Where Have I Been??????????
It seems like time has gotten away from me. With all the changed taking place with our business I seemed to loose track of how much time had gone by. So, lets get back to it.
We are marketing an incredible home in Ocean Pines, MD. Waterfront modern home with an 1100 sq/ft roof top deck with bar, hot tub, sound system and shower. Can you say WOW!!! Bamboo floors, glass and metal elevator, NaNAWall, rain guard sky lights, incredible tile showers with multiple heads and room for all your friend ( ha ha). $1.39 million for this Austin Childs/Becker-Morgan Coastal Modern. Winner of multiple design awards and featured in several magazines.
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On to other things................
The market is busy here. One thing that is happening is that people with available cash who had been very cautious and had not invested are now coming out thinking they can still find a deal. There are deals, but they are farther from the shore. These investors are coming into the hot areas and, sometimes, making ridiculously low offers. If a property is within walking distance or biking distance to the beach, then there are no "Deals". Values are not back up to where they were, but the distressed properties have almost been cleared out of the prime areas and most of the foreclosure notices at the beach are on properties in the fringe area.
Let me clarify. There are a few creative deals in town, but you have to have cash and you have to be open minded. We have Rehoboth By The Sea, which still has leased land. Some of these leases are up in 10-15 years, but there are some that still have 30 years or more left. Now, you can not mortgage these homes, and you do not own the land, but rent is less than $4,000 a year, so if you have a 4 bdrm home 4 blocks from the beach and it cost $600,000 and you can get $30,000 a year in income and still use the home your self for 4 months of the year, then this looks like free vacation for the next 30 years. If you have been coming to the beach and spending $3,000 for a week, then you will save $90,000 over 30 years (more with increases). So if you have $30,000 income from a home and in 30 years that is $900,000 and you have save $90,000 in hotel or rental fees, then you are ahead of the game. The home with land rent is $720,000, so you have $170,000 or $5,666 a year for insurance and cleaning. So, no profit, but you have had a whole house 4 blocks from the beach to vacation in 4 months a year (*weekends maybe), and it has not cost you much of anything.
Creative. If you look hard there are some deals in this area that would cost less up front. Smaller homes closer to the beach with fewer lease years left, but higher rental potential. A few year back I sold one with 21 years left for a little over $300K. The buyer said they had been spending 2 weeks a year at the beach and paying $5500 in rental, so now for $18,000 (including land rent) they could stay all summer, come down on weekend during the fall and winter. They thought that was a deal.
If you did not buy during the market low days and you are now wishing you had, consider changing your investment strategy. The biggest income is from vacation rentals, but they do not compensate for the higher price. A 3 bdrm ranch in vacation rental area sells for $600-750,000 (this is for a standard 12-1400 sq ft). Now, if you go 10-15 miles from the beach you can buy a comparable home for around $175-250,000. You can't do weekly rental but you can do year-round, for about $1200 a month, so yearly total of $14,400.00 and the seasonal for the in town property would be around $30K unless it was right on the beach, so $14,400 is 5.76% of the high end of the cost and the in two $30K is is 4%. After 10 years you have 57% of the original cost in gross income on the home outside of town and you have 40% of original cost in gross income in town. Yes, I am just doing basic and not figuring cost, mortgage, maintenance and such, but expense on a year round rental is much less than on a seasonal, the I think the numbers would look even better considering those factors.
The point of this is that I had an investor looking for an ocean front investment. These properties bring in $70-130,000 a year in seasonal rentals, but they cost $2 million and up. I suggested that we go to a townhouse development 18 miles from the beach that went to foreclosure and buy 20 town homes, which would have been $1.8 million and would generate $288,000 in gross income. They said no, that they thought a beach front property was a safer investment. This would have been more than 125% increase in his yearly income for a single home at the beach priced at $1.8 million. If you are coming to the beach to invest, remember that the workers here can not afford homes here, so they have to rent, and they have to rent outside of town. So you have a constant demand for rentals and you have an abundance of low priced homes away from the beach. This situation will not last forever and is actually coming to an end as I speak.
