A Condo in Florida… A Dirty Proposition or A Good Investment?

Will we ever get tired of hearing that real estate prices are falling?  Not really, especially if you are looking to take your cash and jump into the landlord game.   Need to finance your investment?  Then the condo game in Florida may not be worth your while.

In this new environment where the sales of single family homes are dictated by short sales and foreclosures, market values have taken a total beating.   Across the U.S. condominium prices fell nearly a quarter (24.8%) as reported by The Wall Street Journal. Condominium sales are rebounding in cities like New York and Miami where foreign, cash buyers are purchasing these properties in droves.

But are condominiums a good investment?

It depends.  Investors look to maximize the return on their investment, from the onset.  Regardless of the length of time that an asset (like real estate) is held, investors need their investment to “yield” (commonly known as a capitalization rate: net operating income /sales price) of at least 5-6% annually.   In the heyday I knew of conglomerates passing on deals that did not result in yields of at least 8% annually!  The tide has certainly turned. The supply of available condos has increased at crippling speeds and demand has waned due to the “new” static and dreary economic environment.  The result; yields have suffered, and dollars are chasing investments that can simply cover costs.

In Naples, where demand for condos is split between seasonal and annual renters, finding a true investment opportunity can be tricky, but not impossible.  As of November 1, 2010 there were 434 condos and villas available for sale under $100,000.  Demand for quality residential accommodations during the blissful months of January to April is alive and well, as indicators point to increased numbers of domestic and international visitors arriving ahead of last years’ schedule.    Landlords have a variety of on-line options for connecting with renters, websites such as vbro.com and homeaway.com have proven to be beneficial as visitors can view property images, maps and read past reviews.

The challenge becomes locating a property to purchase for cash in an ideal location which requires minimum renovations. To ensure you achieve the “yield” you seek, a cash flow model of the property is essential; research the neighborhood, rental rates, vacancy rates, calculate annual revenues, and itemizes costs such as maintenance, taxes and utilities.   A beach front condo may rent out every day of the year but if the taxes and HOA fees don’t cover the rental payments, you may be paying people to live there.  With this type of negative cash flow, your “investment” is really a money pit.

Select a property based on the rental opportunities that currently exists.  Purchase a property only when the cash flow meets your investment return requirements.  Don’t buy on what may happen,  instead buy based on what is actually occurring today!

For a detailed consultation identifying lucrative residential investment  in today’s market in Naples, Florida contact us : Enquiries@NaplesMeridian.com

20 Comments

  1. I really must make the comment that it’s rather refreshing to visit a rather original blog like yours, good effort. I expect I’ll be dropping by fairly often, do you think you’ll be making more posts?

    • Thank you so much Erika… Its so nice to see that you appreciate original content, as I do all my own writing. I try and write a couple of times a month though only if there is something worthwhile to say!

    • Thanks for your comments Edwardo! With so much going on in our real estate market another blog post is only days away!

  2. I would like to thank you for the efforts in writing for this site. In fact your creative writing skills has inspired me to get my own site now. The blogging is spreading its wings quickly. Your write up is a great example!

  3. I really must admit it is really quite pleasing to visit a relatively ‘different’ blog like yours, excellent job. I expect I’ll be coming back quite often and I look forward to reading your next post when I do.

  4. I really must make the comment that it’s quite good to uncover a genuinely ‘different’ blog like this, good work. I look forward to coming back frequently and I’ll be keeping an eye out for your next comment then.

  5. Hi there ! Thanks so much for your comment, and its great that you recognize my content! Please check back often!!

  6. What a nice experience it has been checking out this blog. And so I thought I would write a comment. This blog was recommended to me so based on that I thought I should check it out… and yes, my friend wasn’t wrong… great work. There is an endless number of sites on the net which are totally uninteresting, it is cetainly terrific to see someone telling it like it is, keep it up.

    • Thanks Tiffaney! You can always count on me to tell it like it is ! In this new age of real estate there is so much information available that sometimes we just need to cut through all the noise and get the important points. I really appreciate people like you sharing your opinion as to the content of my blog as its great fun to write about the latest and greatest in the biz!

  7. I’ve got to make the comment that it’s rather refreshing to stumble on an original blog such as this one, good work. I expect I’ll be coming back fairly soon and I’ll be watching out for your next comment when I do, bye for now.

2 Pings & Trackbacks

  1. Pingback:

  2. Pingback:

Leave a Reply

Your email address will not be published. Required fields are marked *