Condo at the Beach - Do the numbers make sense?

This is a very interesting thread. Solid points on both sides, as expected. All I can add is this: we own a "middle of the road" (not "luxury", but not "economy", either) 2/2 condo in South FL. On the beach... which we never get to use because we work all day and/or it is always packed with tourists. Very desirable location. The area today is NOTHING compared to what it was a mere 8 years ago. I can not wait to get out of here and buy a house. Yes, the reverse of what most folks do.

I hate living in this place and realized that the condo lifestyle is not for me. Noise, bureaucracy, managers that steal from you, noise, special assessments, rude and inconsiderate neighbors, folks throwing parties at 3 AM when you have to wake up at 5 AM the for work (then you call security and nothing really happens... so you end up calling the police... every other week), noise, sky-high taxes, construction EVERYWHERE (when one building is finished, another one pops out of nowhere... they even built one luxury hi-rise *in front of* another luxury hi-rise that had an ocean view... but not anymore! Value collapsed overnight.), etc, etc... The city approves more and more hi-rise buildings, cramming them in the most unusual of corners... yo go to City Hall and complain, and they do not care, citing the increased tax revenue for them and how it will helps us as well... and yet my taxes always go up, up, up... Did I mention noise?

We are evaluating our options at the moment, and can not wait to move to our own place, where I will not have to ask for permission every time I have friends over, I need to pick up my own mail, or need to bring in a small piece of furniture inside my own home.

I fully see other's points of views, and can understand the appeal. But this type of lifestyle, I found out the hard way, is not for me. Nor do I want to be a landlord. At this point in my life, there is nothing I value more than privacy, independence and *peace and quiet*.
 
sheehs1 said:
. I have been asked to be on the HOA board shortly (Treasurer) as someone is stepping down. Could be a thankless task but at least I will know more about what's going on and I really like the others on the Board. The budget has enough buffer to set aside 25% to 30% into the Reserve Fund every year.
It's not new. The complex is 25 years old, has a track record and I know others that own here.
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Do not doit!
I was Treasurer of my HOA for 25 years. It is a thankless job.For example, we were having the complex reroofed, and some wanted all the board members to sign a statement that none of their relatives were involved in the project.
Another time a petition of some 35 pages were being circulated accusing the board of all kinds of things which were not true.
 
Souschef said:
Do not doit!
I was Treasurer of my HOA for 25 years. It is a thankless job.For example, we were having the complex reroofed, and some wanted all the board members to sign a statement that none of their relatives were involved in the project.
Another time a petition of some 35 pages were being circulated accusing the board of all kinds of things which were not true.
Click to expand...

Souschef, your post was timely! After much thought and speaking twice to an ex-ex treasurer who is a CPA and was treasurer for 9 years, I sent an email yesterday "Passing" on being considered for the board appointment as Treasurer.

I had talked to enough other people to get some of the gist of the politics. The President told me one owner who rents his unit and is a lawyer called her manager at her place of employment and complained about the job she was doing as President of the HOA. She is a director for a property manager company and basically does this for a living. The complaint didn't go anywhere but how personally embarrassing and crossing a line that was! We could not have anyone better. But people there do not like her or her husband and some people are just mean.

I bought this condo to de-stress! What was I thinking even thinking I would want to do it? :facepalm::face palm:
 
sheehs1 said:
Souschef, your post was timely! After much thought and speaking twice to an ex-ex treasurer who is a CPA and was treasurer for 9 years, I sent an email yesterday "Passing" on being considered for the board appointment as Treasurer.

I had talked to enough other people to get some of the gist of the politics. The President told me one owner who rents his unit and is a lawyer called her manager at her place of employment and complained about the job she was doing as President of the HOA. She is a director for a property manager company and basically does this for a living. The complaint didn't go anywhere but how personally embarrassing and crossing a line that was! We could not have anyone better. But people there do not like her or her husband and some people are just mean.

I bought this condo to de-stress! What was I thinking even thinking I would want to do it? :facepalm::face palm:
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Excellent points. Fully agree. Another reason why I want out of the condo "lifestyle". The truth is (at least in my particular case): the only way to get things done is to be a part of the board, but being a part of the board is a thankless, nerve-wracking, even dangerous job (as stated above). So it's a catch-22. All I can add is that I have done nothing *but* stress out ever since we moved to the condo.
 
Karloff: I really do love my condo but it's probably because of the water front views and being a three level low rise not a high rise. It may also be because I have my other home and can avoid most of the politics and gossip by coming and leaving every week-end!

ReWahoo: I think it was a wise decision too!
 
I managed MIL condo in Daytona Beach, oceanfront for two years. Lost about $3,000 per year. Assume more vacancy - there was always an excuse. Assume more "special assessments". Balcony repair $20,000. New hurricane slider door $10,000. Tennis courts to resurface. Garage and stucco repair. Always something to deal with. Not worth the hassle, so we sold it. Extended family wanted us to keep it, so they could stay rent free for a week.
 
I have owned two homes for 23 years now. For many of those, it was a condo in St Petersburg, FL, where there are very many rentals such as you speak about. We opted to own, as we have an aversion to renting when financially it was unnecessary, and DW is very picky about our home. You don't really want strangers living in your *home*, do you? Well, we did not.


Here is how the financials looked, at least a few years ago. You can buy a waterfront condo on Boca Ciega Bay for around $250K. Because Florida has a homestead law that affects your property tax, it is a little tricky doing the calculations. But I can tell you that if you are not homesteaded, your property gets re-appraised every year. When we were not FL residents, our property taxes reached a high of around $6K per year, with no cap on them as property values went up! Most condos there can only be counted on to be rented for Jan-Mar. There are some exceptions, but that seemed to be the case. At one time, monthly rentals then were around $3K. So it seemed to me that people we knew that rented their condos basically broke even as far as $ go. But if you don't mind that, and 1) don't mind spending (say) Nov,Dec and April there (assuming you have cold winters to escape) and 2) are hoping for long-term capital gains, then it is not a bad idea.


But, although the retirement of the baby boomers may still change this, in the past, many of our neighbors, some of whom had owned for 20 years or more, had *not* yet seen the kinds of capital gains they had expected. YMMV.


P.S. As someone else pointed out, another thing to watch out for with a condo is your condo management, and possible big expenses that could blow your calculations away... Where we lived, we had a good board, but good or bad, you could end up with special assessments for things like a new roof, etc., that could run thousands of $ that you did not expect to have to pay, and you *cannot* avoid paying these.
 
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Z3Dreamer said:
Before I begin, I think the answer is that people purchase beach condos for the status, as I don't see that the numbers make sense.
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I have a friend that did this with a house in SC. Your estimates are NEVER correct. Otherwise, everyone would be doing it.

Remember, water attracts idiots. Idiots mess things up. If you buy, then you're stuck with the neighbors. And what if crappy neighbors have an impact on your rentals? With the various on-line rating apps, a problem rental is never secret.

I would pass and rent when I was wanting to be there.
 
My grandparents, then my parents all owned condos in SW Florida. The most wonderful memories in all our lives were made on winter vacations there. To leave dark cold Ohio on a snowy February morning ....and a quick 2 hour flight to Fort Myers....would find us on the beach before noon! We took our kids nearly every year from the time they were babies. Now they have babies!

My grandkids love it and can’t wait to go the first 2 weeks of November. We love it.
 
I'll wade in with some lessons I learned with buying a condo last year in Myrtle Beach...hopefully there will be some nuggets you can use.

I bought an oceanfront, 1-bdrm condo last Nov as a way of diversifying my investments for retirement. I have one other small rental (not at Myrtle Beach) and the rest of my retirement savings are all in the stock market. So, I wanted a way to invest outside of the market. Hence, the rental condo.

We bought this primarily to be rented. We can use it up to 14 days for personal use without losing any deductions for taxes. But, you also get to visit/stay in your condo for any maintenance & repair trips, incl writing off the mileage and cost of supplies. We've done 1 of those trips this year to make some minor fixes (patio chairs coming apart, a/c cover rusted over, etc) as the condo mx handles most other repairs.

We learned by asking realtors about purchasing a condo for rentals purposes, and they guided us to 1-bedroom condos as the bread-n-butter of the rental scene, not the 2- & 3- bedroom condos. The gross receipts don't add up very well vs the price point for those condos, generally speaking. So, you're buying the 2- or 3-bedrm for you w/ the potential of subsidizing some of the costs. The gross rental income for this 1-bedroom last year was $27K, and we purchased it for just over $100K. You'll need to check past gross rental income as it will vary widely by resort and units within that resort. We just happened upon (after many months of looking at units) an end unit with an open balcony that an investor was unloading right in the heart of Myrtle Beach action.

Now, you have to deduct the 40% property mgmt commission which seemed waaayyyy steep until you understand what that covers. They act like a hotel operations in renting your condo, front desk and all. They handle reservations, housekeeping, repairs, operations of the resort amenities for all to use, and they also cover the required business license the City of Myrtle Beach required you to have if you're renting out a property (didn't know about that part until just recently when I got a notice from the city...whew, they had it covered). They handle all the accounting and paying of the many resort/sales taxes each month and you get monthly statements from them. Each month, they send you your remaining share of the rental proceeds. They will also block out any dates you want to reserve for your own use.

The HOA fees you pay separately, and they vary by resort, so do your homework. Someone previous mentioned to check the HOA reserves...look for at least a 10% reserve vs their annual HOA receipts. This is to cover resort upkeep and repairs. There are Myrtle Beach resorts adding "special assessments" on top of their HOAs to cover major repairs. Just beware and check into this for the resort you're considering.

All told, a 1-bedroom oceanfront unit brings in about net $6k per year (average) if it's fully paid for. So, roughly 6% return on a $100K'ish investment...but then you get the tax deductions on top of that, so that will add a few more nickels in your pocket.

I hope there are some useful notes in here to help you in your search!
 
I never really checked into it but I had a friend who once claimed that he could buy a condo in Myrtle Beach, use it for Nov-Apr to get away from NE winters (MB during that time is similar to fall in NE according to him, other than periodic cold snaps) and that rentals from May-Oct would carry the cost. True in your experience?
 
Parr0thead98 said:
I'll wade in with some lessons I learned with buying a condo last year in Myrtle Beach...hopefully there will be some nuggets you can use.

I bought an oceanfront, 1-bdrm condo last Nov as a way of diversifying my investments for retirement. I have one other small rental (not at Myrtle Beach) and the rest of my retirement savings are all in the stock market. So, I wanted a way to invest outside of the market. Hence, the rental condo.

We bought this primarily to be rented. We can use it up to 14 days for personal use without losing any deductions for taxes. But, you also get to visit/stay in your condo for any maintenance & repair trips, incl writing off the mileage and cost of supplies. We've done 1 of those trips this year to make some minor fixes (patio chairs coming apart, a/c cover rusted over, etc) as the condo mx handles most other repairs.

We learned by asking realtors about purchasing a condo for rentals purposes, and they guided us to 1-bedroom condos as the bread-n-butter of the rental scene, not the 2- & 3- bedroom condos. The gross receipts don't add up very well vs the price point for those condos, generally speaking. So, you're buying the 2- or 3-bedrm for you w/ the potential of subsidizing some of the costs. The gross rental income for this 1-bedroom last year was $27K, and we purchased it for just over $100K. You'll need to check past gross rental income as it will vary widely by resort and units within that resort. We just happened upon (after many months of looking at units) an end unit with an open balcony that an investor was unloading right in the heart of Myrtle Beach action.

Now, you have to deduct the 40% property mgmt commission which seemed waaayyyy steep until you understand what that covers. They act like a hotel operations in renting your condo, front desk and all. They handle reservations, housekeeping, repairs, operations of the resort amenities for all to use, and they also cover the required business license the City of Myrtle Beach required you to have if you're renting out a property (didn't know about that part until just recently when I got a notice from the city...whew, they had it covered). They handle all the accounting and paying of the many resort/sales taxes each month and you get monthly statements from them. Each month, they send you your remaining share of the rental proceeds. They will also block out any dates you want to reserve for your own use.

The HOA fees you pay separately, and they vary by resort, so do your homework. Someone previous mentioned to check the HOA reserves...look for at least a 10% reserve vs their annual HOA receipts. This is to cover resort upkeep and repairs. There are Myrtle Beach resorts adding "special assessments" on top of their HOAs to cover major repairs. Just beware and check into this for the resort you're considering.

All told, a 1-bedroom oceanfront unit brings in about net $6k per year (average) if it's fully paid for. So, roughly 6% return on a $100K'ish investment...but then you get the tax deductions on top of that, so that will add a few more nickels in your pocket.

I hope there are some useful notes in here to help you in your search!
Click to expand...


Fully funded reserves!
Ten percent reserves? Last year's $6k return may be the only positive year for awhile if the HOA has a 10% reserve and an assessment rears its' head.


If OP is still considering a condo, he may find that a well managed HOA with fully funded (100%) reserves is the way to go. Read through the board minutes, study the financials and talk with owners and board members. Real estate agents can be good sources of information, but there's no substitute for due diligence.
 
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CaliKid said:
It seems you are missing important things on both sides:
- I don't see vacancy and I don't see capital expenditures;
- On the other hand I don't see anything for tax benefits such as depreciation and tax deductible trips to visit your property.
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+1.
Let's not forget those who want to lock in today's real estate prices and let someone else pay off their mortgage for them. A younger person may eye the condo for a future retirement home, and consider mortgage paydown and tax benefits over the next 20 years a huge benefit.

Lots of ways to get more than 14 days a year, BTW. You could fly down to repaint, remodel, check the condition before and after a rental, make a repair, shop for new furniture, attend HOA meetings, etc. Of course, your flights and rental car could also be deductible. Your CPA has lots of ideas...
 
FWIW - I am a landlord. I have found it works best for me when I am close enough to the tenants to see the whites of their eyes from my residence.

OK, I exaggerate.

My first rental property was at enough of a distance that it was really disruptive to manage, from the standpoint of instilling accountability in the tenants. You must rely on third party judgment to screen the tenants. The third party will never be as invested as you are in their integrity. E.g., you only need one instance of party animals - or druggies - or whatever - to instill animus amongst the neighbors, and to incur a $20K cleanup. Since you are not right there to exercise oversight, it's hit or miss whether or not you get your money's worth from the contractors.

No thanks. I'd rather rent a vacation place than own one, intending on rental income to offset costs, if it is further than an hour's drive.

On top of all that, when is the last time you got an unbiased answer from a real estate agent, when you asked him/her "Is this a good buy? Why or why not?" - The answer is always the same. "This is a SCREAMING deal and you'll make out like a bandit", lol!

Withal, as has been said here so many times before, anecdotal evidence is not probative. YMMV.
 
While talking to a RE broker about the realities/ramifications of beach rentals, she said that in her experience, beach rentals are the best short way to go. Short term rates are more expensive, and wear and tear is less. A vacation renter drops his suitcases as soon as he gets there, puts their suits and flip flops on and heads to the beach. They'll eat in a restaurant. They might put some beer or wine in fridge, and the unit gets cleaned after a week or two. A long term renter, after coming home from w*rk, flops in front of TV, burns dinner while asleep at TV, and you clean up after them after they move out.

I have been landlording locally for 19 years.
 
pb4uski said:
I never really checked into it but I had a friend who once claimed that he could buy a condo in Myrtle Beach, use it for Nov-Apr to get away from NE winters (MB during that time is similar to fall in NE according to him, other than periodic cold snaps) and that rentals from May-Oct would carry the cost. True in your experience?
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Hard to answer this as there are so many variables...what size condo does he have? Which resort? What are his HOAs? Is he renting it out himself or thru the resort property managers? Does HOA cover hurricane insurance (not all do)?



One thing that stuck in my mind from our real estate agent, "During the summer, everything within 20 miles of Myrtle Beach will be rented, but the money making units are the ones you get rented year round." That's why we looked for months before finding this unit at the price point we did. Although we are nearing our first year of renting it, there has been a long-term renter for the month of Nov, some rental activity over Christmas, rented during bike week, and then rents picked up starting in Apr thru now, so far.


So, I suppose your friend could be right if the numbers truly added up like that, but not our experience so far.
 
Winemaker said:
A vacation renter drops his suitcases as soon as he gets there, puts their suits and flip flops on and heads to the beach.
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One place reported that the tenants returned dripping wet and sat on the cloth sofas. Make sure to supply lots of clean beach towels!
 
6% per year is not too bad. If off all issue solve a hotel offcourse.
 
Winemaker said:
While talking to a RE broker about the realities/ramifications of beach rentals, she said that in her experience, beach rentals are the best short way to go. Short term rates are more expensive, and wear and tear is less. A vacation renter drops his suitcases as soon as he gets there, puts their suits and flip flops on and heads to the beach. They'll eat in a restaurant. They might put some beer or wine in fridge, and the unit gets cleaned after a week or two. A long term renter, after coming home from w*rk, flops in front of TV, burns dinner while asleep at TV, and you clean up after them after they move out.

I have been landlording locally for 19 years.
Click to expand...

I defer to your experience, and totally agree. When you are landlording locally, you are close enough to see the whites of their eyes, lol!
 
I'm the opposite of some as I'm looking for an oceanfront condo in Myrtle Beach that the HOA prohibits short term rentals as I would prefer not to be living with all the transients, this is a very difficult search.
 
I own and manage a condo in Panama City Beach, FL. It is not an investment. I could do better in the stock market. I paid cash for it and decided to rent it to offset my expenses. It is work and I refer to it as my side gig. I clear about 12,000-15,000 a year. I take half for my vacation fund and put the other half back into the condo. I love the beach and have enjoyed/utilized my purchase. Best 50th birthday present ever!! :cool smiley: Fast forward to our early retirement in 3 years...we plan to be snowbirds in the condo over the winter months/holiday season while we full-time rv travel.
 
Two exceptions in addition to those that I read.

  1. $225K is VERY low for a beachfront condo
  2. You also need to add in the cost for a Hurricane Cabin in the mountains a few hours inland
 
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