Thread: advice needed

I was just talking with a guy today who went down to FL on a shopping trip and picked up three condo's, all for $40k-$55k. They are all close to the water, in Palm Springs I think and two are fully furnished. One is already rented for $1,500 a month!

Its freaken tempting!

Go to another source and check condo prices in the area, just so you get a more objective idea of what prices should be for these condos.

Also consider how much rent you would get for renting out the property, and how much a manager would cost.

Once you have a better idea about these costs, and feel that this information is reliable, then consider moving forward. It CAN be this simple, just make sure the information you are getting are from reliable and trusted sources.

Maybe someone could verify this, but I have heard that the insurance rates are changing so drastically on coastal real estate because of the hurricanes.

Something along the lines of the insurance companies will not insure most of the house. You can't just replace a house if it's torn down by a hurricane. And I hear that people are trying to get out of these for this very reason?

If so, smells like opportunity... or at least sweaty feet in my dojo...

Due your own due diligence by running all the numbers (financial analysis) and determining on your own if you think this is a good deal. If you determine that you do think this is a good deal, post the numbers here, and I'm sure others on the forum will help substantiate your beliefs or poke holes in your plan.

If you don't know where to start, there are plenty of good posts on here about financial analysis...use the SEARCH feature...

There is only so much you can do remotely, call me old fashion but if the numbers work I would fly down their over a long weekend and look at a bunch. Plane tickets are like what a $130 each way? Plus a hotel and some food. $500 bucks and you will have a good idea what you are buying. Just because a property looks good on paper doesn't mean its a good buy. I have seen some real dud's that look fantastic on paper, just saw one this past Sunday actualy.

Do the legwork before hand, ie contact local agents that have these properties, so you can look at a bunch and make use of your time.

When buying rental property, I'm saying be prepared for a long term hold and potentially significant drop in equity. As long as it cash flows, it's a good thing. If the dollar continues to depreciate, your cash flow might thin out, especially if rents get capped. Of course it's very arguable whether that will happen or not. that's why I'm saying hold it for the long term. Jim Rogers, for example, most recently said he expected this downturn to last as long as 20 years. We really are not at fire sale prices yet.

Still, the reason for my post is to say that even under these circumstances, buying rental property for cash doesn't make a lot of sense to me. High equity position...30% or more, sure, but owning it outright? why not have the tenant pay it down for you? With appreciation being absent for the time being, at least maximize your roi from other angles.

Please do consider that $15k really isn't very much money, and if you happen to be concerned with liquidity at all (it sounds like at least your wife may be), you may want to consider physical gold or silver, or some other vehicle altogether. Maybe I'm wrong and the dollar will be fine. But if it drops like many people think it will, think about the fact that under those circumstances, $1k cash flow on a rental property isn't going to be a good return. My rambling thoughts for the moment!

Originally Posted by undergroundking

Why fly down there if you can look at a bunch of pictures from the computer? That is how we do it nowadays.

Because pictures only tell about 1/4th of the story.

Originally Posted by hatterasguy

I was just talking with a guy today who went down to FL on a shopping trip and picked up three condo's, all for $40k-$55k. They are all close to the water, in Palm Springs I think and two are fully furnished.

Madoff's ex-clientele no doubt...



Be careful purchasing your first property far from where you live. The only time you should expand out of your area is if you really have to. If the potential in a different market is really that much better than your own market, then make the move to the better potential market and thrive.

Buying properties you cannot see or be at on a daily basis if needed is not the best idea for your first couple of properties. It is a high risk situation. Even after due diligence is done, you may get shafted by a ratty management company down there.

It would be more productive to get a property in your area and manage it yourself to get your feet wet. Once you understand the rental industry you can begin to automate the system.

Why not go right down the street and look for a good deal in Queens?

-Alex

Originally Posted by undergroundking

Why fly down there if you can look at a bunch of pictures from the computer? That is how we do it nowadays.

Pictures only tell part of the story. As in the deal I looked at a couple of weeks ago, pictures don't tell you about the smell of sewage because of a collection point for the entire city's sewers thats right next door.

Originally Posted by undergroundking

Why fly down there if you can look at a bunch of pictures from the computer? That is how we do it nowadays.

Why would you ever spend that much money on something site unseen? If it's not worth a day and $500 to you, aren't you really just gambling with your money?