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Old 09-09-2016, 06:48 AM   #41
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Yes, I was talking about trying for a long term rental down in that area instead of FL. But I know nothing about the VRBO properties down there. Everyone on the East Coast wants to go to Florida for the winter.
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Old 09-09-2016, 07:22 AM   #42
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I did some of the "gravy" work, too, and that is another reason we have kept the former primary home. But I think the gravy train is making it's last stop soon
Congrats!
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Old 09-09-2016, 07:53 AM   #43
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Originally Posted by ivinsfan
One thing I love about the HGTV show beach front bargain is the huge amount of lovely beachfront available in this country. Some areas in Texas look amazing.


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They do look amazing but much of that has to do with the magic of video editing. I've been scouring many of those same areas of the Texas gulf coast and those "bargains". Like Fritz has found the VRBO listings to be somewhat misleading, those areas are much different in person.
We searched a couple of areas of the Texas coastline early on in our efforts for a possible 2nd location. We rented a VRBO from a professional management company in Galveston (was rented as one would a hotel room). Boasted ocean view. Actually was tiny condos +/- 500/600 sqft in two large buildings that faced each other across the street from the gulf. The condos in the buildings were angled at 45 degree so that if you stood out on the small balcony and craned your neck to the left/(right) as you hung over the rail - you could see the ocean down the tunnel between the two buildings (otherwise you stared out at the building across the tarred parking lot entrance). Stayed one night.. Checked out a classic 100 year old hotel in the area (took a pass - it was definitely old). Ended up enjoying the rest of our our stay at the San Luis Hotel - which also has one wing devoted to an owner arrangement.

Also went down to South Padre Island, and rented in an option to buy scenario hotel/condo building. Moved rooms twice as they had issues (including non-functioning toilets, and plugged drains in bathrooms).

You learn to review very carefully when you first start VRBO-ing....


Edit/Add: Our very 1st Florida VRBO choice for wintering in retirement was a freshly remodeled condo and the pictures looked great. Never got a chance to stay there for the two months, as the owners informed us after we worked it out with them - that they were renting it to someone who wanted it for a longer time frame (3 mos). It turned out in our favor as we ended up with one in that same building where we stayed for 5 years. It was a larger one bedroom 45 degree angle corner unit at the same price (theirs was the typical tunnel unit - 12-15' wide by +/- 40 feet long with 8' sliders for light and bunks in the hallways). Over the 5 years we rented that unit - we noticed the other unit appeared empty.
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Old 09-10-2016, 02:46 AM   #44
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Although the financials usually suggest renting is the better decision, it will often come down to the competing objectives of control vs flexibility. Ownership usually costs more but does bestow the advantages of controlling your decor, allowing you to leave all your own stuff there, car in the garage, ability to loan out to friends, etc. We find this important, but I can see how others would not. I would find the hassle of having to deal with landlords a real put off, as I don't like people telling me what to do. Likewise I would hate to deal with renters, so I would never rent our Arizona place out.

Everybody is different, but financial considerations, although important, would not necessarily be the deciding factor.
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Old 09-10-2016, 07:15 AM   #45
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+1 with Danmar on ownership benefits, plus I think buying will be a better financial decision for us.

Rough numbers.. 1,450sf 2 bedroom + den cost $175k furnished. Annual costs (HOA fees, property taxes, insurance, electricity, off-season monitoring, etc.) ~$7,500. Paid cash, so if I assume my opportunity cost of funds is 5.5% and the annual appreciation is 2.5% then my annual net opportunity cost is ~3% or $5,250. So my total annual cost is $12,750.

Similar units rent in season for a 3 month minimum for ~$3,000/month plus 10% tax or $3,300/month so my breakeven is ~4 months plus I have certainty about getting a place, can leave my stuff there, etc. We plan to use it 4-5 months a year so I think financially we'll come out a little ahead.

I think over time inflation of rent rates will exceed inflation in my annual costs.
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Old 09-10-2016, 08:28 AM   #46
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+1 with Danmar on ownership benefits, plus I think buying will be a better financial decision for us.

Rough numbers.. 1,450sf 2 bedroom + den cost $175k furnished. Annual costs (HOA fees, property taxes, insurance, electricity, off-season monitoring, etc.) ~$7,500. Paid cash, so if I assume my opportunity cost of funds is 5.5% and the annual appreciation is 2.5% then my annual net opportunity cost is ~3% or $5,250. So my total annual cost is $12,750.
Can you describe the off-season monitoring--what is the cost and what does it give you?

Are the opportunity cost (5.5%) and appreciation (2.5%) each real or nominal? I'm asking b/c it seems like the opportunity cost might be real while the appreciation is nominal?
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Old 09-10-2016, 09:03 AM   #47
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Off-season monitoring is having someone (actually the association's maintenance man does it on the side) go in a few times a month and check that the AC is working, etc. and costs $30/month. I probably could go without it but it is good peace of mind for me to have someone trusted checking in on the place every so often.

The opportunity cost and appreciation are both nominal, and are both conservative. The 5.5% is what I use for retirement planning generally and the appreciation is probably on the low side as well but only time will tell. If I cared to I could always take a mortgage out on the condo and invest the proceeds which would reduce my opportunity cost while taking on some financial risk.
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Old 09-10-2016, 05:07 PM   #48
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The opportunity cost and appreciation are both nominal, and are both conservative. The 5.5% is what I use for retirement planning generally and the appreciation is probably on the low side as well but only time will tell. If I cared to I could always take a mortgage out on the condo and invest the proceeds which would reduce my opportunity cost while taking on some financial risk.
I'm having a total senior moment -- can you help me with what the opportunity cost reduction math/analysis is? Say, taking out a mortgage of 80% of value at 3.7% APR?
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Old 09-10-2016, 09:07 PM   #49
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Right now I have taken $175k out of investments to buy the property. Let's say the I would have earned 5.5% on that $175k so I'm earning $9.6k less as a result of having paid cash for the property.

If I finance it 80% at 3.7%, then I only have 20%/$35k invested so my opportunity cost is now $1.9k plus interest on the mortgage of $5.2k so a total of $7.1k (rather than $9.6k).
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Old 09-11-2016, 03:22 AM   #50
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We have owned two condos in FL, one in Bonita Springs (which we sold) and one in Ft. Myers. We rented out the Bonita condo for 5 years during winter months, and the rent paid about 50% of our total costs (it was mortgaged). We then used it as a "quickie" get away the rest of the year.
We do not rent out the current condo (Ft. Myers). Mortgage free, about $7k a year in taxes, HOA, utilities, etc. We spend Jan-March there and "quickie" vacations during the year.
We looked into getting a place that was more expensive, and trying to rent it out during the other 9 months. A local realtor told us that was very difficult unless you can walk to the beach from your unit. It seems the beach front hotels give great deals in the summer to stay full. Hard to compete with that.

We purchased our current condo as an investment, having bought a foreclosure. If the return on cash ever improves, we would consider selling and renting a winter place. But for now, with the "cash is trash" economy, owning the condo seems like a pretty good deal.
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Old 09-21-2016, 06:50 AM   #51
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I think "banking" on the idea of appreciation is, as we all should have learned in 2007, a bit shaky. Also, when I was working, I was making enough money that I was going to lose a lot of my normal real estate associated write-offs to the AMT. Especially since I live in NY STATE and get heavily whacked already. Keep an eye on the AMT and what it may due to your projected deductions if you are anywhere close to the AMT threshold.
Well I have to go back on what I said -- you may have been spot on regarding the AMT. We use a CPA for tax prep and I'm embarrassed to admit it'd been a few years or so since I looked closely at our 6251. We've crept up quite close to the threshold and may or may not have options to keep everything fully deductible.

I've got time scheduled out with a couple experts regarding those options but in the meantime am I correct that (assuming a traditional scenario) AMT might offset the RE tax deduction of another place but should not offset (negate) the interest deduction of another place?
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Old 09-21-2016, 07:24 AM   #52
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Well I have to go back on what I said -- you may have been spot on regarding the AMT. We use a CPA for tax prep and I'm embarrassed to admit it'd been a few years or so since I looked closely at our 6251. We've crept up quite close to the threshold and may or may not have options to keep everything fully deductible.

I've got time scheduled out with a couple experts regarding those options but in the meantime am I correct that (assuming a traditional scenario) AMT might offset the RE tax deduction of another place but should not offset (negate) the interest deduction of another place?
I'm not an accountant, but I think BOTH the RE Tax deduction AND the mortgage interest deduction could be negated by the AMT, depending upon your income and the size of those deductions along with any other deductions you may have.
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Old 09-21-2016, 07:40 AM   #53
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I'm not an accountant, but I think BOTH the RE Tax deduction AND the mortgage interest deduction could be negated by the AMT, depending upon your income and the size of those deductions along with any other deductions you may have.
The AMT form (6251) adds line 9 from schedule A back in. Line 9 on schedule A is state income taxes (scha/5) plus real estate taxes (scha/6). Mortgage interest is reported on line 10 which is not included in the above.

But like you, I'm not an accountant and have a strong dislike for these forms
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