Buying a retail condo in Naples, FL good idea?

Question

Hello,

We are thinking of buying a retail condo in Naples, FL. However based on much online info, talking to other investors and bankers, they advised us to stay away from it. The HOA is close to $1k per month, and price $700k. Any info is appreciated.

Thanks

Alex Olson · Answer

@Tom Parris having purchased a condo in the past and looked at purchasing more, there is great danger when am HOA is involved especially when considering your neighbors. Unless you control the HOA, the rug could be pulled from under you at any time. Meaning, STR or any rental type of any kind could be prohibited at the drop of a hat. I don't know that market but in the KC area if you buy a condo and then you can no longer rent it out you are upside down pretty quick and they sell a lot slower than a SFH. I would first check on other investment types first for this kind of money. Even office and mixed use as the returns on these asset classes are higher and less headache.

Jorge Cordero · Answer

Thanks all for your feedback

John Warren · Answer

@Jorge Cordero Naples is a great area for vacation rentals. Obviously you have to run numbers on how the HOA impacts your investment goals, but you will be able to see appreciation there for sure.  @Wayne Desmond is an agent that knows the area well. You should reach out to him.

Wayne Desmond · Answer

Jorge - I am a Realtor in Naples who purchased a condo in 2010, moved here 5+ years ago, purchased a single family and kept the condo as investment. Happy to share my experience with the investment and the Naples market in general.

Tom Parris · Answer

Hi @Jorge Cordero,

HOAs have the power to impose fees called special assessments, raise their month dues and all in all become a financial burden on the unit owners. For this reason, banks want to underwrite the financial situation, and organization of the HOA before lending money. The scenario is that the bank is underwriting you to afford $X, and you're at the top of your budget, then the HOA imposes an assessment costing you $200/mo more on top of your regular monthly dues to replace the building's roof, causing you to not afford/be late on your mortgage. No one likes that.

Investors don't like them because investors are control freaks. A condo takes some control from the investor. The community has rules, that in the end protect the owners. Those rules restrict, how long a lease can be for (max and min), how many times it can be rented out a year, and sometimes who can rent there. They also don't like how the HOA takes a portion of their cashflow. Some investors understand that it means you can reduce the amount you escrow to your cap ex and maintenance, as well as offer your tenants amenities that you otherwise couldn't offer.

So you need to know your condo's rules before moving forward. You didn't describe intention of this purchase, so you need to understand how that intention works in the current rules of the HOA.

$1000 a month sounds high, but for a $700k condo, maybe it's because the community has more amenities that require more maintenance. Maybe the community is older, and things break down more, and costs more to insure. Maybe there aren't a lot of units in the building (costs remain the same, just split less ways). Get a copy of the budget to see how the money is spent. I typically see it costing $.35-$.55 per square foot in HOA dues.

Jorge Cordero · Answer

@John Thedford, This is a retail place for us to occupy. Thanks,

Jorge Cordero · Answer

@John Thedford This is a retail place for us to occupy. Thanks,

John Thedford · Answer

Live in or rent? Many have little if any cash flow.