Atlantic City Beach Condos

[Chris Miller]

Currently own 3 rental properties in Philadelphia with success and have been considering with a partner buying beachfront condo(s) in Atlantic City. Looking for anyone with direct experience in this market or local insight. Although the public sentiment still seems to be gloomy on Atlantic City with new casinos popping up all over NJ and PA, we think there is and will continue to be a large enough volume of visiting beach/casino goers and local job base to support AC surviving. This begs the question of whether it's more profitable to do long term rental leases or short term vacation rentals or even an Airbnb setup for these properties. The main reasoning here of course is the still very depressed prices offering high potential for return. It seems that while AC got hit hard post 2008-2009, prices haven't really recovered much. We see condos under 100k, one particular older building has multiple beach condos below 60k in proximity to casino. The main concerns are high relative NJ taxes and HOA fees. Generally speaking, we see about 4-5k annual taxes, 300-400k HOA fees on 500sqft condos. However, with alot of the HOAs covering utilities with insursnce included and the fact that at these prices we would likely pay all cash going in, at monthly costs of about $750, we should be able to justify rents over $1000 and even higher numbers with short term rentals. Although I'm not sure if flood insurance would be covered in HOA fees. Probably the biggest concern is liquidity down the road since currently some of these buildings we see 10+ condos sitting on the market at a time for months/years. With constant hurricane threats, it must take a hit to HOA assessments and and fees. Finally, lowest on the totem pole but still a consideration nonetheless is the fact that it's a property we could possibly enjoy ourselves for a few weeks out of the year. Overall, assuming there is enough demand to meet these numbers and we can buy at these still very depressed prices, it seems like it would be a low floor and low maintenance investment, generate moderate returns for the next 5-10 years, and have very high potential ceiling in the event the area experiences a comeback which many special interests are already working towards. Personally I don't think AC is ever going to be what it once was simply because of the monopoloy it once had on the casino demand. However, it's still the closest thing to "Vegas" on the east and seems to be pivoting towards an event/vacation driven economy. iE hosting concerts, conventions, sports tournaments, amateur fights, ect. What are we missing here? Thoughts, concerns, local expertise?