Florida Condo Investments

Florida condo investments

Florida condos can make a great investment property. They are easy to rent, have low maintenance requirements and in the right markets, have been appreciating. They can offer you a nice cash flow with a relatively low investment. You can even hold them inside your IRA or 401K.

The Florida Condo Market Then

A few years ago I went to look at an apartment development that was converting all their units to condominiums. To keep things in perspective, this is at the height of the real estate craziness.

I noticed that there was a long line of people waiting in front of the office. These people were there to put their name on a list that would be used to determine who would have the privilege of buying a unit when they first went on sale.

The names were put in a big drum and then on a certain date they would spin the drum and pull names out one by one. You had about 10 minutes to choose your unit. Then you would sign a contract and hand over a check.

Entire families were there to try an increase their chances of getting more than one unit. It was totally insane.

Every apartment building was a target for a condo conversion. People who did not know the first thing about real estate were buying up buildings and having them converted. Unfortunately, all of the buyers for the units were investors. So, when the conversion was completed (or before), they all put them on the market at the same time. Then the market fell apart.

Some people who got in early and sold quickly did make money. But when the bottom fell out, tens of thousands of people were left owning condo units that they paid way too much for and there were no buyers. They were going to be in a significant negative cash position for many years to come.

The Florida Condo Market Now

Today, you can purchase these condo units at bargain prices, rent them out and end up with a great return.

For example, a unit that went for $155,000 pre-conversion (only a few select buyers got this price) and were selling at the top of the market for $225,000, can be purchased for about $85,000. They are beautiful units in a great neighborhood. They rent very easily for between $950 and $1,100 a month.

We have seen other apartments with prices in the mid 50's rent from $750 to $900 a month. Again, a great rental opportunity.

For those of you who are less interested in rental income but want to own an apartment right on the beach, they too have come down dramatically. Depending on what area you want to live in, you can get a nice beachfront apartment for between $235,000 and $375,00. The $375,000 apartment would have been over $750,000 a few years ago.

Condo Caveats

Some investors really hate condos as an investment. The main reason is that they hate to deal with the associations that run them. Do not let this stop you. I have found many places where the associations are run by the investors who own the apartments and it is very investor friendly. We have no problems with condo investments when you take a few precautions.

Let me give you some rules to follow if you are thinking about investing in a Florida condo:

1. The building that is converted should be relatively new or the conversion should have included a complete "gutting" of the structure. You want to avoid the "new coat of paint" conversions. We see them all the time. They put in some new landscaping, paint the apartments and sometimes replace the appliances. However, the structure and roof have never been touched. These are problems waiting to happen.

Look for areas where the rental market is vibrant. Beachfront, downtown areas, certain cities like Wilton Manors or South Beach. Larger apartments in neighborhoods that have good schools like Coral Springs.

3. Become active in the building's association. This is your investment and you want to keep on top of what is going on.
4. Sometimes, you can find an apartment with a renter already in place.

Most important are the association's finances.

We have seen very cheap units in developments where the association dues were paid by 30 homes out of 100. This means that those who are paying are carrying everyone else. Your maintenance goes up and you get special assessments.

You must be certain that the association is successful at collecting enough monthly maintenance fees to remain solvent.

6. Be certain that there are no restrictions on your ability to rent your unit. You do not want to buy a unit only to find out that there are rental restrictions.

A Simple, Easy to Manage Real Estate Investment

We like condos as an investment simply because we they are easy to manage.

The exterior or common elements are managed professionally by the association. Your only concern is the interior of the unit.

For my own apartments, I have taken out a maintenance contract. It covers the air conditioning, appliances and even light plumbing and electrical work. It is relatively inexpensive. The tenant has the number and calls to make their own appointments when service is needed.

Of course I do a lot of up front checking to make sure I have a good tenant. Personally, we do credit and criminal checks.

More Info

You can purchase an apartment through your IRA or 401K. They are not that expensive and many of you can easily pay cash for the units.

We are always looking for great condo deals. Call us to discuss this investment opportunity.