If buying a condo in Florida is on your bucket list there are a few things you should know to ensure your investment is protected and you are buying a condo that is right for your lifestyle.
#1 Know what the rental restrictions are if you are thinking about renting it out while away.
Each condo building from Dunedin to St. Pete are unique in this area. Some buildings allow for daily and weekly rentals. Most however require a 1 month, 3 month and sometimes 1 year minimum. Clearwater Beach only has a handful of daily and weekly condos whereas further south towards Indian Rocks Beach there are more short-term rentals. Location is key when it comes to long term or short-term rentals. A real estate advisor will know each buildings rental restrictions and provide income expectations.
#2 What can you expect to get in rental income?
When trying to estimate what an individual condo will rent for we always look at the rental history of the unit, the time of year it will be rented for, the location of the building and if the unit has been updated inside. An evaluation of these elements gives us the best estimate on what you might expect for seasonal or long-term rentals. The season as we like to call it on the beach is December - April. Renting a condo during the season will be yield the highest rate of return. If renting your condo is important to you we highly recommend you let us do a complete analysis before you make an offer.
Having a beachfront condo in Florida, or any condo for that matter, can be an excellent investment if you know how to buy it. A condo on the beach can be quite different than a condo inland just blocks away. One of the reasons is the management. Each condo building is its own community with financial managers and property managers. If the building is financially healthy and managed well you should expect higher rental rates, a continuous flow of tenants, and steady appreciation rates.
#3 Is the building financially sound?
Always review the current annual budget, balance sheet and reserve schedule. Some things to consider during your review: Are the reserves properly funded? Is there any litigation pending against the association that could create a big expense if found to be at fault? Are there multiple unit owners who are in default on the HOA fee? Are there past due assessments or significant expenses planned for the building over the next 3 years? Our team of agents keeps current financials on most condos on the beach. We review them often and know what buildings are rated highly.
#4 Is the building be properly maintained?
From a distance the condo building may look well cared for and usually are. As an agent who is familiar with condos up and down the beach, I always try to discover any maintenance issues as quickly as possible for the main reason is that it could be costly and adds a layer of risk passed on to the new owner. I always look for the following:
Are there any delayed maintenance issues?
Is there any construction within the building planned?
What is the age of the elevators?
Does the building need to be repainted?
I really look at the grounds (outside walkways, hallways, and landscaping) for up keeping and attention to detail.
Every so many years the condo will need new paint, parking lot repaved, pool resurfacing, and common area updates. Your agent will assist you getting answers to these questions fast.
#5 What kind of appreciation can you expect?
It is difficult to predict as with any market. In May of 2015, the average sale price for a condo on the beach was $663,850. In May of 2020 $647,667. Since 2015 the highest average sale price was August of 2018 $739,292. Prices have only dipped below $600,000 once since 2015 which was March 2017 at $597,000. Location and supply/demand are the main drivers. Condos on the beach have a higher appreciation rate than condos just a few blocks away. If the building is in a good location, well-kept and financially sound you can expect the maximum appreciation that the market is giving at that time. (Statistics pulled from MLS historical condo sales data since 2015 condos with a water view from Clearwater Beach to Indian Rocks Beach 500k to 999k range)
#6 The views and amenities, do they matter?
There are several types of water views, direct Gulf front, partial or peek-a-boo view, or a combination of both Gulf and Intracoastal. How much are you willing to pay for a direct Gulf view? In our experience selling hundreds of condos, units with direct Gulf views of the water can be $50,000 - $100,000 more. Usually, even on the intracoastal, west-facing condos that are above the 5th floor are high enough to have a Gulf view beyond the Intracoastal. Also, some condos face due north or south which allows views of the Intracoastal to the East and Gulf to the west. This seems to be the preferred view, “best of both worlds” as we like to say. Since at night, the Gulf is dark, but the Intracoastal is alive with sparkling city lights and boats going by.
Amenities vary greatly from each community and is a personal preference depending on if you plan to live there full time or use it as a vacation getaway. Most condos have at least outdoor amenities, heated pool, spa and BBQ. The luxury condos have a fitness center, tennis, basketball, multiple pools, club room, and media rooms for entertainment. Amenities are a bonus to most buyers, but views and appreciation rates seem to be what affects decisions the most.
#7 HOA fees what do they cover and are they fixed?
HOA fees vary in each community and depend on the size of the condo, the amenities offered and the floor number. Typically, the larger the unit and higher the floor, the more the HOA will be. A 1-bedroom unit on the 2nd floor will have a lower fee compared to a 3-bedroom unit on the 10th floor. HOA fees are paid to the association for exterior building insurance including the master flood insurance policy, ground maintenance, basic cable, water, trash service and some even include internet. Fees can range from $300 to $1,200 a month. When shopping for a condo, do not focus solely on the HOA fee. A low HOA fee is not always a good thing. This could mean the condo is not budgeting appropriately for replacement items and a special assessment for a major repair could be eminent. Always review the budget, balance sheet, and reserve as part of your due diligence. Special assessments impact all owners of the building and could cost thousands of dollars.
#8 Property taxes and Insurance what is required and how to calculate them?
Property taxes are calculated on the assessed value using a predetermined millage rate set by the city. To get an estimate on what your taxes will be the following year after the property is assessed on its new market value go to Link to property appraiser. The HOA fee will include insurance for the exterior of the building. An additional policy called a contents policy is required by lenders to cover the interior of the unit including your contents. This is only required if you are obtaining financing to purchase but it is highly recommended for protection against storms and possible water intrusion from neighboring unit. You can expect to pay a range of $1,000 - $2,000 depending on the square feet, the purchase price, the use of the condo (full time residence vs. rental) and the amount contents you would like to insure.
#9 Condo hotels and Co-ops, what makes them different and are they right for you?
Condo Hotels are a form of condo ownership that will have an on-site rental desk with receptionist for check-in and other hotel like amenities. There are luxury condos like The Aqualea and Sandpearl that are run by big name hoteliers. There are also smaller condo hotels like Pelican Pointe, Island Cay, Camelot and Barefoot Bay that are old hotels converted into condominium ownership. If you are interested in a condo hotel here are a few things to keep in mind:
· Do your research online check for reviews on the building’s hotel services. The interaction between the management company and your renters should be hassle free.
· Check for stipulations on how long you can stay in your unit as an owner. Some limit to 4 weeks a year or no more than 7 days in a row for example.
· Can you manage the unit yourself or does it have to stay in the hotel’s rental management program?
· Maintenance fees are typically higher, plus if you are required to use the on-site manager you may have to pay 25% - 35% of gross revenue to them.
· Financing can be an issue as only a few lenders are funding this type of property. For a list of approved condo hotel lenders contact Stephen Vincelli at 727-430-1995.
· Your pool of buyers is lower than a typical condo and may create challenges when you try and resell.
Condo Cooperatives (Co-op) are quite rare in our area but are quite common up north. The difference is that when you buy a co-op, you become a shareholder in the corporation that owns the building. These are extremely rare and difficult to get financed due to the corporation structure instead of condominium. We only know of one building in the beach area with this type of ownership, it is called Horizon House, located at 31 Island way on Island Estates in Clearwater Beach. Pricing is low but requires a cash only buyer. For more information on these units or to schedule a tour please call us.
#10 Financing a condo what is the lender going to require?
Lenders are going to do a thorough review of the condo building, financials, management and the comparable sales in the building before they issue a commitment letter to you. Have your agent do a thorough analysis of the recent comparable unit sales in the building. Your agent can see the same thing the lender’s appraiser ahead of time. This will save you having to pay $500 for an appraisal if you know value could be an issue. Here are a few characteristics that could present problems:
· Is there an on-site rental office? If so, they will consider it a condo-hotel and lending restrictions change at that point.
· Is there an active litigation against the HOA?
· Any damages to the building and or common areas?
· Are more than 50% of the units currently rentals?
· Are more than 10% owned by one entity. Too many investors can create financial instability and a higher risk to the bank.
· What is the percentage of the HOA fees that go towards reserves for future expenses and emergencies?
Low down payments are eligible for condos that meet lender’s guidelines. 3% down for first time homebuyers and 5% down for all other primary homes. 10% down for second homes and 25% down for investors. If you need assistance finding a local experienced condo lender call or text Stephen at 727-430-1995.
If you would like to speak Kristin or Stephen, we would be very happy to be able to help guide you through the process and help you negotiate your best offer on buying a condo in Florida. Our expertise and knowledge of the local market will put you on the right path to finding and owning your dream condo. Thank you for sharing your time with us today and continuing to use our real estate home search site.
See you on the beach!
Kristin Vincelli 727-686-1596, Kristin@TomSmithTeam.com
Stephen Vincelli 727-430-1995, Stephen@TomSmithTeam.com
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Real Estate Advisors with The Tom Smith Team
Coastal Properties Group International