[Bruins_Fan]

My wife and I have been talking about buying a condo in FL. We live in the Boston area, and are early-mid 40s and would pay cash, with a budget of 80-100k.

We are considering this not so much as an investment, but something we would likely use 3-4 weeks each winter, and may allow some close friends and family to stay there occasionally. As we get older, I expect we would use it more and more. I know the FL condo market was beat down badly after the housing crash, and understand there are still some good buys there. This is why I'm entertaining the idea...we know we'll want a place down the line, so why not get in while RE is cheaper? While this might be a little early (age-wise) to get into a condo considering how much we would use it, I'd hate to see prices rise and prevent us from buying down the road in say 5-10 years when I expect we would use it more. I don't see our budget moving much, either.

I guess my question is, I know we could simply rent for far less $$ each winter. Are we crazy to be considering buying?

P.S. We're not interested in being landlords

[kyle19125]

I would wait a couple of years and keep your eye on the pricing trends. The evidence suggests we're not completely finished with our housing crisis given the number of foreclosures still in the pipeline.

[bbronston]

Real estate markets are very local despite the way numbers and trends are reported nationally. In our area, the area around Sarasota, condo prices were hard hit and slower to recover than the single family home market but they are coming back so, in that sense, you've already missed the opportunity you were looking for. No one can know if prices will continue to climb or if they will fall again but it is probably most likely that the market will go up AND down a few times before you are ready to retire.

Since you aren't looking at this as an investment, I think you should simply run the numbers to see how much more you'll spend (or how much you'll save) each year. Don't forget to factor in condo association fees and taxes. If you do decide to purchase, check the rules to see if they allow short term rentals (you might change your mind) and to see if they allow friends and family members who are not immediate family to stay there and for how long. You might consider a bank owned unit in an association that is well run with good reserves. You might have to fix it up a little but you'll start off in a better position. Finally, if you are not already familiar with condos and the way ownership works, do a little research. People often misunderstand what a condo is and isn't.

[1insider]

In my area, east coast Florida, you can get a decent 2/2 unit close to the beach for $100,000. That unit will cost you around $8400 a year in property tax, condo fees, insurance and utilities. If you stay for 3 weeks a year you won't have to pay for a hotel, $2625 saved if the room is $125 a night including tax. That makes it $5775 cost to you. Now add the missed income from the $100,000 you used to purchase the unit. You can get a jumbo 5 year CD today that pays 2.3%. Add that lost $2300 to your $5775 and your yearly cost is minimum of $8075. You need 8% annual appreciation to break even, not an unreasonable expectation.

Stay for more than 21 nights and your benefit is greater. Let friends and family use the unit, more non-monetary benefit. Get hit with a special assessment, appliance or AC system replacement and your benefit is less. It's a toss up. It's not a crazy plan and you'll probably find yourself shooting down for a quick getaway more than once a year just because you have the unit. If you may need that $100K don't even consider it.

[beachmouse]

That price would be on the lower end for my part of the panhandle. And while you can find something in a nice area in that range, there are also a lot of condos in areas that are a little bit iffy and you need a good realtor who knows their neighborhoods and can clue you in to trouble spots and places that seem to be on a little bit of a decline despite a new roof and spiffy paint job.

[StarfishKey]

Since you're not planning to do this as an investment, I don't really understand why you want to buy. Is there a specific reason you need to?

The headaches that come with condo ownership can be considerable. And many condos in Miami, for instance, have set empty and decaying because only a handful of people are actively living in the whole building, with the rest in foreclosure or unused - meaning its not necessarily nice when you visit. There are also financial problems with the board, as the building can't afford to handle it's needed repairs/unkeep.

If you are in your 40s now, you could rent for a month at say $1500-2000 per year. In the meantime, you divide that 100k savings up into low, medium, and aggressive risk investing. Over the course of visiting for the next 20 years until you are close to retirement, your nest egg is now considerable (a lot better than the profit on market price of a purchased condo), and you have spend somewhere in the vicinity of only 40k for all the visiting. You then are not tied down to a property that needs monitoring and is now really outdated so won't fetch a great price in a sale, and can change your minds if something happens that makes the move not a good idea anymore. And you have considerable savings now to buy a much better house or condo when you are ready to live in FL full-time if that is your ultimate choice.

If you buy, you have to factor in the condo fees over that 20 years or so in addition to the price, which can be significant.

To me, either you make a purchase that you believe is a good investment and will profit, and in the meantime become absentee landlords who visit a few times a year to check on the place, or you save your money for a rainy day and just take small trips down for now. Financially, and I would think stress-wise, this just makes a lot more sense.

But maybe there is a significant reason you have for owning versus renting - like needing disabled access in the condo or something like that.

[Restrain]

Buy now, turn management over to a professional company. Winter snowbird, summer vacation rental is a good profit center. You can depreciate the unit, charge off expenses, etc so it can be a good tax advantage under current law.

As to being an absentee landlord, that is why you use a professional company. They handle everything, and you seldom hear from them other than receiving rental income.

Condos are directly dependent on management, so don't buy sight unseen. Also check HOA rules regarding rentals, etc.

The west coast is a busy snowbird area, good rental potential

Good luck

[Bruins_Fan]

Thanks to everyone for the input. I think we're going to hold off for now, and just rent. Might be a little early to commit to buying with the limited amount of time we would spend at the condo.

[StarfishKey]

Originally Posted by Restrain

Buy now, turn management over to a professional company. Winter snowbird, summer vacation rental is a good profit center. You can depreciate the unit, charge off expenses, etc so it can be a good tax advantage under current law.

As to being an absentee landlord, that is why you use a professional company. They handle everything, and you seldom hear from them other than receiving rental income.

Condos are directly dependent on management, so don't buy sight unseen. Also check HOA rules regarding rentals, etc.

The west coast is a busy snowbird area, good rental potential

Good luck

The only problem to be careful of with management companies is that many are corrupt. One just got busted in the Keys, for instance, for embezzling a ton of money that should have gone back to the owners. They're fine to use but don't trick yourself into believing that you're paying to completely take your mind off things and not know what's going on. Your property is just like your money, you never turn it over to someone else without keeping your eye on it at all times. You let them help you, not take over for you.

[Bruins_Fan]

Originally Posted by StarfishKey

The only problem to be careful of with management companies is that many are corrupt. One just got busted in the Keys, for instance, for embezzling a ton of money that should have gone back to the owners. They're fine to use but don't trick yourself into believing that you're paying to completely take your mind off things and not know what's going on. Your property is just like your money, you never turn it over to someone else without keeping your eye on it at all times. You let them help you, not take over for you.

Like Reagan said...trust but verify