Aversion to condo investing?

Question

I have noticed that the general tone from BP investors with ragerds to investing in condo's is generally negative.

Part of my LT investment strategy is to acquire investment property that cash flow in "destination" locales that I will frequent on vacations in the future. The purpose of this being - to take advantage of the tax deduction that allows yo to deduct two week trips per year to basically "check on your properties". (BTW kudos to rich for planting this seed in my head - this is one of his favorite deductions)

I figure it would be wise to acquire maybe some ski resort property and beach property, among other locales. Being that RE in these areas is expensive, a rental condo is often the cheapest route to go to acheive this goal.

This leads me to purchasing condos in these areas; As it will be a long distance investment this takes some of the concern for property management and maintenance out of the question, and allows for me to throw my condo in the "rental pool".

Noticing a negative sentiment about such investments here on BP, I would appreciate for some of you to detail the cons/negtaives of such a strategy (as well as the positives and other advice). I know rental pools are not the most efficient and neither is the maintenance/management provided. But it still seems that I could make this work. Or if any of you pursue such strategy, please enlighten me on how I can make this work the best.

Bill Gulley · Answer

Let's put it this way, the money you save by not investing in condos will probably pay for your frequent vacations to the area!

I don't see condos as an investment, it's more like a speculation.

Being a long distance owner, the management company and condo association, can clean your clock!

I especially get bad vibes when someone says the developer or management company owns condos in the development. Many times they are not included in the maintenance expenses of the common grounds and what units do you think get leased out first....yours?

About 50 miles south of me is Branson Mo. I bet they have more condos per capita than any place on the planet! I know they have more motel rooms per capita. There are all kinds of time shares, condo rentals and leasing going on and 90% of the units are for sale, but no buyers! In many projects you can't even put a FSBO sign out to sell your condo, slaes have to go through them with as much as 15% commissions.

Basically, you're stuck with what ever the association votes in, that's why I call it speculation, not investing! I suggest you invest in your area and save the money by not buying condos anywhere...then enjoy your vacations. Good luck, Bill

Jackie Patterson · Answer

We're preparing right now for a double closing on a short sale condo in Branson.  Thanks to a great negotiator (James) we're purchasing it for $30K and selling it for $45K.  We've had several cash offers throughout the process.  We'll end up with a profit over $11K.  Not bad for the low price!  Investing in "vacation" condos to buy and hold may not not be the best investment strategy.  You can however make money on condo short sales.

We can take the profit, have a great vacation in the destination of our choice, and not have to deal with property managers and ownership headaches.  Of course we don't have the tax write-off.  Wonder if you could take that if you visit a short sale in progress???   Hmmmmmm

Gregory Childs · Answer

I have friends who own both cond/homes (mountain/beach) in resprt area. In fact, I just stayed in a cabin in Blue Ridge GA two weeks ago. 
Anyway, none of them have seen the appreciation or the cash flow they expected. In addition, the management costs eat away at the pottential returns.

Certainly, here on the west cost of FL, the condo associations are filing for bancruptsy by the score and the assessments are being shared by less and less owners as the vacancy/foreclosure rate continues to increase. Its ugly.

TTFN,
Greg

Will Barnard · Answer

I would agree with Bill's sentiments. Investing in a "vacation" condo has many negatives, all laid out by Bill.
You are better served to pay for your vacation rentals and own better rentals yourself.

The negs of condos are mostly - HOA, higher turnover rates, higher vacancies rates, the potential of the HOA to make new assessments, and having to get permission from the HOA to do anything in your rehab project (as applicable).

Will

Jon Holdman · Answer

This was actually the very first thing I looked at when starting to seriously consider real estate investment.  As I looked at these deals, they made less and less sense.  The costs, property management in particular, are very high compared to regular rentals.  The vacancy is quite high, except during peak periods.  Look on vrbo.com for the area you're interested and look at the availability calendars to get an idea.  The prices in these places tend to be very high.  Financially, I've just never been able to convince myself they make sense.

I've even looked at just buying a vacation property flat out.  Even that I've never been able to make work.  Its always cheaper to just rent something on VRBO or somewhere.  And you don't have to worry about it.

Now, some years ago I did own a weekend house.  It was about 90 minutes away from where I lived.  We went there are least twice a month, and I really miss that house.  This was in Texas, we lived in Rosenberg and the place was near Blessing.   I think we paid a grand sum of $24K for that house.

Tod R. · Answer

I have never owned a condo so this is just my .02. Just recently looked at an attached townhome.  Now it was a lower end product and not a resort destination, but I didn't like it from a pure investment standpoint.  It needed structural repairs and the HOA did not cover foundation work.  Therefore, I would have to get the other units in the building to agree to having the repairs made and to pay for it.  I heard one unit owner was not cooperative.  Association dues were $100/month so there goes a substantial portion of the monthly rent.  I don't see how it could cash flow unless you purchased at a rediculous discount.  Now, if you can prove to yourself that its cheaper to invest your money into a resort property rather than paying for a vacation, then excellent! Don't let tax decisions be the driving factor.

Jackie Patterson · Answer

Bill,

It's Vineyards's Parkway.  I've never been there, so I don't know Point Royale.  Any short sales there?  We'd love to have you send them our way!!!

Aversion to condo investing?

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