chipschindler, Home Buyer in Longboat Key, FL

2013-How profitable are the condo rentals at Sanibel Island,? Are we in a buyers market or sellers right now?

Asked by chipschindler, Longboat Key, FL Sun Mar 24, 2013

If not Sanibel Island, what location is best? I am interested in a property with Gulf views. Are you still seeing good values or has the market fully recovered? I appreciate any advise you can pass along!

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7
Mike Stone’s answer
I beg to differ, Sanibel is up 8% over the last 14 months, in the last 3 weeks we have closed/put under contract 7 multi-million dollar homes and condos, The international buyers are back, the institution buyers (my clients) are back, inventory can be split into two catagories ... those who are grossly over priced and the realist. The Sundial is the poster child for Sanibel re-development - lots of investors are saying " I want to wait and see the completion" ... that will be late. That's where some sophisicated money is going.

We are still able to negotiate deals, but it has to have a complete due diligence file and a logical and factual arguement.

There are many condos that can be bought using a CAP rate model at 10%, there are some that with 100% financing are cashflow even and with cash pirchases ... cash flow.

It's not flat, what we have is the perfect storm - the sellers think it's a sellers market and the buyers think it's a buyers market, we used to be able to negotiate 15ish% off list now, we are fighting for 7ish.

I live on the Island and all I do is Sanibel and Captiva ... lucky if they let me over the causeway.
0 votes Thank Flag Link Thu Mar 28, 2013
In general terms, you can find condos that give you about a 10% gross return on investment. After deducting property taxes, utilities, condo fees and rental fees, you might be able to find properties that yield 4-5% net return (depending on your personal tax situation) on a cash investment. Many condos on Sanibel and Captiva are priced at levels comparable to the late 1990's!!! But prices are going up again though, with an ever shrinking inventory. In addition to your rental income, real estate appreciation on Sanibel has historically outperformed the S&P500 and appreciation certainly has come into play again. We have started a new UP-SLOPE, and this will probably continue for years to come. On a final remark, short sales and bank-owned properties on Sanibel and Captiva are few and far between these days. In order to get a great deal, you need to be ready to move quick and work with an agent that will be able to identify prime properties the minute they hit the market.
To answer William's question, how can you optimize your rental income. You have to be active on-line. Make sure your properties are prominently displayed on websites like homeaway.com and vrbo.com Use GREAT looking pictures, one picture tells more than 1,000 words Make sure your condo appeals to most people, so your condo needs to have all modern conveniences people are looking for like flat screen TVs, modern kitchen and bathrooms and nice looking furniture. The 1980's pastel colored wicker couches don't work anymore in 2013! That sound logical, yet you'll be amazed how many of those I still see almost every day.... as well as bulky old TVs with VHS players (I'm not making this up). If you can't find a condo in prime condition, you might want to think about buying a condo in a great rental complex like Pointe Santo that needs remodeling. There are MANY tradesmen locally that specialize in remodeling. A full remodel of an average 2/2 condo on Sanibel will run about $80,000. With full remodel I mean everything new from the drywalls in. So new kitchen, new bathroooms, new appliances, new flooring and fresh paint. Add some crown molding, get rid of the drop-down kitchen ceiling. If you're up for this, I personally think that you will have a better chance of finding what you're looking for at a lower overall cost.
1 vote Thank Flag Link Sun Aug 4, 2013
The questions that need to be answered before this can be determined are:
1. Owners (You) use. How much and when?
2. Owners efforts (if any) in renting (website, VRBO, field phone calls, email)
3. On-site rental agency or off-site

The answers to these questions start to get you to a gross/net number and determine cashflow.

The appreciation will vary from location to location and improvements needed. Sanibel is climbing. We are up 14.7% this season vs last season. In the first qtr or 2013, 24.1% of all home transactions were vacation properties.

To give you a real life example: Investor buys a $750,000 condo, pays cash, will use 4 weeks a year (2 in peak and 2 off peak), will put some effort into originating reservations, uses off-site rental company, works a deal where he pays 15% for reservations he originates and 25% to Rental Co for all their reservations. 2012 Gross was $74,216. This investors expects to see a 7% appreciation for the next 3 years then a 5% appreciation thereafter and selling in 5 - 7 years. Calculates 25,000 for 7 year furniture depreciation and 725,000 for 27.5 year bldg. depreciation. Apply the cap rate theory and look for something that is 7 - 10% cap rate.

All year - last summer was Sanibel's best summer on record. Hotels are above 90% booked for June. As you might go to your cabin for summer weekends/vacation ... folks from Miami, Orlando, Atlanta come here.

I count on 2/3 occupied and hope for better. I expect a 3 - 5 % appreciation and hope for 10.

Pitfalls - the same as an investment in 1000 shares or CanAgra that pays a dividend.

Hopefully, this helps you think through some things. If I can be of assistance - let me know.
0 votes Thank Flag Link Mon Apr 22, 2013
Would someone weigh in on Chips original question. How profitable are condos/homes that are rented year round? And how difficult is it to rent a unit throughout the entire year? I am in a similar situation where I am getting very close to purchasing a property for investment. Either on Sanibel or Captiva. But need to do some more research to determine any pitfalls and potential financial obligations for a property that may sit empty for periods of time. Thanks.
0 votes Thank Flag Link Sun Apr 21, 2013
William,
The last few years have seen a lot more tourists on Sanibel and Captiva than we've seen in a while. You can tell by the number of passengers at Southwest Florida International Airport as well as by the number of cars that crossed the Sanibel Causeway. By those numbers we are back at pre-Charley (2004) levels. Not too long a go, a good rental condo would rent out about 27-30 weeks per year. This week I talked to someone with a condo at Pointe Santo who will actually have his condo rented out 49 weeks this year! That's truly amazing. In general terms, you can buy condos in the $400-$500K range that gross $40K/yr and $800,000 condos that do $60-70K/year. You will have to pay close attention when buying an income property. I've seen identical condos side-by-side where one would generate $25K of income, while the other one would generate $65K. To be continued...
Flag Sun Aug 4, 2013
We are in a Flat market.....leaning towards a sellers market. If you need the stats I can send them and also send you a list of all available condos you have an interest in.

jessemcgreevy@gmail.com
239-898-5329
http://www.Domain-RealtyGroup.com
0 votes Thank Flag Link Mon Mar 25, 2013
Thanks Jesse. Please email me the info.
Thanks,
Chip
Flag Mon Mar 25, 2013
We still have many excellent values when it comes to gulfview and gulffront condos although its not quite as much of a "buyers market" as it was.

Dan Cohn
0 votes Thank Flag Link Sun Mar 24, 2013
Prices for condos are the best in years on sanibel and rentals are extremely high as well. 2013 is turning out to be best in years for rental income as over 40% of our market are foreign buyers and renters.

Tony DiBiase
0 votes Thank Flag Link Sun Mar 24, 2013
Wow! Thanks Tony. I will take a closer look at Sanibel!
Flag Sun Mar 24, 2013
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