Can we afford a condo?

[Moemg]

While you are waiting I would investigate the costs . Maintenance on a $600,000 to $750,000 condo should be in the $1,000 monthly range or higher . Taxes will probably be at least $12,000 or higher . That already gets you to $24,000 without any utilities and what about the bane of Florida ( Insurance ) . Is that included in the maintenance fee ?

 

[athena53]

Condo fees have a tendency to increase on an annual basis, plus the board can hit you up with special fees for emergencies or items not covered by monthly fees. Just a thought to consider.

I was going to mention that, as well as insurance. (Depending on what you actually own when you buy the condo, the association may cover a lot of the insurance but the cost will be passed on to you.) I worked in the insurance business and they're always updating their catastrophe models after hurricane season and then increasing premiums on property insurance in FL. My parents are in Myrtle Beach (about a mile from the shore) and the windstorm coverage got so expensive they just dropped it. There's no mortgage and they said the property would be worth more than the house if the house blew away.

I also had family who had a beautiful oceanfront home in Mantoloking, NJ (now being rebuilt after Sandy courtesy of the insurance company) and salt water is really hard on buildings. You need to replace parts of the exterior more frequently that you would in other areas. The HOA may have sufficient reserves or they may charge a special assessment for needed repairs.

Every time DH and I throw around the idea of a vacation home (more likely some sort of timeshare) the conclusion always boils down to keeping our cash and our flexibility and just taking vacations when and where we want and letting someone else worry about maintenance.

 

[robertf57]

Just one more thought. Using Firecalc with 40 years duration may be overly optimistic because of the limited number of 40 year periods. You may find running the calculator with 30 year retirement duration looks worse.

 

[newenglandpat]

As I said in a prior post, when we looked at it we concluded we would need to use it 5-6 months a year for it to make sense and we are more in 3-4 month mode at this point though we have had small amounts of snow 3 out of the last 4 nights and there is allegedly more coming so we may rethink that 3-4 month thing.

Owning another property many miles away is stressful for me. While we were in Florida I worried abut our place up north and we also had a no heat situation while we were in Florida. (Luckily I had installed temperature monitoring via the internet before we left for Florida and i could see something was wrong and had my heating guy stop by and check it out). I suspect that I would also worry about the Florida place while I was up north too.[/QUOTE]

We completely agree that it is more expensive to buy than to rent for 4 months/yr. The allure is that it would be OUR home instead of a rental giving us a higher comfort level. Eventually once medicare kicks in and I am fully retired this would become our homestead (6 months + 1 day) to avoid our current state tax situation.

There is always the concern about our current home while we are not there. Not sure how that would play out. I currently handle the snow removal, will need to hire someone. not sure how to handle possible ice dams causing leaks while in Florida!

 

[newenglandpat]

While you are waiting I would investigate the costs . Maintenance on a $600,000 to $750,000 condo should be in the $1,000 monthly range or higher . Taxes will probably be at least $12,000 or higher . That already gets you to $24,000 without any utilities and what about the bane of Florida ( Insurance ) . Is that included in the maintenance fee ?

I really need to get a quote for insurance. These buildings do have hurricane shutters which should help with the cost. There is some room in the 24-28K for insurance but may not be quite enuf!!

 

[newenglandpat]

Just one more thought. Using Firecalc with 40 years duration may be overly optimistic because of the limited number of 40 year periods. You may find running the calculator with 30 year retirement duration looks worse.

I just ran my numbers using 30 yrs vs 40 yrs and the 30 yr did show a higher success rate than the 40. the whole firecalc might be overly optomistic given the current state of PE,etc, then again this time may not be different after all....

 

[ivinsfan]

It's interesting how different we all are and one of the great things about this site. I'd say at least 50% of us posting on this thread say the "allure" and comfort level" comes along with it NOT being your own home. As a matter of fact, I think more of us have commented about the hassle cost then the actual money spent.

It will cost you money to winter in a premier climate, no doubt about it. How you do it is up to the individual or couple involved.Homes need to be taken care of all time either by the owner or someone else.

 

[newenglandpat]

I really need to get a quote for insurance. These buildings do have hurricane shutters which should help with the cost. There is some room in the 24-28K for insurance but may not be quite enuf!!

looks like insurance will be in the range of $1200- $1500/year which would fit into the projected carry cost of the unit

 

[MichaelB]

looks like insurance will be in the range of $1200- $1500/year which would fit into the projected carry cost of the unit

That sounds low for the "northern Miami area". Are you certain you can get coverage from a financially sound insurer?

 

[newenglandpat]

That sounds low for the "northern Miami area". Are you certain you can get coverage from a financially sound insurer?

yes, I just reviewed an actual policy for this subdivision. there is some coverage from the HOA, this covers contents, interior buildout,fire,etc

 

[MichaelB]

yes, I just reviewed an actual policy for this subdivision. there is some coverage from the HOA, this covers contents, interior buildout,fire,etc

Does the HOA coverage include wind? That is the critical insurance needed in South, Central and Coastal Florida.

 

[newenglandpat]

Does the HOA coverage include wind? That is the critical insurance needed in South, Central and Coastal Florida.

the buildings do have master hurricane coverage

 

[pb4uski]

yes, I just reviewed an actual policy for this subdivision. there is some coverage from the HOA, this covers contents, interior buildout,fire,etc

When we were looking it was explained to us that the association and their insurance covered from the outside to the paper of the drywall, the paint on the drywall and everything inside of that would be our responsibility.

I thought it was funny only because I had never heard of it being described that way.

 

[SkisALot]

I'd like to add an observation. I've lived in a second-home area for 35 year- round years. In fact, DH and I are the only full time residents in the area. Many of our "neighbors" are professional and upstanding people. What I have noticed is that some of them will say that they use their houses 3, 4, 5 months out of the year when I know for a fact that in a given year they might be there a week at the most. Now, I know that these people are not liars. What I suspect is that there is some kind of unconscious denial going on to the effect of: "If I'm paying for this house it must mean I'm using the heck out of it; otherwise I might just be dumb for paying for something I don't use. And I'm not dumb." (They aren't.) My idea may be far-fetched, but I'll say to those considering a second home to be aware of the possibility of the "second-home denial effect."

 

[45th Birthday]

the buildings do have master hurricane coverage

You will also need a policy that covers wind if you want your interior improvements and contents insured for hurricane damage. Otherwise, you are not covered. Something to look into.

Having said that, I would go for it. You have a good handle on the numbers, and it is doable.

We bought a condo on the ocean in Florida (our third home). It is now our primary domicile. The original primary domicile will be sold at some point (will yours?), and will be replaced with a smaller condo in an urban area TBD. The second house, only used in the summer, is a forever place. Would I do it again? In. A. Heartbeat.

 

[newenglandpat]

thank you everyone who responded to my query here! We have decided to watch and wait for the time being. It's hard to do a 180 and let go of that kind of capital (or be on the hook for a large loan). We have been careful spenders and very good at saving/ index investing. One day not long ago it was apparent that all of a sudden we had financial independence! I am finding it very enjoyable dealing with work knowing that I really don't have to! It is quite the different perspective.

DW and I will take our time figuring out if/what/where to buy. Until then there is a high likelihood we will be back renting in so Florida sometime over the next winter.

 

[Meadbh]

I think you have made a good decision. I remember when I first realized that I was FI (after an inheritance). Suddenly the world was my oyster and I had a lot of choices. But that didn't mean I should choose all of them. I did buy a vacation condo, but at a fraction of what you have been considering. In fact, I only bought a fractional ownership. It's been a great lifestyle investment. But I would not have put my ER plans in jeopardy to buy the whole thing.

Good luck!

 

[Bamaman]

Congratulations on being a little conservative on buying such an expensive condo in Florida.

I used to work in Florida and spent 5 weeks or more there in most years. My daughter also lives outside St. Augustine.

I don't know why you'd be stuck on North Miami or north of Miami. There are so many other more livable, reasonably priced places in the state. Many prefer the Ft. Myers to Sarasota region to the megapolis from West Palm to Miami.

The property taxes and homeowners insurance in Florida is simply out of sight. When it comes to second homes, these expenses in Florida simply break the camel's bank. And HOA fees can be just as expensive as property taxes.

Go for the second home, but you do not have to spend $750K to find a perfectly decent place down there.

 

[Golden sunsets]

I understand the lure of purchasing a condo. I am guessing that you have found a community that you enjoy and have started to make friends and want to maintain that continuity. DH and I have sufficient assets to purchase a second home but have resisted for many of the reasons already stated. We have been renting for 8 or 9 years in the same complex. We have many friends in the complex and look forward to our return each winter. The development is ocean front and is very upscale It has become increasingly popular in recent years, thus harder to find a rental. We have been fortunate in that the owner we rent from holds the property as an investment, and thus far they seem committed to rent to us each year. If that situation changed we would be in a mad scramble to find a different unit within the same complex. That uncertainty is the downside of being a renter, but that is virtually the only downside that I can think of. Our friends who are owners constantly encourage us to buy but we also observe the machinations they go through with the headaches of the HOA, ever increasing maintenance costs and decisions to be made as Board members(plan on being drafted to serve on the various committees that oversee the buildings and grounds). Our friends who are renters all concur that renting provides all of the benefits of ownership without any of the disadvantages. This group of owners and renters are very homogeneous and we renters don't feel like second class citizens, nor are we treated as such by the owners or the property managers and staff. During the period that we have rented the condo values have swung wildly from high to low and now recovering once again. I do note however that there are still quite a number of units available for resale. We just can't justify taking $550,000 (this complex is in Mexico in an upscale resort populated completely by US or Canadians) from our portfolio when we can spend $9,000/season for a rental and be done with it. We would never travel there other than during the winter months. That is one factor to consider when contemplating purchase/rent. I've been to Southern FL during the summer and aside from the heat and humidity, the areas along the beach seem for the most part to be boarded up and it almost feels like a ghost town.