Another Auction --Heron's Watch 7 Condos

Searcher,

Two things:

(1) "Ignoring the expenses" is what is getting these folks in trouble now.
10 Properties = 10 Insurance Policies + 10 Property Tax Bills + 10 Closings + 10 RE Commission Charges

AND

(2) You forgot to start your illustration with "Once Upon A Time....."


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Yes, in Florida the real estate commision is a charge to the buyer at closing. In addition, the buyer always pays the closing fee, and taxes are never pro-rated, right Shelly?

Yes, in Florida the real estate commision is a charge to the buyer at closing. In addition, the buyer always pays the closing fee, and taxes are never pro-rated, right Shelly?

Depends if you're talking about 2005 or 2007.


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I should apologize for being sarcastic but I wasn't really asking. Leveraging like that is just asking for trouble in my opinion. - I agree, don't try this at home. I'm merely trying to illustrate a point. - What if the market slips further and renters shy away from the area? I still have 90k and the asset and you have lost 100k and might lose 10 properties. - No, you have your entire $100,000 tied up in the property - you paid cash remember. You have the asset only, at whatever its current value is but presumably you are still OK because you are collecting rent - The risk factor goes up by more than the leverage percentage. - Depends on the property. - If you have the million in the bank anyway why let someone else take away all of your appreciation with a loan? 5% apprciation is close to historic norms. - Indeed. Why not just put your cash in a CD? Forget RE. It is all calculated risk - If you don't have the cash why not buy 1 property and roll cashflow into more properties? - Confusion here. If you don't have cash, you must leverage to buy property to create cash flow? - Is there a tipping point when the market goes down? - Yes, if rents fall and/or costs rise and you can't break even, You are tipped right off a cliff. You bought the wrong property and should have stuck to CDs - RE is cyclical and prices/rents don't always go up. - Yes, it is a calculated risk - everything depends on the property you buy. - 95-100 percent loans contributed greatly to the explosion in prices in the area everyone complains about. - Agree -Think of how careful people would be if it was all their money going towards that investment. - If they are not even MORE careful with borrowed money they should stick to CD's - I prefer cash but leverage is smart at smaller percentages to make deals with fantastic returns work. - average return is OK too if you get it - I feel it shouldn't be used to make mediocre deals turn higher cash flow. - Absolutely agree - A beach rental rarely falls into the first category. - Absolutely agree -

I'm not trying to defend stupid speculation on beach RE. As I said in my earlier post IT DEPENDS. Sometimes leverage can work to to one's advantage. Cash purchase will usually work just fine but it is not the only way to make(or loose) money.

Searcher,

Two things:

(1) "Ignoring the expenses" is what is getting these folks in trouble now.
10 Properties = 10 Insurance Policies + 10 Property Tax Bills + 10 Closings + 10 RE Commission Charges

AND

(2) You forgot to start your illustration with "Once Upon A Time....."


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As always - thank you Shelly.

1 - Remember rule #1 "Crunch Thy Numbers"

2 - Amen - it is much harder now ...but not impossible.

If a piece of real estate will not cash flow with 80% loan, then it isn't an investment.

Everything cash flows when you pay cash...but your returns suck.

Everything cash flows when you pay cash...but your returns suck.

I would be so sure about that. You must consider mgt fees, taxes and insurance, which could leave you at break even or negative cash flow, depending on the property.

If a piece of real estate will not cash flow with 80% loan, then it isn't an investment.

Everything cash flows when you pay cash...but your returns suck.

To each his own. A loan definitely takes a sizeable chunk of your return. I only buy deals that make sense to me with little risk. My returns do not suck I assure you and no matter what the market does I will be fine. It is a risk versus reward game to be sure. If you had bought those 10 properties a couple years ago I assume you wouldn't be so agressive. I don't feel like risking 100 percent of an investment to make a higher return. If you do then I wish you luck and prosperity in your gamble.

Litter on the "Scenic Highway"

It seems that that it is more important for people to advertise than it is to keep our area from looking like billboard row. Let's try to have a little more respect for area.

Thank you, Joe. Why do so many people insist on making this place just as trashy as so much of the rest of this country?

its not about gambling...its about opportunity cost and diversification.

I would submit its more risky to own 1 property vs. 10 and its also more risky to have 100% equity in an investment than 10%, but you are rite to each his own. seems like your strategy has worked for u in the past and i hope it continues to do so.

You sure that's not from a Carlton Sheets workbook?

its not about gambling...its about opportunity cost and diversification.

I would submit its more risky to own 1 property vs. 10 and its also more risky to have 100% equity in an investment than 10%, but you are rite to each his own. seems like your strategy has worked for u in the past and i hope it continues to do so.

I think this statement only works if your properties are very diversified. One example of it not working is when you buy 10 units in the same condo complex.

Each person does have to take into account how much risk they want to put on the line. It should be unique to each person. Since people are involved, it is not about only the numbers, though I think we all understand your examples of return on cash invested.

I'm pleased to report that the huge sign, illegally placed on the side of the road at hwy 98/CR 283N, is no longer there. :clap_1: Unfortunately, judging by the frame of the sign on the ground, I suspect the auction company didn't remove it. It would seem odd that Code Enforcement would strip the two big signs from the frame, but maybe they had to do so to fit in their truck. Those signs did not fit in the back of the truck of the guy who posted them. They were hanging out of all three sides of the pickup truck.

OK, who has the scoop on today's auction results at Heron's Watch Condos?

7 Condos--no reserve--Absolute.


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Anywhere between 130k and 150K with the exception of 1 of the properties which included commercial space and that went for 260K (I think). But all properties did sell.

On another auction note, Roebuck's Auction was yesterday also and nothing sold. The highest bid on a Silver Beach Towers 11th floor, three bedroom, was $705K. The highest bid on a Magnolia Village in Sandestin was $650K just to give you an idea.

I was there; the units went from $140,000 to $170,000 plus a 10% Buyers Premium. The combo units (2 that sold together) went for $245,000.

Based on $1,000/month rental income may not be a great buy at $140 - $170K + 10%, but based on construction prices...it may be about right. These are 1,000 SF units and I doubt you could replace them for ~$150/SF.

Thanks for the info everyone, this auction should set a ceiling on those other units listed in MLS.

I was there; the units went from $140,000 to $170,000 plus a 10% Buyers Premium. The combo units (2 that sold together) went for $245,000.

Those sales are similar to prices paid on resale units in the same complex in 2003 and about 50% of the high water mark for a couple of resales in the same complex in 2005.

But, for someone looking for a small second home (not an investment) near some of the most gorgeous beaches anywhere, $150k doesn't sound too bad.

Thanks for the info everyone, this auction should set a ceiling on those other units listed in MLS.

Don't you mean a floor?

Don't you mean a floor?

I think the intent was ceiling--as in don't pay anything higher than the price recently paid at auction.

I think the intent was ceiling--as in don't pay anything higher than the price recently paid at auction.

Ditto...considering the current direction of the RE market.


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Yeah I meant ceiling...not sure the floor has been established yet?

I would hate to have been a buyer at $280K

Yeah I meant ceiling...not sure the floor has been established yet?

I would hate to have been a buyer at $280K

I believe the high water mark was actually $330K.

I don't think that an absolute auction in our current market establishes a ceiling. Auctions are not contingent upon financing, inspections, etc. By it being an absolute auction in our down market, the seller's motivation is probably generally acknowledged as "highly motivated." Also, the buyer pool is rather small at auctions. If those units were listed, at the selling prices, they would have sold long ago.

I would hate to have been a buyer at $280K

I wonder if you will have the same thoughts ten years down the road.

I don't think that an absolute auction in our current market establishes a ceiling. Auctions are not contingent upon financing, inspections, etc. By it being an absolute auction in our down market, the seller's motivation is probably generally acknowledged as "highly motivated." Also, the buyer pool is rather small at auctions. If those units were listed, at the selling prices, they would have sold long ago.

There are several listed at under $190k right now and they aren't selling. Looks to me like the auction set a new ceiling. And, yes, I believe the people who bought at $250k, $300k or $330k will be lamenting the fact even 10 years from now. In order to get a decent return (8% or more after carrying costs) on these "investments" 10 years from now, those units would need to be worth over $600k. Do you really believe that those units will be worth over $600k anytime in the foreseeable future? If so, were you a buyer at $150k or are you going to be buying one of those units at $180k?