Florida Condo: Rent vs Buy?

[Gearhead Jim]

There are some pretty good prices on condos in SW Florida, and we are considering buying one. However, I suspect that the annual cost of condo association fees + property taxes (bend over) + insurance; would be similar to the cost of renting a condo for Jan & Feb. Obviously, a particular deal would have its own particular numbers, but what do you folks think?
If we buy, then some day we might make money when prices rise. Or not.
There are certain hassles with owning, different hassles with renting.

 

[Rich_by_the_Bay]

That is a very nice area if warm sunshine, surf, and relaxation are what you have in mind. Prices are embarrassingly low. If you are in no hurry to sell, you can pick up great bargains - much lower than when we looked 4 years ago. Anything south of, and including, Sarasota is considered tropical and only Fla offers that in the continental US.

You'll have to run the numbers and hurricane risk. The insurance problem seems to be loosening up. And if you can see your way to establishing Fla residency, you will never pay state income tax again.

Worth looking at. We are.

 

[socca]

There are some pretty good prices on condos in SW Florida, and we are considering buying one.

This is an understatement. There are so many condos for sale in SW Florida that you can pick up one for a pittance. Personally, I like to keep things as simple as possible, which is why I will probably never own a second residence anywhere. Keeping a primary residence in good shape is hassle enough.

 

[BunsGettingFirm]

There are some pretty good prices on condos in SW Florida, and we are considering buying one. However, I suspect that the annual cost of condo association fees + property taxes (bend over) + insurance; would be similar to the cost of renting a condo for Jan & Feb. Obviously, a particular deal would have its own particular numbers, but what do you folks think?
If we buy, then some day we might make money when prices rise. Or not.
There are certain hassles with owning, different hassles with renting.

Be patient if you're looking at a distressed or bank-owned properties. Those low price don't actually mean that you'll close on that price. I have made 3 bids on condos, but none of them actually resulted in a sale. The banks are too swamped.

 

[Moemg]

If you are thinking of buying there is no better time than now . Prices are cheap and everybody is ready to deal . If you only intend to use it two months I would think that renting would be much cheaper and allow you to try out several areas .

 

[Urchina]

If you do decide to buy, take a close look at the Association's financial position and books. I don't know about Florida, but here in California the association is required by law to have its reserves fully funded by (I think) 2010, and a reserve study is required every three years.

Also ask about upcoming special assessments (one-time charges for repairs, etc.) A friend of ours is sitting on his condo right now because they have a $95,000 special assessment pending for
major structural work. It's a nightmare.

Poor association management would be a particular problem for absentee owners, I would imagine, since you're not there all the time to keep an eye on things.

 

[Gearhead Jim]

I'm also thinking that if a particular building has many units in default/foreclosure, those people won't be paying their condo fees and the "good" owners will have to make up the difference.

 

[Moemg]

My SO's son lives in a rented condo . These condos were built right at the end of the bubble and most of them were bought by real estate investors who have now rented them . The places have gone downhill fast . If I was going to buy a condo in Florida I'd look for an established one with older owners .

 

[Martha]

I'm also thinking that if a particular building has many units in default/foreclosure, those people won't be paying their condo fees and the "good" owners will have to make up the difference.

At least in the states that I am familiar with, condo fees take priority over mortgage debt and even if the mortgage holder forecloses, the fees are still owed.

 

[honobob]

At least in the states that I am familiar with, condo fees take priority over mortgage debt and even if the mortgage holder forecloses, the fees are still owed.

I believe both CA and Hawaii limit the collection to six months. Associations need to be very proactive if a unit is in foreclosure.

 

[Gearhead Jim]

...
the fees are still owed.

In today's world, there seems to be a big difference between "owed" and "paid". Not sure how that will all work out.

 

[Urchina]

At least in the states that I am familiar with, condo fees take priority over mortgage debt and even if the mortgage holder forecloses, the fees are still owed.

Not so in CA. It turns out that the association's legal documents spell out whether or not this is so. Our association, for example, does NOT require that fees in arrears be paid when the unit is sold. The association next door does.

Our HOA recently filed a lien on a unit in our association as a means of forcing foreclosure and limiting our losses, but we're still going to eat nearly $7,500 on it.

I can assure you that I'm going to spearhead a change of the governing docs for our HOA pronto. Too bad it's expensive to do.

So, I'd check and read those CC&Rs, bylaws, and articles of incorporation THOROUGHLY.

 

[Roger that]

It hardly seems worth it to buy if you're only going to live in it 2 months a year. I've been renting in south florida for 3 years now. 4 months...mid December to mid April, in a 2 bedroom high rise directly on the ocean. Fully furnished and professionally decorated. The cost of the 4 month rental is less than the annual cost of real estate taxes, monthly maintainance and insurance and utilities.
That doesn't take into account the loss of interest on the principal of the purchase price and the furnishing and decorating the unit.
I don't have to worry about an unoccupied unit 8 months a year or have the fear of hurricanes; or assessments either
The only down side is I have to take my clothes and toys with me each year.
Sure there's a chance of capital apprectiation if you buy now and sell later, but with the market the way it is, that's a long way off.

 

[youbet]

It hardly seems worth it to buy if you're only going to live in it 2 months a year. I've been renting in south florida for 3 years now. 4 months...mid December to mid April, in a 2 bedroom high rise directly on the ocean.

DW and I have been casually considering a 3 -4 month escape from Chicago one of these winters. What is the rent range for a nice place such as you've been renting these days? Has the glut of condo's on the market forced rents down?

 

[Gearhead Jim]

I'm not Roger that, but I live near Chicago...
A one bedroom condo in Bonita Springs across from the beach (Bonita Beach?) is $3k/month in February. Other units in the area that seemed comparable ran from $2,800 to $3,500. A person who knows the area, does research, and is willing to reserve a year in advance could probably do better. I'm guessing the rock bottom price for similar units by the beach would be about $2,500 now. We did not price larger units.
The woman who owns the place says that condo fees + insurance + taxes run about $9k per year. I'm not sure if that also includes interior maintenance like furniture replacement, air conditioner, etc.
My impression is that the condo glut has not yet caused rents to decrease near the beach, but others with more information might dispute that.
BTW, looking at your sig line: SW Florida isn't as congested as the Miami area, but it's still pretty crowded near the beaches during winter. Fort Myers Beach can have traffic moving slower than you can walk. Of course, you can go inland a few miles and be near a golf course if you like that, or go a few more miles inland and listen to the dueling banjos...
Or go furher north (My MIL lives in Spring Hill) where there are far fewer people but you can easily freeze your buns off in February.

 

[Roger that]

Florida condo...rent or buy

[Quote
The woman who owns the place says that condo fees + insurance + taxes run about $9k per year.

Don't know about your area, but real estate taxes average 2-3% of purchase price, so a $300K unit would have about $7500 in taxes. Monthly maintainance for the apartment is about $500 a month or $6k. Don't know what insurance is, but we're well above $9K already.

 

[MovingtotheCove]

Management from afar...

We concluded that managing a 2nd property from a distance was not worth the pride of ownership. My parents rented in the winter for almost 20 years. Good choice...when they wanted to move complexes or units easy to do so and no insurance, no worrry, no fees, etc. Yes, rent did go up over time but the other things would have also. In our case we own timeshare weeks. Good choice so far for us. Five weeks in Ft. Myers Beach and one week in Kissimmee. We can come and go and have no hassle at all...yes, you must drag along luggage and anything you acquire must be hauled "home" again but fees are far less than rental prices so far and for the past 8 years we've had a getaway without the ownership being fully on our shoulders. Again, our decision was based on the challenges of management of a vacation unit from a far vs. the ability to walk away at the end of a trip. Good luck in your search for the right answer...certainly it is a buyers market right now in SW FL.

 

[oma]

It hardly seems worth it to buy if you're only going to live in it 2 months a year. I've been renting in south florida for 3 years now. 4 months...mid December to mid April, in a 2 bedroom high rise directly on the ocean. Fully furnished and professionally decorated. The cost of the 4 month rental is less than the annual cost of real estate taxes, monthly maintainance and insurance and utilities.
That doesn't take into account the loss of interest on the principal of the purchase price and the furnishing and decorating the unit.
I don't have to worry about an unoccupied unit 8 months a year or have the fear of hurricanes; or assessments either
The only down side is I have to take my clothes and toys with me each year.
Sure there's a chance of capital apprectiation if you buy now and sell later, but with the market the way it is, that's a long way off.

From FLA: taxes and insurances alone make me think this is an outstanding plan.

 

[MovingtotheCove]

Ego vs. functional

As in our previous post we just can justify full ownership for a part time 2 or 3 month residence each year. We have no ego that is such we must tell others we OWN our winter or summer retreat. As long as we can either rent from an owner or use our timeshare weeks to get what we want this is our plan. Again, right now we have 5 timeshare weeks in Ft. Myers Beach and 1 in Orlando....plenty of home resort use and plenty of chance to trade to other resorts. We find timeshare gives better ammenities and activities. When we rented directly from owners or through normal real estate channels no bad experiences but not quite as well equipped in the kitchens or with beach chairs, etc. as at the timeshare resorts. Everyone knows right now SW or Central FL has great deals on condos and villas, but do you want the Taxes, Insurance, and HOA fees for only a few weeks of use?

 

[Rich]

I put the numbers (own vs. rent) on a spreadsheet and they come up with renting every time. Indeed, if you rented a place for twelve months out of the year the numbers still show rent wins over owning.

One reason this is so is that most folks don’t take into consideration the cost of the money used to purchase the unit. If you buy a $100,000 dollar condo outright, that money would earn around $3,000 dollars a year (at 3%) even in today’s soft interest rate environment. Then there are the property taxes (high in Florida) and high insurance rates. Also, you might well face unanticipated assessments for repairs at your facility, which can be quite steep.

Anyway, that’s how it looks to me.

Rich

 

[honobob]

I put the numbers (own vs. rent) on a spreadsheet and they come up with renting every time. Indeed, if you rented a place for twelve months out of the year the numbers still show rent wins over owning.

Rich

Rich. What number are you using for appreciation? Take Sarasota, Fl for example. The city as a whole experienced 11.25% annual average appreciation over the last 18 years. That includes the last couple of years that have not been so good. Obviously a better NBHD will beat that, but even $11,250 gain each year goes a long way against $20K down on a $100,000 property. If you rented when not in use using a property manager you'd be even better. Would definitely like to see your figures that would support renting over owning.

 

[lazygood4nothinbum]

between 2000 & 2005 sarasota county population grew by about 2.35% per year***
between 1990 & 2000 by about 1.6% per year*
between 1980 & 1990 by 3.2% per year*
between 1970 & 1980 by 3.33% per year*
between 1960 & 1970 by 4.6% per year*
between 1950 & 1960 by 10.3% per year*
between 1940 & 1950 by 6% per year*
between 1930 & 1940 by 2.62% per year*

projected sarasota county population growth 2008-2026 is about 1.44% per year**. so the next 18 years might look very different from the prior 18 years or from the previous 70 years for that matter.

*source http://www.bebr.ufl.edu/system/files/Hist_Census_Counties_0.pdf

**source http://edr.state.fl.us/population/web10.xls

***source http://en.wikipedia.org/wiki/Sarasota_County

 

[honobob]

between 2000 & 2005 sarasota county population grew by about 2.35% per year***
between 1990 & 2000 by about 1.6% per year*
between 1980 & 1990 by 3.2% per year*
between 1970 & 1980 by 3.33% per year*
between 1960 & 1970 by 4.6% per year*
between 1950 & 1960 by 10.3% per year*
between 1940 & 1950 by 6% per year*
between 1930 & 1940 by 2.62% per year*

http://

So I'm guessing that the time period that I'm looking at that has resulted in 11.25% average annual appreciation has had only 2% population growth that probably it will have a greater population growth resulting in a greater appreciation rate. It's all good.

 

[lazygood4nothinbum]

zillow shows sarasota from about dec 1998 to date appreciating at about 6.88% per year (and falling).

during that time population increased by about 2.25% annually.

population is projected to increase by about 1.54% annually over the next 10 years, a 32% decrease in the rate of population from when property values were increasing by the aforementioned 6.88% per year.

but aside from less demanding population growth, also, wouldn't character changes of an area over time spike appreciation rates to new and sustainable plateaux which might never be repeated again. for instance, i bought into my area when it was a dilapidated cracktown which we transformed into a gayborhood so desirable that even str8s with children have moved back in. probably that's not gonna happen again this lifetime. so likely i received gains that a subsequent owner might not.

i remember sarasota from the late 1970s because a friend bought a hotel there where we used to play. it was pretty backwater back then. but try driving along tamiami trail now during rush hour. what a mess. sarasota has come into its own already. when is that going to happen again?

 

[socca]

FWIW, some folks thought it was worth gambling around $1 billion on new development in downtown Sarasota:

Sarasota Proscenium Project Locks In Waldorf-Astoria

The latest scuttlebutt is that this deal is starting to fall apart. After all, there's already a Ritz-Carlton downtown. I'd be willing to bet some of the Paulson bailout money on Proscenium, but not my own