Archive for the 'North-Florida' Category
Heard Recently…
Monday, September 29th, 2008
On a local real estate message board -
“So the Fed is paying for some top dollar real estate at 2005 prices? I wonder if they’ll be working with local realtors?”
No, but they’ll be using your money to buy it.
East, West, or..
Wednesday, August 20th, 2008
3br, 3ba, brick ranch built in 1997, barn off to the side, city water, 5 acres old growth forest, situated on a lake, secluded area.
$170,000.00.
Screw west or east, I’m headed north baby, early retirement here I come.
Rental Property Research
Friday, July 11th, 2008
Over the last 5 months or so I’ve been looking at vacation rentals as a form of investment. In general, I’ve come to the conclusion these properties are not good investments to make up here in north west Florida. (They may be good investments in other regions, just not here.) My main conclusions –
1) The season is too short, yielding low average occupancy rates thanks to a lengthy off season (nearly five months of the year)
2) Capitalization costs are too high for the properties people are interested in renting (450K to 700K)
3) Carry cost are too high (insurance, property taxes, utilities, and fees on management services)
4) Risk is too high – good rental properties must be near the beach, and a majority of land in this area is within a storm surge or flood zone
While in good years it’s possible to turn a very nice profit, over lengthy ownership periods the average profit is much lower. For a property within walking or “golf carting” distance to the beach, best case average annual return is around 7%. You can do better in other markets.
As an alternative, I’ve been looking at long term rental property (leased) that meets the following conditions –
1) Low capitalization costs – smaller 2 bedroom, 2 bath homes for less than 250K at current prices
2) Optimal location - Safe, single family homes in communities that appeal to middle income families
3) Off but near the beach – purchasing property that is not in a flood or surge zone yields lower carrying costs (insurance costs, property taxes)
4) Gated communities – most sought after for various reasons (security, social standing, sense of community)
There are numerous communities down here that meet these requirements. The return on investment also appears to be much higher than vacation rentals - upwards of 15% annualized return. So I‘ll be shifting my research around more toward this type of investment. I’ll post what I find down the road.
REO’s
Tuesday, June 3rd, 2008
Ask vs. sell vs. REO asking price per square foot for a community -
Red - sell
Blue - ask
Orange - REO ask
What do you suppose will happen next?
Quote Of The Day
Monday, May 19th, 2008
“Public records, it’s like swimming around in the bowels of the housing crisis. I feel dirty. I need a shower, and a drink.”
Spreadsheets
Monday, May 12th, 2008
My property investment ’sheets’ keep growing, six tabs now per community at this point. Neat. 
These are the best two tabs, the rest are all numbers, some of which I’d rather not plaster on my blog.
When I first started getting into this I considered writing custom code to handle all the calculations. Thankfully I didn’t take that route. One of the great advantages of working with Excel is you can buy custom sheets from accounting and investment companies that have all the calculations down. Case and point, I blew some cash on a couple really nice rental investment sheets recently that were well worth the money. Amortization, capital gains, cost of ownership, appreciation, cash flow, cost recovery, tax rates, NPV, etc.. there’s no way I could have coded all that on my own. If you ever consider investing in something like a rental property, I highly recommend you do the same. (assuming you’re not an acountant)
30 Year Fixed Rate
Sunday, May 11th, 2008
I noticed this today after checking in on BofA’s 30 year fixed rate and was surprised to see it had jumped a full half percentage point from when I last checked. Anything over 6% (and even that is pushing it) for me next year and I’ll continue to wait regardless of what deals I find. As if the situation couldn’t get any uglier, and the FED is powerless to stop it.
Also found a great article over on the Economist -
By most measures, prices are still above the levels implied by the fundamentals. Using a model that ties house prices to disposable incomes and long-term interest rates, analysts at Goldman Sachs reckon that the correction in national house prices is only halfway through. They expect an 18-20% correction overall, or another 11-13% decline from today’s levels. But their models suggest that six states—Arizona, Florida, Virginia, Maryland, California and New Jersey, could see further price declines of 25% or more.
Mmmm, 25% or more. In the areas I’m tracking, 25% would take things back to mid-2001 levels.
Building On The Beach
Thursday, May 1st, 2008
I found this nice landscape shot of Seaside, Florida today. The planning of this community represents what I’d characterize as responsible beach development. Note the very large dune buffer the community enjoys. That land is worth millions, but they refuse to develop on it. Unlike some other areas, which aren’t as smart -
Many more pictures of all the new urbanist communities down here can be found on the SoWal web site.
Ouch
Sunday, April 27th, 2008
08-27-1997 - $50,000 vacant lot: yes
06-04-2004 - $330,000 vacant lot: yes
07-23-2004 - $430,000 vacant lot: yes
11-22-2005 - $1,000,000 vacant lot: no
07-03-2007 - $466,000 vacant lot: no
01-10-2008 - $365,000 vacant lot: no
Sales vs. listings for the community this property is in -
Something tells me demand is not going to keep pace with supply.
It’s interesting though, mid-level ‘bubble’ price areas (650K -> 1M) where ownership is primarily for investment and secondary income seem to have hit a secondary ceiling after experiencing a signifigant drop over the last year or so. Sales have also been very sparse during this time. There was a signifigant decline in price last year (1M down to 650K) with very few sales. Now, I’m seeing listings skyrocket at 650K with sales around 450K. I suppose this could be due to owners in these areas having deeper pockets, so they’ve managed to delay having to sell in the hopes of seeing a recovery, or, maybe they have been unable to accept what’s happening. Now it seems these owners are finally accepting reality and are starting to unload en mass before it gets worse. They still list at prices higher than local sales though, indicating they haven’t accepted reality completely. I’d guess that will change in time as supply in these areas increases. Best guess is these properties will sell at 2002-2003 levels by the end of the year - 275K -> 350K, which I’d consider reasonable.
Higher priced areas (800K->2.1M) seem to be in the same mode, but are lagging behind mid-level areas. Most of these areas aren’t seeing any sales. List prices of the few homes on the market are very high (2005 levels). I wonder if we’ll see these areas go through the same cycle.
Real-estate
Wednesday, April 16th, 2008
The more I dig into some of the areas I’m looking at, the more I’m feeling sorry for folks in the area. Most of the properties I’m seeing were last sold in 2004, 2005, and 2006, for two or three times what the property is worth today. (who knows how much they’ll be worth at the end of the year.) I can’t even begin to imagine what it feels like buying a beach house for $950,000.00 and then listing it two years later for $650,000.00, then $550,000.00 and then $455,000.00. If things go the way the experts are predicting, these homes might get back down to their 2001 or 2002 price levels, which means that same house may end up being listed for $200,000.00 - $300,000.00. Can you imagine taking a $700,000.00 loss on an investment you thought would net you a couple hundred grand in profits plus rental income? That has got to suck.
