Posted by ChuckJ on June 08, 2005 at 20:09:54:
Makes sense. Thanks again for taking the time to respond and for the info.
-CJ
Vacation Condo or Single Family Homes? - Posted by ChuckJ
Posted by ChuckJ on June 06, 2005 at 20:01:21:
I am considering using 150K as a down payment on a vacation home to be used as a rental. Generally speaking, I believe this would serve as a down payment for 1 vacation rental on or near the beach. I am considering Florida or maybe Hawaii. Another option would be to put 20K or so down on several single family homes for rental cash flow and appreciation. I have no specific properties in mind at this point. I am just looking for some thoughts/comments.
Thanks,
Chuck
1 M or more on the Beach - Posted by JT-IN
Posted by JT-IN on June 06, 2005 at 21:16:21:
1M or more on the beach in most places of FL. Near the beach, or water, maybe in that range.
When you put this 150K down, do you expect this property to cash flow…? It probably won’t come close, as most don’t. The payoff has been, (and I stress the past tense), appreciation, and lots of it. So even if one had a neg cf property, and it were appreciating at a 25% rate… So what’s the problem…?
The problem may come in if you NEED it to cash flow, and it doesn’t… plus what if the appreciation of the past is not repeated any time soon…? Who knows?
You would be diversified with more condos / houses, rather than one. However, the past performance would say that the closer you have been to water, the better the property has performed. I wouldn’t look for that to change, no matter what… As example, if the avg off water property was static, no appreciation, you would likely see some on water property…
I know nothing about Hawaii, except that it is a LONG flight… and last time I looked there, prices were off the charts…
What is your overall objective…? And be certain that you are being realistic about the risk / reward. As prices have risen dramatically over the past few years, it will be harder to repeat that type of performance, due to the affordibility index. Prices must make some semblence of sense for Mom and Pop to come pay the price, whether it be rental or ownership… Crazy prices may simply force folks to sit it out for a while…
No Golden Answers at this point, more caveats than direction… These deals are much harder to get out of than into, so do your homework up front…
Just the way that I view things…
JT-IN
Re: 1 M or more on the Beach - Posted by ChuckJ
Posted by ChuckJ on June 06, 2005 at 21:42:41:
Thanks for the insightful reply. What you say makes a lot of sense. It appears you are from Cincinnati. Do you own properties here?
Re: 1 M or more on the Beach - Posted by JT-IN
Posted by JT-IN on June 06, 2005 at 21:46:22:
Here…? As in Cincy, if I understand your question…? Yes, I own props in Cincy… Ind, Ky and FL. Like horse manure, all over the place. I am lightening my holdings in the midwest gradually.
Re: 1 M or more on the Beach - Posted by ChuckJ
Posted by ChuckJ on June 07, 2005 at 17:56:39:
Yes, Cincinnati. As for lightening holdings in midwest: Is it because of the low appreciation as compared to other areas? Just curious…I am just getting started with REI, which is the reason for my initial inquiry. Some experts say to start with your home area, but I may by-pass that for areas with more growth.
Starting Line or Finish Line…? - Posted by JT-IN
Posted by JT-IN on June 08, 2005 at 15:35:13:
Chuck:
Maybe it depends more of where one happens to be, in their RE career. I would be closer to the finish line, as opposed to just starting out. It is time for me to reposition some of my holdings. As I have gone along, I have accumulated holdings that wouldn’t necessarily fit my scheme today, so is is time to jetison some of these properties. Not that they are bad props, but they don’t fit me as well anymore.
One of the benefits of the coastal areas is that there has been a huge run-up in values (prices). These same areas may be volitile, if there is some settling out in prices to come; no one knows for sure. The advantage of the Midwest mkt is that the volitility doesn’t really exist, which is a good thing if mkts are over bought… So starting out in Cincy, or surrounding areas isn’t really a bad thing… due the price stability, and perceived lower risk compared to some highly inflated markets.
I would tend to agree with the experts, that you should start investing close to home. Once you have mastered the techniques, then you can move into other areas. Some of the issues that one can run upon, while new to investing, would be compounded if you were distant from these properties.
JT-IN