To Condo or Not Condo Beachfront is about an Architect’s point of view about whether it’s a good idea or not to buy a condominium on beachfront right now. In particular, the SEUSA eastern seaboard.
There are some things going on that might make you think twice these days.
This Architect was considering buying an oceanfront condominium. Penthouse. Direct ocean view. Sounds nice.
But not to move into full time. At least not now. Maybe in 7 or 10 years.
And so, in the interim: make money as an investment.
This was the Architect’s Financial Proforma Analysis:
It showed nearly a 7% ROI (Return On Investment), which is pretty good these days.
But what you don’t see here are the 20 questions the Architect asked of the selling real estate broker. And of those, one of the most important was:
IS THE $7189 FOR THE MAIN BUILDING P&L PAID FOR FROM THE YEARLY HOA FEE OF $11,700? OR WILL WE HAVE TO PAY THAT IN ADDITION TO THE HOA FEES?
Well, on the morning when the Architect and his wife were halfway to the beach, they received a phone call from the selling agent who had decided to answer some of the Architect’s questions.
And the answer to that question: NO, YOU HAVE TO PAY AN ADDITIONAL $7,189/YEAR. AND INSURANCE RATES HAVE SHOT UP CONSIDERABLY DUE TO THE INCREASE IN HURRICANES AND IS LIKELY TO CONTINUE ESCALATING.
Okay: so move that $7,189 into the 2 columns in the financial analysis, and the nearly 7% return in the right columns goes down to barely 5% ROI. And if the insurance for the main building (this condo’s share) doubles next year and next year, this condo (and all the others) will be LOSING money, NOT making money, which means this whole deal just became a BIG LOSER and NOT worth doing at all.
So: are beachfront condos a worthwhile investment?
They don’t appear to be at the present time and may very well not be worth it for the foreseeable future, unless hurricanes along the seaboard somehow, magically become a thing of the past. But that’s not likely, given what appears to be climate change.
So: the Architect and his wife turned their car around on I-85 and headed back to their mountain home and promptly wrote a post for his company website warning others who might be considering doing the same.
Be careful out there folks.
Oh: some of the other questions answered: only 1 car parking space in the parking garage and these are Not assigned, so every time you come home from the grocery store, you run all over the parking garage to find a single parking slot.
Many/most beachfront condos are in reality HOTELS. And operate accordingly and the niceties we are all used to with home ownership vanish. Not to mention lack of security. Ready to be mugged?
And another question likely answered: WHY ARE THE CURRENT OWNERS SELLING?
Well, let’s see: how about: they’re not going to be earning much, if any interest on their investment now, or soon, and they might be trying to unload it before it’s too late.
Husband your lifelong resources carefully.
To Condo or Not Condo Beachfront