Florida Vacation Properties with Potential
Author: admin // Category: Fl Keys Relocation, Key West investment opportunitiesBuying a home, whether for investment or actually planning to live there is challenging in today’s real estate market. And with current economic conditions, you may be hesitant to take the plunge, always thinking in the back of your mind, “Maybe the price will drop further!” Well, sometimes it does and sometimes it doesn’t. One general way to guard against the unthinkable price drop is by purchasing a home that has already taken a deep plunge due to its condition. Maybe the prospective investment home could be described as “shabby” and maybe there area few “rocks” under the surface, yet to be discovered by a hapless investor. At the same time, such properties may also present a real estate investor with tangible opportunities and many of these can be found down in Florida.
Among the most promising are homes and condos located in desirable vacation areas, especially in parts of Florida, like Key West and the Florida Keys. We’re considering homes and condominiums that might be defined as ‘distressed properties’. Many of these could be near the beaches or waterfront areas and normally could be rented out on the weekly or monthly basis during most of the year, if they were in presentable condition.
Florida vacation properties will always be in demand by tourist regardless of the economy:
- In a weak real estate or economy, people will still take vacations, but rather than drop thousands for lavish destinations in Europe or elsewhere, Florida is still a great vacation destination.
- In a strong economy, many will still opt for Florida as a fill in or second vacation. It’s easy to get to Florida from anywhere in the U.S. and airfares to and from are typically reasonable
The Florida Vacation Connection
The areas we’re considering are located mostly on the east coast of Florida, such as Vero Beach and the Keys. Although parts of the west coast are also desirable and quite obviously this approach will certainly work there, as well. Single family homes or condos near the beach or the shore front areas will command high prices, but in today’s real estate markets, what is high anymore? This investment strategy is intriguing, but there are a few factors that must be considered.
Averting a Home Purchase Disaster
Obviously, there are dangers inherent in purchasing distressed properties. Sometimes the previous home owners never maintained the properties very well and sometimes they’ve moved out because of foreclosure and actually vandalized their own homes, rendering them unlivable. Other times, a home is just so old that modernization is absolutely mandatory. There are many reasons why a home is in substandard condition. Should this deter you from making a purchase? No, not if appropriate precautions are taken prior to finalizing on the purchase. And the price can be adjusted downward, if possible.
Also, keep in mind that real estate in Florida vacation areas will always be in relatively high demand because of its income generating potential. Unlike typical residential locales, the land in vacation areas will always have a high value relative to other areas in the sunshine state Even if a home must be practically rebuilt, this renovation will further enhance the value of the investment. Caution is the name of the game and making sure that the price is consistent with your minimum income generation expectation is your ultimate goal.
However, there are fundamental issues that must be explored and answered to your satisfaction in order to avoid a catastrophic mistake, prior to finalizing on this type of real estate transaction.
- Question the neighbors as to what type of person the previous home owner was. If your sense after speaking with the neighbors was that the previous occupant was erratic and possibly negligent about maintaining his home, you might avoid the purchase or at least you’ll be on guard.
- Always, always, always check out the zoning. If short term rentals are prohibited, don’t expect to obtain a zoning variance. The property, under these circumstances, can not typically generate enough revenue to justify the purchase.
- Always use an expert home inspector that has been recommended. He should be able to sort out and identify major problems from minor problems. Once problems are identified, then they must be quantified and whether you perform the renovation yourself or use outside contractors, the cost of repair and renovation must be realistic. You should factor in a 10%-20% cost over run in determining your cost basis, to account for unforeseen circumstances.
- If the home you’re considering purchasing is a VA repossession, attractive price and mortgage opportunities are available, including obtaining financing directly through the VA. The VA however doesn’t guarantee home condition and therefore inspection is still mandatory.
- An alternative approach might be to use the FHA HUD program section 203(k) which will assist you in rehabbing a property. The only limitations are with condos for investment which is prohibited under HUD regulations.
- Whenever possible, consider an investment vacation home in an area where the property you’re considering is one of the lesser expensive properties in a more expensive area. This will offer some upward potential, as opposed to buying a more expensive property in a lower priced area.
- Now, once you have established realistic and conservative costs, you will need to run a rate of return analysis to see if your potential weekly/monthly rentals can afford you the ability to purchase the home and enjoy a positive or at least break even cash flow after all relevant costs, realistic expenses and revenues are taken into consideration.
Assuming that the number work, you can begin the price negotiation process. Also keep in mind that if the property is now salable and economic conditions have substantially improved, you can always sell and cash out your investment for a profit. Of course, having a vacation property in a sought after location gives you a place to go and relax from the stresses of life.
Tina Masters
REALTOR®
Coldwell Banker Schmitt
Real Estate Co
1201 White Street #101
Key West, FL 33040
305.292.7440 direct line
305.923.0062 cell
E-MAIL
www.yourkeywestagent.com
