Condo Investments in South Florida
Delray Beach, FL · Member since 2017 · 31 posts · 8 votes
I've been going back and forth deciding on whether I want to start off by investing in a single family home or purchasing a condo. On one hand, the appreciation should be higher with a single family home. But with condos, the potential to get a better location for a cheaper price is appealing, and I've also thought about turning it into an airbnb since we're in a vacation destination.
Does anyone have any experience with condo rentals in south Florida? And any experience turning them into an airbnb? How viable are condo rentals in the current market?
Hey @Matthew Maynard,
I am an investor/realtor in Palm Beach county.
Like Mike said, Condo's are tricky. On top of everything he went over, some condo's only allow you to rent once a year. So if your tenant doesn't pay rent and you evict them, you cant rent it out again until their lease would have been done. That also eliminate's the possibility of airbnb.
I wouldn't get caught up with what is the best location, rather what is the best investment. In short term rentals, it may matter more about location, but if SFH it doesn't matter as much. Look at the market rents in the area and make sure you are getting a good cash on cash percentage.
Duplex's and triplex's are preferable but there are a lot of investors in the area taking anything that is a good deal. Also, I am sure you have seen the ones that are a great deal are not in the best neighborhood. Have you considered moving your search north? I am finding some good deals in the Martin County area that have some good cash on cash returns.
Kyle Funnell, Realtor
You really need to analyze the costs associated with the investment. While a condo can be more worry-free, the monthly maintenance fee can really eat into your profit. Another alternative to condos and houses are rental income properties (duplex, triplex, quadplex) or townhouses. A lot of the news I've read in my industry during this pandemic is that people are ditching condos and wanting to move to a house for more freedom and space. I have a spreadsheet analyzer I use for properties. If there are some properties that you are interested in, send me an email. I can help you analyze them.
Does anyone have any experience with condo rentals in south Florida? And any experience turning them into an airbnb? How viable are condo rentals in the current market?
One major hurdle with condos is the condo association. Some are putting a lot of restrictions on how you can use it, and might completely forbid you to lease it. Some association will only allow a non-owner use for a few days per year; some will accept a long term lease, but each tenant will have to be approved by the association and pay an application fee. So make sure that you read carefully the rules of the association before you buy. Also, rules may change in the future, so stay on top of it.
I did invest in condos, but I bought all of them, so now I am the association and decide how I want it to be run.
Last but not least, lending is usually a little bit more expensive on condos than on single family home.
You really need to analyze the costs associated with the investment. While a condo can be more worry-free, the monthly maintenance fee can really eat into your profit. Another alternative to condos and houses are rental income properties (duplex, triplex, quadplex) or townhouses. A lot of the news I've read in my industry during this pandemic is that people are ditching condos and wanting to move to a house for more freedom and space. I have a spreadsheet analyzer I use for properties. If there are some properties that you are interested in, send me an email. I can help you analyze them.
Thanks Nicole, I appreciate the input and offer to help me analyze properties. I agree, I've been primarily looking for houses or anything up to 4 units but I was thinking about condos as an alternative in case I can't find what I'm looking for.
Does anyone have any experience with condo rentals in south Florida? And any experience turning them into an airbnb? How viable are condo rentals in the current market?
One major hurdle with condos is the condo association. Some are putting a lot of restrictions on how you can use it, and might completely forbid you to lease it. Some association will only allow a non-owner use for a few days per year; some will accept a long term lease, but each tenant will have to be approved by the association and pay an application fee. So make sure that you read carefully the rules of the association before you buy. Also, rules may change in the future, so stay on top of it.
I did invest in condos, but I bought all of them, so now I am the association and decide how I want it to be run.
Last but not least, lending is usually a little bit more expensive on condos than on single family home.
That's interesting, in your experience what has been the requested down payment for condos? I didn't realize the lending typically costs more on them. Also not a huge fan of the random fees they can assess at any time.
@Matthew Maynard - let me add one more piece to @Nicole C.'s comment with the following: condo prices in South Florida were feeling pressure prior to Covid-19. I was helping a client with a condo purchase in Hallandale (1 town south of Hollywood) and I ran the numbers in late Feb and compared them to Q4 2019 and noticed a stark difference - supply went up significantly. This was in line with the increased supply in Miami-Dade (trends tend to start there then make their way up to Broward). Condo prices were already headed for an adjustment, Covid only makes it more certain. My recommendation is that you find a small SFH. Obviously a duplex or triplex would be preferable however those have been at a premium in S. Florida since at least 2013/14. Good luck!
Hey @Matthew Maynard,
I am an investor/realtor in Palm Beach county.
Like Mike said, Condo's are tricky. On top of everything he went over, some condo's only allow you to rent once a year. So if your tenant doesn't pay rent and you evict them, you cant rent it out again until their lease would have been done. That also eliminate's the possibility of airbnb.
I wouldn't get caught up with what is the best location, rather what is the best investment. In short term rentals, it may matter more about location, but if SFH it doesn't matter as much. Look at the market rents in the area and make sure you are getting a good cash on cash percentage.
Duplex's and triplex's are preferable but there are a lot of investors in the area taking anything that is a good deal. Also, I am sure you have seen the ones that are a great deal are not in the best neighborhood. Have you considered moving your search north? I am finding some good deals in the Martin County area that have some good cash on cash returns.
Kyle Funnell, Realtor
As a Real Estate Broker and also partner of Stratton were we manage short term rental property my suggestion is that you keep in mind the following things.
When you think of investing on a Condo you have to be aware that condos may in this era of social distancing and stay at home jobs people are looking for privacy, less congestion, and more private amenities at their disposal. Don't get me wrong I am 100% ROI and cap rate thus, my longing has been multifamily for ling. However, this new normal has been a breakthrough in my risk/reward frame of mind.
If you are thinking about turning the property into an Airbnb I am all about single family homes as of now because you're also able to tailor the experience for the guest's and there is also a limited amount of single family home experiences that can be offered. In contrast to condos and vertical multifamily anyone can replicate that experience and compete with you. I believe we're seeing a massive shrink in the short term rental market and that is because before the virus there was an overabundance of small 1/1 and 2/2 units.
Hope this helps and as always feel free to reach out!
Best regards
Hey @Matthew Maynard,
I am an investor/realtor in Palm Beach county.
Like Mike said, Condo's are tricky. On top of everything he went over, some condo's only allow you to rent once a year. So if your tenant doesn't pay rent and you evict them, you cant rent it out again until their lease would have been done. That also eliminate's the possibility of airbnb.
I wouldn't get caught up with what is the best location, rather what is the best investment. In short term rentals, it may matter more about location, but if SFH it doesn't matter as much. Look at the market rents in the area and make sure you are getting a good cash on cash percentage.
Duplex's and triplex's are preferable but there are a lot of investors in the area taking anything that is a good deal. Also, I am sure you have seen the ones that are a great deal are not in the best neighborhood. Have you considered moving your search north? I am finding some good deals in the Martin County area that have some good cash on cash returns.
Kyle Funnell, Realtor
Thanks for the reply. I had never heard that some condos allow you to only rent once per year, I assume that comes down to the individual condo association?
I've definitely considered moving the search north to Martin County. I was mainly trying to start out with house hacking (I don't plan to move out of Palm Beach County) but if I had to buy something with conventional financing, going further north isn't out of the question. One thing I've noticed is that a lot of the single family homes in Palm Beach County have an expensive HOA which kills a lot of the deals. I know this isn't the case everywhere but as I've began my search, I've run into this issue a lot.
Yes it does come down to the individual condo association so if you go that route make sure you read there bylaws. And yes HOA's are high. When looking for myself, I usually set restrictions on HOA's and HOPA's. Almost every time I see a good deal, it is usually one of these that make it a deal breaker.
House hacking is a great way to go! If you are looking for a duplex, I am sure you have seen that they are really expensive or in rough areas. But there are definitely still some options in Palm Beach.
If you need any assistance with your search let me know. I am constantly looking at complex’s that pop up! I am happy to assist.
Kyle Funnell, Realtor
Yes it does come down to the individual condo association so if you go that route make sure you read there bylaws. And yes HOA's are high. When looking for myself, I usually set restrictions on HOA's and HOPA's. Almost every time I see a good deal, it is usually one of these that make it a deal breaker.
House hacking is a great way to go! If you are looking for a duplex, I am sure you have seen that they are really expensive or in rough areas. But there are definitely still some options in Palm Beach.
If you need any assistance with your search let me know. I am constantly looking at complex’s that pop up! I am happy to assist.
Kyle Funnell, Realtor
Yes I have definitely noticed that with the duplexes in the area. Will most likely be sticking with single family homes.
Thank you for your help!
Hi! It sounds like you decided on a SFH and that would be my suggestion. One thing that wasn't mentioned in the thread is that with condos you are most likely more limited on number of people you can sleep there. Vacation rentals drive profits by how many people you can sleep and SFH often have a larger availability for "heads in beds" so to speak. As you look into STRs, I have a great proforma tool that analyzes expenses/income and I'm happy to share with you, if you send me a message, I'll send you the link. Good luck!
Be VERY careful if you decide to invest in condominiums in S Florida. As many have alluded to above, you have to carefully read through the condo docs and find out what kind of (if any) rental restrictions there are. Also, ask for the minutes from the last meeting to see if there was any discussion of a “special assessment” which is above and beyond the regular monthly or quarterly condominium fee. Just as important (and something that is often missed by investors and agents alike), check on the age of the building. The building is between 37 and 41 years old, check to see if they have done their “40 year inspection”. If not and the association does not have significant reserves you can be in for a huge special assessment upwards of $10,000-$20,000. As a Florida license realtor, I was casually discussing listing someone’s condominium for sale. It was just casual talk so I didn’t search tax records, age or building or anything like that. About two years later when the seller finally got serious and I started preparing to take this listing, it turned out that she received a notification that there was a special assessment coming for $24,000 for her unit alone. Those who sold lost out on that equity while those who stayed had to get a loan to pay the assessment. BE CAREFUL WITH CONDOS!!!