Cadillac CTS-V Forum banner

1 - 20 of 27 Posts

·
Premium Member
Joined
·
15,029 Posts
Discussion Starter #1
And considering a rental condo as an investment property.

It would be beach front, in a top 5 beach and the same area we've been coming to for years. Were not here to get rich - mostly just cover the costs while we accrue equity for eventual retirement into the unit 20+ years from now.

Outside of paying the HOA fees, management / cleaning fees and passing on the taxes to the renters, any advice or "gotcha" experiences from the peanut gallery?

I think that we could cover the mortgage on the peak seasons and what we spend on our existing rentals by itself - everything else would be management and taxes.

I guess I'd be open to suggestions on rental agency and advertising tips for the IRB / Clearwater areas... were just now starting the search so no specifics yet - but forming a framework.

Estimate purchase cost of $700k ocean front condo, or around $3-4k a month depending on terms. HOA probably $5-800 a month. Taxes probably 8k a year. I don't know what management fees will be. Estimate rentals anywhere from $2500 to $4000 a week based on season.

I feel like the biggest issue is the 25% down on investment properties which I would cover in part by pulling from other investments.

Sent from my SM-G965U using Tapatalk
 

·
Premium Member
Joined
·
7,089 Posts
Tuning in as well although we are at least 10 years out on any type of move due to the astronomical daycare costs along with timing itself. Our eyes are on St John USVI but it is just a dream right now that we hope can become a reality. I just need that 100% pay raise and score a few scratch off jackpots!

We use VRBO for all our vacation rentals, I'm sure that is of no help but I would guess a lot of revenue/bookings come from there.

As far as cleaning, isn't that passed onto the renters along with taxes as you mentioned? I know everywhere we stay there is a cleaning fee tacked on at the back end.

I wouldn't worry about the 25% down especially if its a long term retirement plan. What I would be curious about is the insurance on something like this being ocean front in FL along with being titled a investment/rental property.

It sounds like you have a solid plan so I would maybe try and located quite a few owners down there and start getting references for rental management companies and see if any of them recommend the same one/ones.
 

·
Premium Member
Joined
·
15,029 Posts
Discussion Starter #4
Sounds like a timeshare pitch... ;)

Kidding, you should rename the thread to baller status achieved. I'm still working out the metrics of how affordable a spouse is and risk/reward associated lol.
Dude- I'm not even "pre approved!" Lol

But it makes sense for us long term so I am now trying to work out the details. Realty on the gulf coast is brutal though - day one we have a showing scheduled and they warned us that any reschedule notices will be a verbal phonecall from them; any other notifications are likely a competitor trying to poach buyers. Geesh.

VRBO / home away is it's own scam but we may bite the bullet since advertising is the biggest issue in getting rentals. I think they want like a 10% cut or something which is crazy when you think about it.

The 1st rental is the hardest one... after than its gonna be easy!

Sent from my SM-G965U using Tapatalk
 

·
Registered
Joined
·
1,343 Posts
Sounds like a timeshare pitch... ;)

Kidding, you should rename the thread to baller status achieved. I'm still working out the metrics of how affordable a spouse is and risk/reward associated lol.[/QUOTE]

To do all over again.. girlfriends!! They can't take your house and 1/2 your shit.. and as for me its a struggle to eat the same food day in and out.. I love varity, and as much as I love pizza everyday.. there are times I want a steak, not everyday, but once in awhile the urge to try something else becomes strong and I fight it back with car parts!! lol
 
  • Like
Reactions: Force_Recon

·
Jaguar
Joined
·
866 Posts
^Truth. I have only been married a year and sometimes miss the taste of a good slumming lol.

But I have also realized I'm too old to deal with that shit anymore and actually enjoy the comfort of being able to fart when I want.

Random, if its something you truly want, make that shit happen; life is too short. I'm not there yet, but when I am hopefully you will have the kinks worked out to ask questions.

I grew up on South Padre Island and my grandparents used to own a condo on it. They made a mint when they off-loaded it, coastline property will only appreciate.
 

·
Registered
Joined
·
943 Posts
Outside of paying the HOA fees, management / cleaning fees and passing on the taxes to the renters, any advice or "gotcha" experiences from the peanut gallery?
Really scrutinize the HOA coverage and budget. Check for history of special assessments. Newer complexes may underestimate maintenance costs, especially in a sunny/windy climate. Sunny areas require more frequent repainting. I don't know about roofing costs in Florida, but got hit with a big assessment in CA. The management team the HOA uses can make a huge difference.
 
  • Like
Reactions: random84

·
Premium Member
Joined
·
2,539 Posts
My investment partner and I own a few condos in Myrtle Beach that are vacation rentals. We shoot for a 10% income after all expenses. We don't have mortgages so ROI (return on investment) is what we focus on.

The best performing ones we have bought are under 100k. The worst performing ones are the more expensive ones. When I see you are looking at spending 700k it makes me nervous. That's a lot of eggs in one basket. It wasn't too long ago we had the BP oil spill that shut down vacation rentals in the gulf of Mexico. That was an event that couldn't have been predicted unlike a downturn in the economy.

The management company is a big consideration in a condo purchase. Some are really horrible. We looked at one in Florida that grossed nearly 20%. Once we started looking deeper we discovered a management company that stripped away profits with fees and assessments that brought the net down to zero. At that point you are hoping on rising values for ROI. Not a good plan.

Sounds like you can put 200k of cash into an investment. With that kind of money you could buy a condo outright. Get one at a 10% return and you would have your original investment back in 10 years. Going with your 20 year plan, you could then buy your second condo in 10 years with the profits from the first condo. At the end of 20 years you would have received 400k on the first condo and 200k on the second for a total of 600k on your original outlay of 200k. Net would be 400k plus the value of the two condos of 400k for a grand total of 800k. So at the end of 20 years you have two paid for condos with a purchase price of 400k, have received rental income of 600k and could sell the condos for 400k (assuming they didn't gain value) for a total of 1 million with an initial investment of 200k.

Contrast that with a 700k purchase of with 200k down that simply pays for itself. At the end of 20 years you still owe 270k. If the value remains the same as the above example than you have 460k of equity compared to 1 million of value as the example above.
 

·
Registered
Joined
·
5,645 Posts
My investment partner and I own a few condos in Myrtle Beach that are vacation rentals. We shoot for a 10% income after all expenses. We don't have mortgages so ROI (return on investment) is what we focus on.

The best performing ones we have bought are under 100k. The worst performing ones are the more expensive ones. When I see you are looking at spending 700k it makes me nervous. That's a lot of eggs in one basket. It wasn't too long ago we had the BP oil spill that shut down vacation rentals in the gulf of Mexico. That was an event that couldn't have been predicted unlike a downturn in the economy.

The management company is a big consideration in a condo purchase. Some are really horrible. We looked at one in Florida that grossed nearly 20%. Once we started looking deeper we discovered a management company that stripped away profits with fees and assessments that brought the net down to zero. At that point you are hoping on rising values for ROI. Not a good plan.

Sounds like you can put 200k of cash into an investment. With that kind of money you could buy a condo outright. Get one at a 10% return and you would have your original investment back in 10 years. Going with your 20 year plan, you could then buy your second condo in 10 years with the profits from the first condo. At the end of 20 years you would have received 400k on the first condo and 200k on the second for a total of 600k on your original outlay of 200k. Net would be 400k plus the value of the two condos of 400k for a grand total of 800k. So at the end of 20 years you have two paid for condos with a purchase price of 400k, have received rental income of 600k and could sell the condos for 400k (assuming they didn't gain value) for a total of 1 million with an initial investment of 200k.

Contrast that with a 700k purchase of with 200k down that simply pays for itself. At the end of 20 years you still owe 270k. If the value remains the same as the above example than you have 460k of equity compared to 1 million of value as the example above.
What a great post, and well... his user name has Realtor in it so he probably knows what hes talking about ;)
 

·
Premium Member
Joined
·
15,029 Posts
Discussion Starter #11
My investment partner and I own a few condos in Myrtle Beach that are vacation rentals. We shoot for a 10% income after all expenses. We don't have mortgages so ROI (return on investment) is what we focus on.

The best performing ones we have bought are under 100k. The worst performing ones are the more expensive ones. When I see you are looking at spending 700k it makes me nervous. That's a lot of eggs in one basket. It wasn't too long ago we had the BP oil spill that shut down vacation rentals in the gulf of Mexico. That was an event that couldn't have been predicted unlike a downturn in the economy.

The management company is a big consideration in a condo purchase. Some are really horrible. We looked at one in Florida that grossed nearly 20%. Once we started looking deeper we discovered a management company that stripped away profits with fees and assessments that brought the net down to zero. At that point you are hoping on rising values for ROI. Not a good plan.

Sounds like you can put 200k of cash into an investment. With that kind of money you could buy a condo outright. Get one at a 10% return and you would have your original investment back in 10 years. Going with your 20 year plan, you could then buy your second condo in 10 years with the profits from the first condo. At the end of 20 years you would have received 400k on the first condo and 200k on the second for a total of 600k on your original outlay of 200k. Net would be 400k plus the value of the two condos of 400k for a grand total of 800k. So at the end of 20 years you have two paid for condos with a purchase price of 400k, have received rental income of 600k and could sell the condos for 400k (assuming they didn't gain value) for a total of 1 million with an initial investment of 200k.

Contrast that with a 700k purchase of with 200k down that simply pays for itself. At the end of 20 years you still owe 270k. If the value remains the same as the above example than you have 460k of equity compared to 1 million of value as the example above.
So a 100k condo has to be well off the beach - everything here is $200k for "walking distance to the beach." Beach view is $400k and beach front is $600+ give or take.

We're mulling over the off-season rental options of something that is beach front (higher occupancy) and perhaps beach view (lower cost but lower fill rate)?

Any feedback on fill rates? I feel like were starting off at a significant disadvantage because the market is hot here - and the swarms of realtor groups / investors get first crack at the truly good options.

This is Day 1 for us so I'm basing my perspective off what I know as a renter only... and that is family orientated, value driven, location centric for a rental:

2+ bed, beach front, smaller building (no hi rise), etc. And that all seems to cost a lot of money! So were weighing the options of a place WE would like to stay, vs a purely revenue-generating location when we come down here twice a year ourselves.



Sent from my SM-G965U using Tapatalk
 

·
Premium Member
Joined
·
12,771 Posts
my friend also has a place in myrtle beach, they rent it out a few times a year to basically pay for itself. there is very little ROI. That place was not that expensive

so pretty much echo what hotrod realtor has said. I think most people who look at rentals for investments look into quantity thinking let them at least carry themselves,make a couple bucks, and hope values rise to sell one day. People with true f-u wealth get it in real estate but its not as easy as we may think.

I cant imagine spending that much on a rental, sounds crazy to me. I guess if you have it and its not a strain for you go for it but remember everyone wants to move to the vacation spot and just because you may have rented an expensive vaca pad doesnt mean it makes it a good business.
Why not invest locally? Perhaps a commercial location? People I know who own both say they much rather the commercial guys they dont call you for anything where the residential people are calling for EVERYTHING
 

·
Premium Member
Joined
·
15,029 Posts
Discussion Starter #13
Well I suppose my first mistake is thinking of this as a way to pay for the retirement home while having a place to stay when we visit ourselves. That's certainly not what "f-u money" does. Lol

Second issue is revenue potential: how much rent will a cheaper, off-beach condo generate? I have to play with some numbers but the cleaning costs and taxes are paid by the renters, advertising and management is based on rental value typically and absorbed into the costs

So $200k unit that demands X amount in rent, minus 10% in management and 10% in advertising as an example. Then we factor in borrowing costs.

A $700k unit might demand 3-4x "X" rent, minus the 20% in fees and then borrowing costs.

Except now we factor in fill rates off season... some of these units have a 90+ full rate year after year. Our favorite place is 100% filled and books out 9 months in advance, with peak season being $6k a WEEK. But that is an extreme example for a unique property- I don't know yet on our target property but I'm thinking out loud. This is why I posted the thread so thank you guys for giving me something to think about. Let me get some real world data from this area and post back.

Sent from my SM-G965U using Tapatalk
 

·
Premium Member
Joined
·
2,539 Posts
So a 100k condo has to be well off the beach - everything here is $200k for "walking distance to the beach." Beach view is $400k and beach front is $600+ give or take.

We're mulling over the off-season rental options of something that is beach front (higher occupancy) and perhaps beach view (lower cost but lower fill rate)?

Any feedback on fill rates? I feel like were starting off at a significant disadvantage because the market is hot here - and the swarms of realtor groups / investors get first crack at the truly good options.

This is Day 1 for us so I'm basing my perspective off what I know as a renter only... and that is family orientated, value driven, location centric for a rental:

2+ bed, beach front, smaller building (no hi rise), etc. And that all seems to cost a lot of money! So were weighing the options of a place WE would like to stay, vs a purely revenue-generating location when we come down here twice a year ourselves.



Sent from my SM-G965U using Tapatalk
All of our properties are oceanfront. Most are in high-rise buildings with amenities like swimming pools, lazy rivers and some even have restaurants and Starbucks coffee shops in them. I have been looking for something in Florida for a couple of years now. I just can’t find anything where the numbers make sense. We have found a great return on the properties in Myrtle Beach.

Fill rates in the off-season are spotty for us. Some months like January and February we have to pay a little bit of money because the rentals don’t cover our fixed costs.

Sounds like you are asking the right questions. I hope you are with a real estate agent that is familiar with what you are trying to do. We use a real estate agent that is familiar with the area every single transaction. Even though I could do the transaction myself and save the commission. Having an expert in the area is essential to getting a great deal.

Feel free to give me a call if you have any questions or are looking for unbiased advice.
 

·
Premium Member
Joined
·
2,848 Posts
I had some friends just buy one in Mission Bay, CA for a little over a million. He said the ROI is great there, but I have no idea what the details are either. He also has the cash sitting around, so that makes a big difference.

What happens when "global warming" moves your beach a few hundred yards inland!? Haha
 
  • Like
Reactions: adam112

·
Registered
Joined
·
2,966 Posts
What happens when "global warming" moves your beach a few hundred yards inland!? Haha
I was thinking this same thing, haha!
 

·
Premium Member
Joined
·
15,029 Posts
Discussion Starter #17
I had some friends just buy one in Mission Bay, CA for a little over a million. He said the ROI is great there, but I have no idea what the details are either. He also has the cash sitting around, so that makes a big difference.

What happens when "global warming" moves your beach a few hundred yards inland!? Haha
<sigh>

Can anyone say 4th floor condo? Gonna turn this bitch into Little Venice and rake in the cash!

Sent from my SM-G965U using Tapatalk
 

·
Premium Member
Joined
·
15,029 Posts
Discussion Starter #18
So yeah on a $700k condo it looks like borrowing costs are going to be close to $40k or more (75% loan at 4.5%, plus property tax and HOA fees at 6-800 a month) not counting the down payment.

Revenue is 2-300 a night, which accounting for vacancy means best case around $70k a year.

That's a huge sum of cash for $30k in profit... before advertising and management costs!?!

How do people make money on these again?

Sent from my SM-G965U using Tapatalk
 

·
Premium Member
Joined
·
15,029 Posts
Discussion Starter #20
likely a small part of a larger portfolio
Yeah I guess it could be 2-4% return on the pricier condos plus the value improvement of the real estate over time and be relatively hands-off.

But i must have "sucker" written all over my face - someone will pitch me a time share next?



Sent from my SM-G965U using Tapatalk
 
1 - 20 of 27 Posts
Top