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

Your numbers are very wrong

The home owners fees and insurance and all of that are probably much higher than you are thinking.

Tons of people lost their asses on condos who purchased at inflated prices around 2006-2008.

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Your numbers are very wrong

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Meh...not knowing his numbers, it's not enough to call him wrong...but he probably is.

Condo in Orange beach brought in an extra $8k last year over the loan payments and shared leasing co fees. Of course I don't take it, I put it back into the loan and keep some cash on hand for furniture/maintenance issues. It's a brand new tower and will keep being an attractive destination for quite a few years to come.

Yes, you have to be able to identify inflated pricing. But, if you get a solid deal, drop $25k down payment and let leasing customers pay your retirement for 15 yrs, I cant see how it's a bad investment.

And the often overlooked factor, for a family like mine that goes to the area anyway a few times/year, I save thousands in $$ I would have spent somewhere else on housing....it is a # to be factored in for me!
But not far all

You're the first person I've met that has made money on a condo investment in the gulf. I've ran the numbers every way possible and I just don't see how it is done.

That's awesome you're doing it though. I'm jealous.

I own on the Atlantic side of Florida. The real money, if there is to be any, is on the exit from the property. It isn't as easy as some think and the key is to have the capacity to stay during tough times.

I'm guessing you need a minimum of 20% down, but what's the current rate on a NOO Investment/2nd property mortgage for prime credicks and 80% LTV?

I ran some numbers based on the three year occupancy averages for the Gulf Shores/OB/Perdido area broken down by quarter. Year round it's just under 50%. Pricing extremely conservatively on rent and estimating extremely aggressively for HOA/Insurance, if your rate is around 7%, you won't come out of pocket for the note, and you'll end up with a nice chunk of change to put back on principal each year.

In peak season, you still have the better part of a month's worth of time based on occupancy averages and that's thousands saved on vacation rentals is normally be out of pocket on.

I love Bama...I've been kicking this idea around, so I'm interested in how your math matches up. Care to share?

My plan is to buy a tower unit in a desirable location and go in with multiple buyers. All of whom would split the rent and agree to reinvest funds above monthly obligations.

But who in the wide world of sports would float an investment like that if they couldn't afford the monthly note even without rental income?

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.

Ask an owner you know how much they've spent on "one time" beach restoration projects over the last few years.

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".