Low-Ball Offer???

[Miss Critter]

Oh, I see, the instant equity is based on an appraisal. Whew, glad you cleared that one up for me.

Or until recently, what your lender would offer you through a HELOC. Those days are over, at least for the foreseeable future.

 

[AAbsolute]

AA -- Please further explain your definition of this value bottom / safe standard you speak of. Do you mean that the rental income covers ALL costs + some (mortgage, maintenance, tax, insurance, etc.)?

If so... in 15 years of owning/living in SoWal, I've only ever heard of "cash flow off rental income" actually occurring on those little studio condos north of 30-A in Seagrove... and then, only IF they were purchased prior to 1995 for under $60.0.

Is that the kind of bottom you're talking about?

Rosemary Beach was founded in 1995. (13 years ago) Do you think any of the first 50 properties in there were capable of the cash flow equation I spoke of? I'd bet they would nearly double their cash flow.

Seacrest Beach was selling property in 1999. (9 years ago) We were selling 4 bed homes in the 300's. Do you think any of the first 40 in there were capable of the cash flow equation I spoke of? I think they would nearly double their cash flow.

100' bayfront lots were selling for 115,000 in 1999. (9 years ago) with a 300,000 build out someone could do pretty good. I think they'd get 40% over their monthly expense.

There are a builders who will rent back homes they sell for a monthly payment equal to the mortgage too. Remember Sweet Homebuilders Models?

 

[30ashopper]

I feel the same. I'm thinking we may be at the floor too. I'm sure there will be some isolated cases still, especially since we're moving into the off season. I'm thinking if we can get through till February without another drop, that it will start inching up again. Who knows, maybe it's headed there now. It's just too early to tell. It will be interesting to chart other groups. I'm thinking beachfront condos, rosemary, watercolor. It will also be interesting to watch some condo complexes in PCB.

I think that's being too optimistic. We'll reach a floor then tread sideways and slightly down for at least another year. The inventory is just to large to support any upward movement.

 

[30ashopper]

Can you also graph the number of homes sold each month? The sample size is likely very, very small on a month to month basis making it very difficult to draw any conclusions regarding trends.

I have that but Walton's site has been so out of date lately it's hard to tell if it's accurate. Sales experienced a pop in the spring, as to be expected, but have now tapered off again. The majority of sales in Seacrest over the last couple months have been shorts and reos.

Also, does your graph include all sales including foreclosure sales, short sales, etc?

Everything that walton has that's qualified. Although it seems some reos don't go in as qualified so there may be an error that pushes the ppsf up. Cork might be dealing with more accurate data from ECAR, maybe he/she can answer that.

It would be interesting to see the same graph for all of walton county and one for sowal from inlet beach to sandestin. Larger sample size lending a bit more credibility to looking at trends.

All I have is sales, not ppsf for walton. That number varies so much across different areas I think it's pretty worthless except to see general trends. Maybe Josh would be willing to add that to his ECAR tables so we can graphit out?

 

[30ashopper]

I was the one who did the graph Fisher. Yes, it does include short sales and foreclosures.

Cork, is that based on ECAR or Walton? Just curious.

 

[beachmouse]

AA -- Please further explain your definition of this value bottom / safe standard you speak of. Do you mean that the rental income covers ALL costs + some (mortgage, maintenance, tax, insurance, etc.)?

If so... in 15 years of owning/living in SoWal, I've only ever heard of "cash flow off rental income" actually occurring on those little studio condos north of 30-A in Seagrove... and then, only IF they were purchased prior to 1995 for under $60.0.

Is that the kind of bottom you're talking about?

I suspect that a lot of people are easily covering just the mortgage payments on short term rental, but that the other carrying costs (HOAs, insurance, wear and tear and shrinkage issues) end up leaving them actually in the red. When you've got properties with $1,000/month in HOA fees alone, those extra costs add up very quickly.

 

[seagrovegirl]

Rule of thumb for cash flow on a vacation rental investment would be a factor of .10

If you purchased a condo for $250,000 and the rental income is $25,000 py, a 10% return is a good starting point when investigating an investment purchase. Haven't seen anything like that in years, but we may be getting back to that point in history.

 

[Cork On the Ocean]

Cork, is that based on ECAR or Walton? Just curious.

Yes, I extract the data myself from ECAR and plot it. For that reason, it doesn't include FSBO's but I think it's better than the county info and of course more up to date. What I did with Seacrest and Rosemary is remove any sale that might skew the data in a misleading way. For instance, there was a carriage house only sitting on a 2nd tier lot in Rosemary that sold. The sq. ft price was way too high because the bulk of the value was in the lot so I didn't use that in the data. I am using REO's and short sales though because they are indicative of the current value.

While it's true that researching data never tells the whole story, Aabsolute, I've found it very valuable. For instance, I picked up the first scary drop in sales back in April of 2005 I believe and then there was a second "telling" drop in July of 2005. List prices continued the acceleration through Fall of 2005 and people kept paying it throught at least fall or winter of 2005. While few expected the magnitude of the decelleration, the signs were there and a lot of people got caught during that time. Data merely supports good judgement and sound investment practices such as yours for sure.

 

[JoshMclean]

Rule of thumb for cash flow on a vacation rental investment would be a factor of .10

If you purchased a condo for $250,000 and the rental income is $25,000 py, a 10% return is a good starting point when investigating an investment purchase. Haven't seen anything like that in years, but we may be getting back to that point in history.

Many things are getting back to those levels.