Consiering Condo Investment - Good Time or Stupid Idea?

[Normy]

Originally Posted by serge944

This might be a stupid question, but, uhh...where do you sleep?

There must be a "Murphy bed" or perhaps a fold-out couch.

-Frankly, I think it is a good time to start moving on real estate, at least in South Florida. Me and a colleague have started a business renovating distressed homes, we have two under rent right now, two more will come on the market in about a week, and we also are nearing completion on the renovation of an 18 unit condominium development in the Sailboat Bend area of Fort Lauderdale.

The prices in south Florida are still in decline, but they probably won't decline much more, at least in the areas that we are working. I suspect that in the next 5 years, property values will slowly rise....though that depends upon the economy. The condo development is ideal because it is within one mile of the downtown core of Ft.Lauderdale, greatly reducing transportation costs for a person who works in one of the banks or businesses located in the center of the city.

The units themselves are one bedroom units, with a large combined kitchen/living room at the front and a large bedroom at the back. They average about 500 square feet, have had everything but the shell of the building replaced or restored, and have upgrades such as granite countertops, stainless-steel appliances, washer/dryer, and new 175 mph-certified impact glass. We are going to put them on the market at between $130k and $150k. These prices mean a small profit, but that's the market right now. We figure we will most likely do rent-to-own agreements or outright rentals at first.

For anyone who is considering doing something like this, I have two pieces of advice:

1. DO YOUR RESEARCH: We spent hundreds of hours searching for the houses we've renovated and rented, and bought only the cheapest places we could find. But they are only cheap because the owners were in trouble- they were in decent shape [one is spectacular, needs nothing]. Do at least 100 hours of research for each place you buy! And every location is different!

2. LOCATION is EVERYTHING: The places we own and are renovating all have one thing in common: Unique locations. The houses are located in a desireable suburb of Fort Lauderdale where nearly all the homes have been renovated and upgraded in the past 10 years [according to the local newspaper, that zip code saw an 11.2% increase in sales in the year ended in May], and the condominiums are very close to downtown, also in a trendy neighborhood. If this fact wasn't true, they would be worth no where near what we paid for them, since they are simple units. But they are perfect for a senior citizen, a young cop, a young teacher...etc.

Best of luck. My opinion now is the time to start cautiously looking at real estate...

N

[rammstein]

I work as an analyst for a very large vulture fund based in South Florida. I do not know the San Fran market at all.

Here are the general things I could tell you:

1) Normy is right when he says to do research. If you don't know EVERYTHING, to the point of feeling ill thinking about it, you aren't prepared.

2) Be extremely wary of condo associations, and the limitations that they can put on you as you try to keep it rented.

3) At least in our market here, there isn't much of a need to rush. Prices have probably come close to bottoming out, but appreciation anytime in the future is pretty ludicrous to plan on.

4) Are you planning to get leverage on this? If so, investigate very closely what financing terms are available to you.

5) Particularly for a one-off deal person such as yourself, stick with fundamentals instead of trying for an otu of the park homerun. Quality building, quality location, and in the case of a condo quality management are imperative for this to work.

Financial stuff to dig deep into includes HOA fees, taxes (see how re-assessments have worked on other units in the building that have recently closed), insurance (do you guys have special earthquake insurance?), etc.

Honestly, it is a scary business, and frankly I don't know if I would want to be a residential landlord. Could you buy into a single tenant NNN retail property somewhere in Texas or something? That's a much safer bet, and far less time consuming- almost like a savings bond.

Tread carefully, and don't listen to anything a broker tells you.

[lowyder993s]

Originally Posted by Normy

We are going to put them on the market at between $130k and $150k. These prices mean a small profit, but that's the market right now. We figure we will most likely do rent-to-own agreements or outright rentals at first.
N

Holy Schizzle...I paid more for a 35' sportfisher!!! 15 years old...single berth...but its got 20 rod holders...and I don't mean pole dancers

[the]

Haven't read all the posts, but your situation is an easy analysis:

Does the rent you can get for it cover all the expenses (mortgage, insurance, etc.) assuming 15-20% down?

Or, as a data point that can be used for analysis, what is the yearly gross rent you can get for it?

[Porsche-O-Phile]

Can you cover ALL your carrying costs assuming 85%-90% occupancy?

Doubt it.