AAbsolute
Banned
I agree. Is there a less costly 4 bedroom, new, gulf front in the area?
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Ocean Reef Absolute Auction Results
- Thread starter lil mick
- Start date
I agree. Is there a less costly 4 bedroom, new, gulf front in the area?
SHELLY
SoWal Insider
Franny
Beach Fanatic
The end units are all four bedroom and the interior are two bedroom. The developer is selling the four for $359,500 and the two bedroom for $259,500.
I showed these condo's a few weeks ago. Yes, the price is good for a four bedroom, new condo, however it was obvious that the developer cut a few corners on these units that I have not seen with his other projects. Even so my customer was willing to go in and make the necessary changes to bring the condo up to par. Not major changes, but out of pocket money nonetheless. I wasn't really crazy about the locale either, next to the run down Fountain Blue.
Cashflow????
I don't know of a beach property cash flowing since the 80's unless you put a heck of lot of money down.
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SHELLY
SoWal Insider
Cashflow????
A lot of folks who show positive "cashflow" using a chunk of money for down payment more likely than not fail to figure in lost opportunity costs from the "chunk."
A $300k condo-box on PCB purchased today isn't going to produce positive cashflow--period.
.
Bought lot, built house south of 30A 1998. $85k for lot $240k for house, firnishings. Cash paid for lot and furnishings, $220,000 Mortgage. $9000 negetaive cashflow until sold. Used approxamatly 45 days per year, no fee's or rent, value $9000, in personal use, not paid to others. Sold 11/2003, net $525,000, rolled into 1 back from beach, total including furninghings 1.1mm, 400k mortgage, $70k more equity out of pocket. Total carry per year, on 2005 costruction, with all current hurricane construction standards, $42k. Net rental income $52k, + 45 days personal use. So 10k positive cashflow, no income taxes, and the equivilant of 10-12k for not having to rent from another. So no matter what the value, as long as I get my equity back out, or a tatal of 575k, upon a sale, my return is equal to 22k on an out of pocket investment of 180k for 12.2% return, annualy. Even in this market I should get my equity back + the laon balance in that the propery brings in 70k+ in gross revenues per year.
So Shelly, digest these #'s, and compare to like returns in equities, mm funds, or high yield corporates, or anything for that matter.
So Shelly, digest these #'s, and compare to like returns in equities, mm funds, or high yield corporates, or anything for that matter.
Matt J
SWGB
I seriously doubt that. One it's illegal, second the 2nd and 3rd bids only went up $5,000. That's not exactly rigged.
SHELLY
SoWal Insider
Read my post one more time....nothing is going to cashflow at these median prices today.
Simple "figured on a cocktail napkin" calculations don't work when valuing an investment...what about the "time value of money?"
.
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Matt J
SWGB
The point I was making, lets try to encourage potential buyers to look today with the idea in time it will cash flow. In the meantime the use of the property has value. Would it not be nice to try to have some postive forward thinking to the market, as I believe the opportunities are a lot more realistic for affordable beach property. This is not the bottom, I don't believe, however more people should be doing due diligence for a purchase, and when they feel comfortable with the deal, pull the trigger. People love to rent SoWal properties, and properties close to the beach will always have renatal premium.
I read your post and used it as an opprtunity to show what time can do for your beach investment. Do you not agree with anything I stated.
I read your post and used it as an opprtunity to show what time can do for your beach investment. Do you not agree with anything I stated.
Little Fish
Beach Lover
Shelly:
Ok, I'll take a stab at it.
Question: Is it possible to cash flow at recent auction prices?
Assumptions:
Earnings Before Tax = Rents - (DEPR + MAINT + INT. EXP)
Net Earnings = Earnings Before Tax - Tax = ($6,883) - ($2,065) = ($4,818)
CASH FLOW = Net Earnings + DEPR - Principal Repayment
Little Fish
Ok, I'll take a stab at it.
Question: Is it possible to cash flow at recent auction prices?
Assumptions:
- Purchase Price $359,500 (for 4BR as stated earlier in the thread)
- 20% down with a 30 YR FXD at 6.5%
- Annual Mortgage Payment = $21,828 ($18,600 Int. + $3,228 Prin.)
- Annual Maintenance = $6,300 (HOA Fee of $400 plus additional exp.)
- 1st YR. Rents = $30,000
- 30% Marginal Bracket
- 1st YR. Depreciation Expense = $11,983 (Straight line)
Earnings Before Tax = Rents - (DEPR + MAINT + INT. EXP)
- EBT = $30,000 - ($11,983 + $6,300 + $18,600) = ($6,883)
Net Earnings = Earnings Before Tax - Tax = ($6,883) - ($2,065) = ($4,818)
CASH FLOW = Net Earnings + DEPR - Principal Repayment
- ($4,818) + $11,983 - $3,228 = $3,937 A POSITIVE NUMBER
Little Fish