What are the ins/outs of buying a beach condo as an investment?

A 10-yr, 1x MOI does not sound remotely attractive.

May Be Some Help in Here

Why not invest in. REIT or company such as JOE and not in an individual property? This way you would not have a monthly note or liability, take that money and go on a awesome vacation to different places every year. Destin is great until you are forced to go there every year.

This is something I've looked at myself - in Orange Beach. But I haven't gotten too far into it.

I do have 6 clients that own condos on the Gulf Coast. 5 of them are married couples that each own a single condo or beachhouse in various spots between Gulf Shores and Seaside. The 6th are two brothers that own 7 condos in and around Port Aransas, TX.

The 5 married clients: each couple has a wealthy breadwinner, 3 of them are doctors and 2 are high-level attorneys, all of them are in SE Louisiana. None of them truly look at the condo as an investment. They all love going to the beach and using the unit personally (they each go personally or allow family to go at least 30 days a year, at least half of which is during winter). They all were spending lots of money renting stuff, and just decided to buy. None of them are really looking at making any serious money off it it. None of them cash flow positive, they cash flow negative between 1K and 5K a year. But... they are personally using the properties so that is a replacement of cost they would pay to rent. All of them are subject to vacation property rules for tax, so, basically, they get to write off the personal use of the mortgage interest and property taxes as a second home, and as a rental property, they show no taxable income.

The other one is a different story. Two brothers who about 10 years ago sold a construction company they co-owned and they each made about 15 million off the sale. All 7 condos they own in Port Aransas are truly investment. They spend 10 months a year in Port Aransas in their personal houses down there, and 2 months a year in San Antonio. They are retired. They handle everything themselves - they do not use a rental agency. They are both handy so they do ALL the maintenance on the properties themselves. They are located in all different complexes - no more than one per complex. They do hire a cleaning crew - they use same crew for all properties.

Each property cash flows approx 1000-1500 per year. The cash flow is very variable month to month. Each property is held in a seperate LLC. With depreciation they generate a taxable loss. However, they can use these losses to shelter some income coming from other passive investments they have.

I'm still not sure they are really making a wise investment, but they do it more as a "hobby".

Beach condos on the panhandle are terrible investments. The only way you can make money is if there is another bubble/boom or you 'steal' it. I bought one cash in 2009 at 50% of the peak values. I have more rentals than 90% of the units there and the net income (after insurance, utilities, dues, commissions etc) returns about 5% or so. My unit has low dues and I've had no assessments. The vast majority won't even return the little I make on mine.

I bought it hoping for appreciation and as a place for the family to hang out, but it's a very poor investment as virtually all of them are.

I did a TON of research before I bought and unless you virtually steal one, it's not going to be a good income producing investment...and even in that case, you're better off financially selling it at market price and investing in 'real' real estate.

I think you have a mistake in your analysis if you think you're going to finance it and pay it off in 10 years...unless you put down a BIG down payment which you'll get zero return on for 10 years.

What's the cost of the unit, your down payment, and what you think you'll get in rental income?

ETA: I found the cheaper places I wouldn't want to spend time in had better returns. Slum lords always seem to get better returns. The bottom end properties MAY cash flow a little, but then you have to worry about repairs, assessments, foreclosures ruining your building etc.