I Bought A Beach Condo

If you’ve paid any attention to my blog in the recent months, you’d know by now that I was interested in purchasing a beach condo. Well, I’m happy to report that I’ve technically bought a beach condo. You’ll understand why I say technically later. I hope you had your coffee. This is going to be a long post. In this post, I will go over my thought process, initial purchase criteria, and what I ultimately ended up with. Hopefully, I’ve made a wise decision, but only time will tell. I’m super interested to know what you think, so without further adieu, let’s dive in.

1. Why Buy A Beach Condo?

I like dividend investing, but I love investing in real estate. So far, I’ve only had one property that I purchased about three years ago. I had lived in it for a year with roommates who helped pay for the mortgage. Then when I moved out. I turned the property over to a property manager and have rented that house out ever since.

I view real estate as my plan-B for retirement. My plan-A is to retire from my current job and hopefully have enough in my Roth 401k and Roth IRA to help support me for the rest of my life. Based on my current age, I feel like I’m far behind.

So then there’s real estate! Since I want to retire in about 14 years, the question I asked myself was how much real estate would I need to own to be able to retire off of? Stated another way, how much real estate income per month would I need to generate to be able to retire off of?

The good news for me is that I don’t need much and I could retire comfortably if I was generating $50,000 per year. But, I’m willing to shoot for the moon and so I’m working towards making $10,000 per month in my retirement years. So, I would need either 10 properties generating $1000 profit or fewer properties generating more money per month.

1A. A Closer Look At My Real Estate Projections

For the house I bought 3 years ago, I still have a mortgage on it. Quite frankly, the mortgage is a 30-year fixed. As late as January of this year, I was struggling with the decision as to whether I should pay off my mortgage early or invest. After agonizing with that question, I decided to pay off my mortgage early and documented my reasons for doing so in that post.

Part of my thinking was to coincide paying off the mortgage with my goal to retire in about 14 years. Imagine, wouldn’t it be cool to have several paid-for houses by then? So, that way, if I’m still getting $1500 in rent, most of that would go to me after I pay taxes, insurance, and a property management fee.

So, every month, I add about $575 extra to the mortgage payment so that I can pay it off in 15 years. Once the mortgage is paid off, I will use the extra income to either a) live on or b) to pay-off other mortgages. That way, I will be able to snow-ball paying off the mortgages on all my properties, which will be owned free and clear. My plan is a work-in-progress. I do try to maintain flexibility in case I need to adjust because of life’s struggles or opportunities.

2. Why Florida?

As you know, I live in California. However, I have more of a connection to the state of Florida. I did most of my schooling there and I lived there for several years after I graduated. As of right now, my intentions are to retire in the state of Florida. Even if I don’t retire there, it’s nice to own a vacation rental in that location.

Part of the reason I chose Panama City Beach (PCB) was because it has consistently rated high as a top destination spot to buy vacation rentals in Florida. For example, check out The Top Places To Buy A Vacation Rental Property In 2019 report from Rented.com. I compared PCB to Destin, and honestly, I prefer PCB better, having visited both locations. Time will tell if I made the right choice.

3. Purchase Criteria

This is important. Prior to heading to PCB, my purchase criteria was simple. I wanted a 3/3 corner unit condo directly on the beach. And, I wanted to spend no more than $400,000. Simple right? Well, not so much.

I looked at several condos. Indeed, one of the ones I thought I was going to buy was ultimately not ideal. I couldn’t make the numbers work. The condo fees were basically $3500 per quarter!!! That’s about $1166.67 per month. Ouch.

Of all the other condos that I saw that made sense, they were really expensive. The asking price for one of those condos was about $620,000 and the condo fees were $800 per month. The other unit I saw was asking $650,000 and the condo fees were $900 per month. Long story short, I was getting disappointed that I wouldn’t find something that met my criteria.

Truth be told, I still didn’t!!! I chose to compromise. The condo I’m buying was actually one of the very last condos that I toured. But as I was doing so, my exact quote to my realtor was, “it just feels right.” There were many pros about the condo unit even though it wasn’t exactly what I wanted.

Based on the projections, I’m hoping to cash flow on this one. Let’s take a deeper look.

4. Beach Condo Purchase Specifics – CONS

I figure the best way to present this information is to explore the pros and cons of purchasing this specific condo. So here are the cons.

4A. Not Beach Front

So the biggest downside to this particular condo unit is that it’s not directly on the beach – by my definition. Specifically, it’s across the street from the beach. I realize that might be a distinction without a difference, but I think it’s a big deal. In my opinion (not really based on scientific data), most people who go to the beach for vacation want to stay directly on the beach! I mean, that’s the whole point, right? So, a HUGE con, in my opinion, is that my condo is not DIRECTLY on the beach. It’s instead across the street from the beach.

For what it’s worth, although the unit is across the street, to get to the beach, a guest walks over a walkway (on the third floor) so they don’t have to worry about waiting for traffic to pass.

It’s not the end of the world. There are several condo resorts that are located across the street from the beach. My preference, however, was that the unit I buy be directly on the beach! So to me, this is a con.

4B. The Third Of Three Towers

This is both a pro and a con. With respect to a con, there are three towers in very close proximity as part of one overall condo association. The fact that this particular unit is in one of the three towers is an indication that it will be one of over 600 units available. So, there will likely be overcrowding during the busy season and things like long waits for elevators might be an issue.

There is something to be said for peace and quiet while on vacation, but that’s not necessarily for everyone.

4C. The Price

For privacy, I’ve decided that I won’t disclose the price of the condo, but sufficed to say, it was more than $400,000 that I initially wanted. Because of the purchase price, the closing costs are likely to be more than I initially wanted to spend. Regardless, I’m supposed to bring an additional $10,000 at closing in addition to the closing costs to get the favorable loan terms that I want.

In addition to the price of the condo, there’s also the fact that it will not come furnished. Therefore, I’m going to have to spend about $20,000 to furnish the unit. Not fun.

Therefore, I’m listing the price and overall cost to acquire the condo as a con.

4D. Not A Corner Unit

Despite my initial criteria, the unit I purchased was not a corner unit! I initially was not interested in a non-corner unit. However, as I mentioned, when looking at the unit, it just felt right. I’m sure my ego had a lot to do with it (more on that later), but this was one of the concessions that I made.

As ridiculous as it sounds, I rationalized this decision by saying that I’ll get exactly what I want 14 years from now when I retire. But, since I’m not getting a corner unit, I’m listing this as a con.

4E. That’s It.

Although the above cons are significant, that’s all I could come up with for this particular unit. Quite frankly, if this unit was directly on the beach, and be a corner unit, I think it would be near perfect.

But, even though I’m not getting exactly what I want, I think what I got was definitely worth it.

5. Beach Condo Purchase Specifics – PROS

Although there were several cons to this unit, there were significant pros. Let’s explore.

5A. Location

You’ve heard it before. When investing in real estate, one of the most important aspects of a good deal is location, location, location. The condo unit I purchase is in THE location in PCB in my humble opinion. Even if there’s a better location, I’m sure that the unit is in an awesome location for PCB.

The location is good not just because it’s a popular destination for vacationers today, but there are numerous developments in the works that may have a positive effect on appreciation values. So, I’m pretty happy with the location.

5B. New Construction

Most of the buildings I saw were built around 2007 or older. 2007 is not a bad year by no means. But, that’s still twelve years ago. The condo unit I’m purchasing is new construction. So, it’s currently being built! Estimated completion date is early 2020.

Part of the good thing about buying pre-construction is that a lot of the equipment inside the condo unit will be covered by warranty. So, I expect to have little-to-no maintenance issues for the next several years.

5C. HOA Fees

Honestly, one of the things I hate about buying a condo is that I will always have HOA fees, even after I pay off the mortgage. Well, the good thing about the unit I’m buying is that the HOA fees are relatively low comparatively speaking.

My HOA fees on this condo are around $370 per month. By comparison, my car payment is around $356 per month. But that’s still better than paying $800, $900 or even $1100 a month for HOA fees because that feels like a separate mortgage payment.

Although this particular unit is pre-construction, there are two already existing towers that were built around 2007. I know the HOA fees have been stable for the past 6 years, and likely longer than that. They can always rise, but I think it’s going to be a while before it gets to the $800 mark.

5D. Penthouse Unit

I think this was a suitable compromise. Although I’m not getting a corner unit, I am getting a penthouse unit. This is entirely due to ego. There are pros and cons to owning a penthouse unit. For example, a pro is that I don’t have neighbors above me to worry about. A con would be that it’s harder to escape in case of an emergency, especially if elevators are down. I also worry that if there’s a leak on the roof, it might be harder to fix because it’s a condo unit – but that’s just a guess.

Finally, although this unit is not a 3/3, it is a 3/2 and so I think that’s a fair compromise as well.

5E. The Views

The views are ok. The pictures you see of the front and back of the condo are the actual views I’ll be getting once the unit is finished. They are not the beach views I wanted. I really wanted only beach views. However, one of the things I realized (and experienced) was that at night, if your unit only has beach views, it’s very dark! After all, there are no lights on the sea. But if you have views of the city, you may get some city lights. Also, because the view overlooks the street, there is the potential to have a dynamic view at night.

One of the cool things about the condo is that is has a view of the city and beach from the back of the condo and another view of the city and beach from the front. Together I get about 180-degree views.

I should also point out that these are forever views (at least with respect to the views on the balcony). That’s because the city owns land impacting the view and so a private investor couldn’t just build on that land.

Conclusion

There are many more aspects to this purchase that I left out in this post. For example, I didn’t talk about the new and updated amenities being built in the new tower, or the extent to which I’ll be making a profit or loss. However, overall I think I’ve made a good decision. Only time will tell if all the assumptions and expectations I have will pay off.

I still have several days to decide whether I should cancel the deal. But as of right now, I’m leaning towards accepting it and seeing where this next journey in life takes me.

What do you think of this post? Do you think I made the right decision? Let me know your thoughts by commenting below.