out @ 12k a year...even $15k a year and I would still have 32 weeks to relax....not bad in my book.....the only real concern I have is how the HOA fees work....building upkeep and so forth..can you get screwed with condo in WC with the HOA fees? Whats the pros and cons of condos in WC?

 

[Smiling JOe]

There obviously has to be a point where they will cash flow......at what point does everyone feel a condo in WC would break even....matter of fact even break even AFTER the 20% down payment.

I don't think you will ever see that. I'm not in the rental business, but I understand that WaterColor management charges 40% (not close to the 25% mentioned in the scenario above), and in my opinion, your place will be rented far more often if you use WC management than another. On top of that, the purchase price in the example above is for the properties located in Phase IV, and I don't think those will come close to renting 20 weeks per year. Also, that same scenario is very giving, and while it might work like that for one year, chances are, it won't be that good every year averaged together.

Cash flow break even point is when your expenses equal your income. It will vary from property to property, and is dependent on things such as which rental company you may use, the frequency of rents, the rental rates (which will vary), etc. In general, even at today's prices, we aren't seeing properties with positive cash flow. There are some properties which should cash flow in the long term rentals, but I don't see them in the short term, beach properties.

 

[SHELLY]

Im just trying to figure out buying a 500k condo putting 100k down and not expecting a return on that down money and trying to come as close to cash flowing the rest as possible....worst case I would pay for it myself but like to try to figure out everything and scenarios before pulling the trigger.

You're not expecting a return on that down money?--how would you feel about losing some or all of it (and more and more every month) if the price on the property goes down in the next year or so? Let's say you "paid" $500K for it and then in the next in six months a similar place down the street goes on the auction block for $425K and then in early summer next year a major hurricane hits the panhandle and scours the beach black and the place next door goes on the block for $325K? (I'm just trying to gage your risk aversion)

What's the type and the cost you're going to use to finance the remaining 400K? Have you approached a bank/broker about financing an "investment" condo in Florida?

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