Do you think the luxury condo market will hold for the next 12-18 months?

[NsXMas]

Some friends and I are looking at some luxury condos for an investment, probably to hold for a year or so, and then selling them.

The condos we are looking at are worth $1 million to 1.5 million.

I have talked to my local real estate experts who feel that it is a good opportunity, and really don't have much downside.

The only risk is the luxury real estate market tanking, but I can find really no indications that this space is in danger of tanking in the forseeable future.

Anyone who is in real estate have an opinion about this market?

 

[KGP]

You talking about the lux condo market in Anchorage, AK or Miami, FL? :tongue:

 

[NRG]

I'm looking into luxury high-rise at the moment for rental.

I don't think you should expect an increase just with 1 year of holding because you never know the unforseen of the economy. Maybe 5 or 10 years from now, the appreciation will continue to go up steadily based on the history of real estate.

Don't get an opinion from the real estate agents....they make a living by selling units to you. If you ask all real estate agents, then they will say the same thing.

Real estate is an investment; and all investment is a risk.

 

[NsXMas]

We're looking at a very unique luxury development in the most prestigious part of Phoenix. Given the demographics of the Southwest and that many afflulent baby boomers are moving to Phoenix to retire, luxury condos here are booming. In fact Trump is trying to win rights to develop a luxury high rise here as well.

The luxury condo I am looking at is seated in an exclusive golf course club house building, with some very expensive services/benefits as part of the monthly fees. It is in the heart of Phoenix, close to exclusive shopping, recreation, the airport, and businesses. Luxury developments there have done very well.

My concern is not with the specific development, but rather the risk that luxury developments in general may somehow hit a down turn, especially in the Southwest. I've not invested in luxury developments before but I feel generally fairly safe with this investment, but nothing is risk free, especially when you are talking about mega-bucks.

Arizona has no hurricanes, or any other natural disaster that would suddenly cause real estate values to plunge, but one can never fully anticipate the future.

 

[O-Ace]

Ofcourse, there's always risk in any investment but one thing I would consider is the amount of total capital you are investing. I'm not sure if this is the only real estate investment you'll be making this year or if it's one of several. If it's the only one and you can invest 1-2Million, I would probably divide that up into 4 different investments, half a million each to reduce your overall risk. This is just my opinion. I'm not a big shot investor or anything but I do have RE investments in Chicago and Florida, and am also a licensed Realtor in Illinois. The other thing I look at is the local economy. For example, I'd be more comfortable investing 1MM+ in downtown Chicago than in downtown Madison, WI since the local Chicago economy is stronger and more diverse.

I know my post didn't specifically answer your question but I hope it gave you some other things to look at when making your investment. Just my $.02 (not even )

-Awais

 

[steveny]

So what do I do with a 15,000 square foot, 4 story building with no parking. I spent the day checking this building out to buy it and I am really interested in rehabbing it into apartments, but there is NO parking what so ever, not one space. The realator only told me this after I had wasted my entire day doing a walkthrough. It appeared to have parking in the rear but she didn't tell me until I asked. The entire footprint of the building is all the land I would get with the purchase. The street level floor is broken up into commercial space and the other floors are broken up into apartments. The entire building need to be rehabbed.

Who would live where they don't have a place to park? Any feedback would be appreciated.

 

[Dtrigg]

If you want to purchase an apartment for a year or so, you're not investing, you're speculating. "Flipping" real estate is a game you don't want to play in short pants. Have you run your numbers to determine your cash flow from a rental property? If you don't look at it as any other investment or business venture -- buy a REIT.

 

[Carguy!]

I don't know if you have also considered that having a substantial monthly service fee can be a very bad thing.

If in one year you need to sell the property and the values have gone down, you are not only going to be hit with taxes but also that service fee.

I know of several people who speculated on condo's with a service fee and lots their shirts because once too many go up for sale other panic and sell cheap because they can't afford to hold them until the market increases.

Good Luck! I would also be one of those guys that tells you to divide your investment into more less expensive homes.

 

[Ryanmcd2]

If this is your 1st time doing it I would do about 10% of what you are doing or spend 10k on getting informed on what you are doing. Asking a bunch of car guys if spending 1-2mill on a condo is not the place to start. I do know many people that do well buying strip malls or even land that is about to be developed on but they took the time to learn what is going on. Spend the money and educate yourself and do something cheep just in case you lose on it so you can do it again. Just like anything else take small steps and learn what you are doing. Start small and talk to someone that does this and makes good money. Find someone that buys and sells these type of plots and ask them how they got started and ask if they can mentor you. I did that with stocks now I teach the guys who tought me things

Some friends and I are looking at some luxury condos for an investment, probably to hold for a year or so, and then selling them.

The condos we are looking at are worth $1 million to 1.5 million.

I have talked to my local real estate experts who feel that it is a good opportunity, and really don't have much downside.

The only risk is the luxury real estate market tanking, but I can find really no indications that this space is in danger of tanking in the forseeable future.

Anyone who is in real estate have an opinion about this market?

 

[Ryanmcd2]

What is the mass trans like around there? Any big companys that may want to place people there in corp apt housing?

So what do I do with a 15,000 square foot, 4 story building with no parking. I spent the day checking this building out to buy it and I am really interested in rehabbing it into apartments, but there is NO parking what so ever, not one space. The realator only told me this after I had wasted my entire day doing a walkthrough. It appeared to have parking in the rear but she didn't tell me until I asked. The entire footprint of the building is all the land I would get with the purchase. The street level floor is broken up into commercial space and the other floors are broken up into apartments. The entire building need to be rehabbed.

Who would live where they don't have a place to park? Any feedback would be appreciated.

 

[steveny]

What is the mass trans like around there? Any big companys that may want to place people there in corp apt housing?

Bus service is all. Small town 1200 people population. 20-30 mile drive to the next nearest city with 25-45k population. I could put 10 apartments and 2 commercial spaces in this building but who would rent where there is no parking? I am currently looking into a long term lease of adjoining property for parking or I may buy the building next door and demolish it to create parking.

I can not come up with any other use for this building. I thought about office space but clients would need a space to park. The big box companies are just starting to develop the main street area where this building is located. Most of the property is being bought up by large developers. I am assuming the values will go up substantially over the next 15-20 years so I would like to hold on for a while.

I have also thought of setting the building up as assisted living but the staff would need parking too.

 

[Ryanmcd2]

I say buy the one next to it and demolish it, put in parking and sell the extra spaces to others that need it. Parking will be needed down the road for others.

Bus service is all. Small town 1200 people population. 20-30 mile drive to the next nearest city with 25-45k population. I could put 10 apartments and 2 commercial spaces in this building but who would rent where there is no parking? I am currently looking into a long term lease of adjoining property for parking or I may buy the building next door and demolish it to create parking.

I can not come up with any other use for this building. I thought about office space but clients would need a space to park. The big box companies are just starting to develop the main street area where this building is located. Most of the property is being bought up by large developers. I am assuming the values will go up substantially over the next 15-20 years so I would like to hold on for a while.

I have also thought of setting the building up as assisted living but the staff would need parking too.

 

[NsXMas]

Thanks for the feedback. I am going into one property with another investor, so it's about 50/50 investment.

I was made aware of this opportunity by a close friend who is in the real estate space, and who has had quite a lot of experience in Nevada and Phoenix. He has done his homework, checked with his realtors, etc, and feels very confident that this will be a hit.

I double checked with my other realtor friends and they seem to think it's not a bad idea, but nothing is 100%.

I'm still gathering information and will decide if I am going to put my money into this venture.

 

[Ryanmcd2]

If it's such a good deal why did your close friend not take it? I am not trying to be a hard ass but everyone is a pro and knows what they are doing until your screwed and out of the money. I say look into it yourself and see the real deal. I used to do VC deals until you learn 90% of the people are full of it. Unless you make or have 10mill I would not spend more then 10% on *1* deal, if that's all you have and you are putting it all in one deal you are just foolish. If you want to talk to someone who does this for a living and knows what he is doing and does over 10mill a year and deals send me a pm. But the one thing I ask is when you talk to him dont waste his time and have a idea of what you are talking about. Time is all you have.

Thanks for the feedback. I am going into one property with another investor, so it's about 50/50 investment.

I was made aware of this opportunity by a close friend who is in the real estate space, and who has had quite a lot of experience in Nevada and Phoenix. He has done his homework, checked with his realtors, etc, and feels very confident that this will be a hit.

I double checked with my other realtor friends and they seem to think it's not a bad idea, but nothing is 100%.

I'm still gathering information and will decide if I am going to put my money into this venture.

 

[Dtrigg]

FYI. On one of the finance television programs this morning there was a discussion regarding some of the "over heated" residential real estate markets, and the potential for a downturn. One of the markets that was mentioned was Phoenix. Of course there was a real estate sales person that thought all of that was crap, versus the three other investors.

Ryanmcd2 makes some great points. Carguy also hit the nail on the head. I have been looking at some rental property on the Alantic beachfront. I've discovered that some of the management fees are 40%! That type of number coupled with insurance, bad weather possibilities, previous rental history, etc. turned me off to the whole thing.

As I mentioned in a previous post, you don't play this game in short pants. Plus, I was very serious about making a real estate play using REITs... professional management, ability to have several types of real estate plays, plus they have to pay out 90% of their earnings in the form of dividends, etc..

Good luck, no matter what you decide.

 

[NemesisX]

No...Its topping!

The question you should ask yourself is whether you can afford to lose all of your investment, like others have said...risk management!

 

[NsXMas]

Thanks for the info. My friend is actually invested and has a unit himself.

I spoke to my financial advisor, and he thought the worst thing that would happen is that I would end up having to live in the condo myself. I suppose worse things could happen.

I'm still doing my homework so I appreciate the feedback.

 

[Ryanmcd2]

lol, so you think if he thinks it was a bad idea he would tell you? A screw up loves company.

Thanks for the info. My friend is actually invested and has a unit himself.

I spoke to my financial advisor, and he thought the worst thing that would happen is that I would end up having to live in the condo myself. I suppose worse things could happen.

I'm still doing my homework so I appreciate the feedback.

 

[Dtrigg]

Please keep in mind that I don't want to rain on your parade, but if that's what your financial advisor is telling you, you should get another opinion. My financial advisors and my bankers beat the hell out of the deals I bring to them. That's their job. That's why I pay them - to make sure we all make money.

Did you discuss how to get out of a deal, and not just how to get in? What's your ROI? What's your cash flow? Over what timeframe? What is the management fee, or are you going to be a landlord? What's the condo fee? What are your taxes? How much did you allocate for damage and repair? What kind of covents are there at the condo regarding the number/percentage of rentals? What's the rental history? What's the builders history? Are these long term or short term rentals? What's the rental market like in the summer in Phoenix? How many months out of the year do you expect for your unit(s) to be vacant? What the best way to finance this deal, being that it's not your primary residence? Are you looking for cash flow or to flip the property -- that alone brings another series of issues.

I don't want to go on and on, but please take your time. Never be concerned about walking away from any deal. Just make sure it's the best deal for you.

Regards,

Doug

 

[Dtrigg]

Did your financial advisor mention anything about what to do with your current home if you have to move into the condo? I assume you have a current home that you own prior to investing in rental property.