Florida Condos as Investments?

[TooFrugal]

CNN had a video on Florida condos that sold for over 100K a few years ago now selling for 35K or so. I really haven't been into real estate as an investment much up until now, as I barely keep our own house repaired.

But wow, those prices are intriguing, maybe even for a vacation or retirement home at those kind of prices.

I really like Florida and we have thought of retiring there eventually or maybe living there part of the year.

So has any one else thought of this? What are the pros and cons?

 

[brewer12345]

Assuming you can deal with the landlord issues or will simply keep it empty, the big gotcha is condo association troubles. Many are underfunded, the project is majority owned by the builder (or their lenders), and in many cases the bulk of owners (posssibly the builder) are stiffing the condo assoc on maintenance fees. If you can find a stable condo assoc selling on the cheap, maybe it would work. Otherwise I think the game is really for bigger fish who can buy the whole enchilada for peanuts and fix the operational/financial problems of the project.

 

[donheff]

Yeah, its on all the stations now. The Today Show just had a segment on South Beach "luxury" high rise one bedrooms going for $50K. I like Miami but it is too far away for week ends.

 

[cardude]

I poke around on the internet looking at prices from time to time since I think about possibly moving to FL after the kids are off in college in Texas.

I've seen some stuff where the asking price is about 1/2 of what it's on the tax rolls for. My question is, if it sells for that will the appraised value automatically drop by half for RE taxes as well? If not, then RE taxes could eat you alive.

 

[skyvue]

I have a friend who bought in a nice location in Tampa (Harbour Island) 3 years ago. She unfortuntely took out a no money down, interest only loan on the property because her realtor "assured" here that it would appreciate quickly. Well she paid $185K for it and they are selling for $100K now. Tons are on the market!

 

[Moemg]

. My question is, if it sells for that will the appraised value automatically drop by half for RE taxes as well? If not, then RE taxes could eat you alive.

Yes, the property taxes will be on your purchase price . There are some great buys right now on condos but some of them were bought as investments and then rented to whoever would rent them so disrepair set in . You would really need to look at them and check out the area . The only ones I know of for $35,000 are pretty awful . A more realistic price is low $100,000 and that is no where near a beach .Beach front or close to beach condos are still $350,000 and up .

 

[Lisa99]

and watch out for the monthly association fees.

There are some amazing deals here in Vegas too for condos. One set of condos in a nice building is selling for 60% of what they did before the housing bust.

BUT, the association fees are $565 per month! And with more condos going into foreclosure the association fees keep going up to cover all of the empty units.

So these might appear to be a good deal, but know all of the ongoing costs/fees before getting too excited

 

[sheehs1]

I saw this too and wondered the same thing. Thought to myself..."could buy one, hire a property manager and rent it to generate some monthly or yearly income" and maybe do better than the stock market or what the banks are now offering. But....my 2nd and 3rd thoughts mirror what others have said here. Only want to do it if I can actually make money on it each year. Don't need it to "eat" money. I guess I am too chicken to trust it. Risks: monthly condo fees, ongoing maintenance, special condo association assessments which can be pretty hefty, no guarantee anyone would rent it continuously, bankruptcy by the owner/builder - then what?
My mom had a condo in Va. Beach Va and they hit her with a $20,000 special assessment as the condos were built with stucco and they had to redo the entire facade of every building in the complex. When we went to sell it after her death, we had to put $25,000 in escrow for the new buyer to offset this special assessment. I think we got what she paid for it 12 years earlier - no appreciation. It was water front! Taught me a lesson that is for sure.
All sorts of things can happen. Most of them negative.

 

[FUEGO]

I saw the same CNN video. But as others have pointed out - condo assoc fees could be killer. Especially since half the units probably aren't paying their fees and the HOA may be completely dysfunctional.

The condos they showed in the videos looked a little rough on the outside. Those kinds of places sell for $50000-$80000, maybe 20% less if you are buying short sale/foreclosures in my "normal" area of the country, so $35000 isn't too much of a steal. And there is such a glut of housing on the market, you may be waiting a long time for values to go up. Plus I imagine there is a glut of inventory for renters. And what will the quality of the renters be if unemployment is really high?

It's tempting, but seems like it would be rather risky and a fair amount of work to make a go at it. Now if you were to have a lot of free money, I could see where buying up 51% of a place, taking over the HOA and forcing the deadbeat owners to pay up or face liens/foreclosure for nonpayment of dues, and subsequently pumping some money into the development could be a good real estate investment. Run it as apartments until the property market turns around and sell it off as condos unit by unit. This would clearly be like a full time job, and a little too far on the "risk spectrum" for me. And I don't have a million or two in liquid capital lying around to pursue this. I'm talking about the smaller 1-2 story condo developments like they showed in the CNN video, not the 20-40 story highrise lux condos.

 

[dex]

the big gotcha is condo association troubles. Many are underfunded, the project is majority owned by the builder (or their lenders), and in many cases the bulk of owners (posssibly the builder) are stiffing the condo assoc on maintenance fees. If you can find a stable condo assoc selling on the cheap, maybe it would work.

Good points.
Imagine getting a bill from the condo association for 25K to repair a roof or something.
Also, the people who bought at the high end might walk away from the condo causing more problems.

 

[TooFrugal]

Thanks to everyone who posted replies. I've never owned a condo so wasn't really thinking about association fees and special assessments. But that wouldn't be much of an investment to buy a vacation condo for 35K and get a special assessment for 20K, especially with housing prices most likely not going up in the foreseeable future.

We are still intrigued by the home prices overall in Florida, though maybe condos aren't the way to go right now if you can't buy the whole complex.

I don't know if the Home and Garden channel home prices are are really very accurate, but they show nice looking 4 bedroom homes with covered pools in places like Bradenton going for less than half of what a comparable home would cost in California.

 

[Karloff]

I live in FL (and actually hate it, but that's another story).

Just to illustrate and hopefully help with some hard numbers, our condo (2/2, 1500 sq. feet, fancy area, great location by the beach, close to everything, on A1A, also known as Ocean Drive or Collins Ave) was worth $390K in 2008 and more than 400K in 2007. It is now valued at $225K, but the condo fees and taxes are still outrageous and ridiculous.

Our unit is paid for, but we still have to shell out $1070 on a monthly basis ($570 for our condo fees, and around $500 put aside every month for property taxes). That does not include any "special assessment fees". For example, I was told we will soon need a new pool, which will require each unit owner to pay around $5K (for something that, in our case, we never use). Taxes used to be $8K in 2008, close to $6K now.

My wife loves the place/area. But if it was up to me, I would live anywhere BUT the beach, and pay less than half for everything. In my opinion, it is NOT a good time to buy. Real estate is history for a while. Our building is half-empty. Prices will continue to go down. I wouldn't be surprised if our unit goes to $180K in a year or so.

To keep things in perspective, it was bought in 1997 for $120K.

 

[dex]

To keep things in perspective, it was bought in 1997 for $120K.

I'm happy for you on that account.

My grandmother died in '08 and has a condo in Hollywood or Hollandale - just north of Miami a block from the beach - it was worth 80K at one point - no interest at all. There are newer condos in the area that are not selling.
Florida has always had a history of boom and busts in real estate. Ponce de Leon was sold on the Fountain of Younth angle - he went broke looking for it.

 

[Karloff]

Yes, our unit is right in-between Hallandale and Hollywood. This place was bubble central and it will take years to recover, if it does at all.

 

[Moemg]

if the Home and Garden channel home prices are are really very accurate, but they show nice looking 4 bedroom homes with covered pools in places like Bradenton going for less than half of what a comparable home would cost in California.

I watch Home & Garden and I actually know what areas they are talking about . They are subdivisions which are in more remote areas but they are nice developments about 45 minutes from the beach . For about $250,000 you can buy a decent size house with a covered pool . The downsize is the lots are tiny . There is an area in Bradenton called Mill Creek that has large lots and very nice houses . If you are thinking about retiring in that area I'd check out Venice ,Fl. It's less congested with close access to great beaches . Most of they newer developments there are a 10 minute drive to the beach and there is a cute downtown with a lot of restaurants and upscale shops .

 

[tryan]

I stopped buying condos as investments 20 years ago ... owner occupants hate rentors/investors and have no problem racking up "special assessments" EVERY year.

Tried 3 ... never made a penny.

 

[kcowan]

With these horror stories about Florida condos, is there any end to the bubble? How low can they go?

 

[NW Landlady]

Dh & I just got back from Big Island Hawaii & we looked at Vacation Condos in the Kailua-Kona Area - all Ocean Front condos. We were looking for a possible alternative season home for us when it gets cold here in Seattle.

Very disappointed. Although the realtor indicated prices were Down 70% from 2007 (I sorta think he exaggerated, maybe for top end homes that would be right)...most were selling in the $250K - $350 K range minimum for 600 - 950 sq ft Ocean Front & the condo fees & taxes alone were running about $1300+ per month. Occupancy is only 30% and rental rates are down/negotiable, so you would be lucky to cover the fees if you put it in the rental pool, but not cover the mortgage or expenses at all. Additionally the "VOG" & weather wasn't what we usually see and our Local friends said that this is pretty common now. We went from Sunny Seattle to Cloudy Kona...not a good change for us.

No doubt about it, you need to check out all the angles on a condo purchase. Think we would be better off just renting a place & more flexibility.

 

[modhatter]

I live in Florida, and I am very familiar with prices of condo's as I have always had rental units in condo's and townhouses. You can buy a decent condo or townhouse in a nice area now in the 80-$100,000 range that were previously selling in the $220,000 range before the crash.

That will buy you a livable unit in a nice town (not so near the beach) with HOA fees in the $150 to $200 range.

If you look at beach communities (within a couple blocks of ocean), all those numbers go up.

There are many nice condo's in not so terrific area's that can be had for the $35 - $50,000 range. Some of those units are nice, but I would prefer living in a different town. All depends on your standards and nest egg, I guess.

Real estate taxes have also decreased, but if you go online and look up real estate taxes for Florida now, they warn you that just because you buy a property at a fire sale price, don't think your taxes will reflect the purchase price. In reality, I find that the taxes have fallen considerably, as the values have declined.