Whether you have been vising the Emerald Coast for decades, or just discovered our slice of paradise, this guide will help go from dreaming about being on the beach to having your toes in the sand in less than 45 days. This may sound like a daunting task with endless options of beaches from Destin to Sandestin, to Scenic 30A and Panama City Beach. Many buyers have spent hundreds of hours endlessly searching the internet via Zillow, Trulia, agent websites, and even Google Street View virtually touring neighborhoods and streets searching for the perfect beach house. Buyers are more educated than ever on the real estate market and oftentimes this turns into “Analysis Paralysis”, where there is so much information that buyers just keep looking and looking and looking and never end up buying, or worse…missing out on the home they have been stalking on the internet for 6 months.
“Hi I am calling about 123 Beach Cottage Way. You know it is the green house with the white trim next to Mrs. Smith’s place. The house has 3 palms trees up front and the amazing beach shell picture frame in the kids bunk room on the 2nd floor that is painted blue. I am not sure about the stairs because they seem like a lot compared to 333 Beach House Drive. But 123 Beach Cottage Way was built in 2003, sold in 2004 for 1.2mil and then was a short sale in 2010 for 612K. I don’t see any changes other than paint since the buyers bought it in 2010. However, I see the neighbors remodeled their house and their rental income is 65K a year. I spoke to them yesterday and they may be thinking about selling. Do you know why they would be selling?”
This may sound funny, but this is a typical first time conversation I have with a prospective buyer. Being educated on the market and researching the market is critical to making a purchase, but over analyzing things oftentimes clouds your ability to your end goal, which is purchasing a beach property.
In 2013 I sold over 52 properties from Destin all the way east to Panama City Beach. I have sold homes, land, condos, investment properties, and even development sites. I sold property to cash buyers, buyers who financed, investors with self directed IRAs, 1031 exchanges, and multi-family/ multi-buyer LLCs. I have not seen it all, but I have seen a lot. At the end of the day, if purchasing a beach property is your goal, then here is my way to fast track the purchasing process by identifying the what, where, and how to get your toes in the sand in less than 45 days.
How do you envision yourself using the beach property?
This is one of the most important questions to honestly answer and oftentimes the most difficult. Rarely does everyone involved in the purchase have the same collective opinion on the property. Mom wants a place for the family to enjoy and create wonderful beach memories, while Dad wants a property that cash flows and visit only twice per year. Which type of property are you really looking to purchase?
- 100% Investment Property CASH FLOW – You are going to purchase the property and never use it. Period. I actually have clients that bought two investment condos via self directed IRAs and they are boat captains in the Caribbean. They literally never go to the condos. Is Cash Flow most important or is a long term Equity Return most important? An older beachfront condo that historically has produced solid rental income year after year is a great example of a pure cash flow property. It is not your dream beach property, but it cash flows. Due to its age, its value may increase less than a newer home on 30A over a 5 year period. The condo will generate 35K in rental income for a 300K purchase, and the home on 30A will generate 40K in rental income on a $500K purchase. The condo is better for cash flow, but the home on 30A will increase significantly more in equity over a 5 year period. If you are looking for a 100% investment property for cash flow and ask “Where are our parents going to stay when they visit” or “Do you think this kitchen is big enough for all of our kids,” than you are not looking for a 100% investment property for cash flow. It is hard to take the emotion out of this type of investment property as you are going to rent it and never use it. The only reason to change paint colors or do upgrades is to increase rental income not because that lime green bedroom is offensive. Your toes are in the sand when you visit and stay at your true second home or another property paid for with the rental income from your investment property.
- Second Home / Vacation Rental – You are going to rent the property to offset some costs, but this is your family’s second home. You will have pictures of your family in the bedrooms, you will have your stuff locked in an owner’s closet and you definitely are going to want to repaint that awful lime green room and re-tile the hideous tile in the master bathroom. This is the place you look forward to visiting on a long weekend or over the holidays. This is the place you invite your friends and family to come and share some quality beach time together. A few items on your wish list may have to take a back seat to rental income. For example, wanting a garage and a large yard will limit many areas on 30A where lot sizes are small. However, popular subdivisions like Seacrest Beach, WaterColor and Rosemary Beach historically generate better rental income than a house on a side street that has a large lot for a pool, garage and a yard. There is a balance between what you want and what you need, and how to find the best property that meets those needs.
- Second Home/ Retirement Home – This is your second home. There is not an owner’s closet because the only one visiting is you and your family. This is the home you purchase and plan to hold onto for 5 years or more. Oftentimes, this property will be your retirement home or a place you plan to stay 6 months out of the year. Rental income is not as important because you are not going to rent the property. However, it is an important thing to consider when it comes time to sell the property. I always discuss an “Exit Plan” with properties. That is, when it comes time to sell, will this property be easy to sell. If the property has been on the market forever, and every time it has sold it has languished on the market before selling, we need to take a hard look at why. Many times it is an awkward floor plan, or a not so nice property next to it, or just being over priced in the market. What ever the reason, if it is something that cannot be fixed or addressed than this needs to be an important part of your decision to purchase or not.
Where do you want to put your toes in the Sand?
This is probably the single most difficult question to answer as there are many variables such as price point and how you intend to use the property that will impact where you purchase. Additionally, I find buyers have already set in their minds the vision of where they want to be and have eliminated many areas purely based upon what they have seen on the internet or experienced on vacation. “I only want to be South of 30A” is a common request and eliminates some amazing beach properties. The last two homes I sold in 2013 on 30A where both homes that the buyer insisted they were not interested in the area they were located. However, after showing their list of properties they reluctantly viewed the “not interested in these” homes and immediately fell in love with them and bought them. I lost count how many times I have sold Panama City Beach condos to buyers that say “I only want to look at condos in Destin” or homes on 30A to buyers that called wanting a condo in Panama City Beach. One of my most favorite experiences was when I was showing condos on 30A to a buyer from New York City during the madness of spring break. He wanted to see 30A only, but every condo I showed him he gave me the thumbs down. I decided to take a risk and show him a condo in Panama City Beach. We went up to a Calypso condo on the 16th floor by Pier Park. Front Beach Road was loaded with scooters, cars, motorcycles and people. It was pure beach spring breach chaos. My buyer raised up his arms looking at all the commotion below and exclaimed, “Now THIS is what I call paradise!” This is when I really learned that everyone’s vision of paradise is as unique as our area.
- Put my toes in the Sand on 30A – You like to walk to get your coffee in the morning or take a beach cruiser on the bike path to grab some breakfast or lunch at your favorite dining spot. Kayaking or stand up paddle boarding on the rare coastal dune lakes of Eastern Lake and Western Lake is your idea of fun. If you are going to the beach, a short walk or bike ride is perfect. You like quiet beaches with only a few people on them. You want the feel of a community where you can hang out with your friends when you all visit over the holidays. Green trees and nature trails over high rises are what 30A is about. 30A is extremely diverse with each community having its own vibe and style. Do you want to be in the Heart of 30A in Seaside or WaterColor with endless amenities and always something to do like the farmers market, concerts, plays, or toasting the sunset at Bud and Ally’s. Do you like a more eclectic area such at Grayton Beach where you can find a unique mix and new construction and old historic homes, where you can get a permit to drive out on the beach and hang out with friends and family. Is the East End of 30A more your style with the private and secluded shingled homes of WaterSound Beach or the unique West Indies architecture of Rosemary Beach and Alys Beach offers some of the most unique and upscale architecture on 30A modeled after Bermuda architecture and courtyard homes. Amenities and planed communities not for you? Then areas such as Inlet Beach, Dune Allen, and Old Seagrove are excellent areas to enjoy the beach without being tied to home owners associations or the constant flow of people and activities in Seaside, WaterColor and Rosemary Beach.
- Put my toes in the Sand in Panama City Beach – You want to be right on the beach, and look at the beach when you wake up in the morning and watch the sunset over the gulf in the evening. You want gulf front living without having to spend $2mil to get it. High rise condos are perfect for your family as you can enjoy the beach, the pool and amenities and don’t have to walk to get there. Driving or walking to Pier Park for dinner at Margaritaville and a movie is a perfect evening. Playing on the beach, renting jet skis, para-sailing, concerts, music festivals and visiting the Gulfarium are some of your favorite things to do. You want to be close to an airport so you can fly to your vacation property. Condos such as Splash and Calypso offer lots of amenities are close to Pier Park and the Northwest Florida Beaches International Airport and will generate over 40K in rental income for a 2 bedroom condo.
- Put my toes in the Sand in Destin and Miramar Beach – You love to fish. Destin is world famous for fishing and known as “world’s luckiest fishing village”. If you are not on the beach, you are on a boat and your dream is to launch your boat from many of the world class harbors Destin offers. Spending the day at Crab Island on your boat and then dining and shopping in Destin Commons, Silver Sands, Grand Boulevard or Baytowne Wharf in the evening is your idea of a perfect day. You like to golf and enjoy the beach and love the coastal lifestyle of Old Scenic 98. Destin and Miramar Beach has a great mix of high rise condos such as Majestic Sun and Ariel Dunes. Beach communities of Frangista Beach, Destiny by the Sea and Crystal Beach are some of the top areas in Destin offering a spectacular beach lifestyle on Old Scenic Highway 98.
What is your toes in the sand budget?
You are looking to purchase your dream beach property to be happy and simply enjoy the beach. It should be a time to celebrate life and not stress on how you are going to cover the mortgage of your second home. Just because you can afford an 800K second home does not mean you should or need to purchase an 800K home…especially if we can find a home that more than meets your needs for 600K. An open and honest assessment of your budget range will go a long way. I present my clients with a detailed investor analysis to ensure all the carrying costs of the property are identified. Investment properties can and will cash flow, but you should be able to carry the investment even if the property does not cash flow.
Is you budget realistic? Setting an unrealistic price threshold is setting you up for failure in your search for a dream beach property. Prices have increased since 2009 and 2010 and the price your neighbor paid for a property during the BP Oil Spill in 2010 is not realistic in 2013. Are there still great buys…absolutely. Will property values continue to rise? Most definitely. If all of the available inventory in a specific area is well over your budget, waiting for a property to come on the market in your price range may not be a viable option. With prices continuing to rise, waiting for that perfect property to come along may never happen. Do not miss your window of opportunity to purchase. You may need to expand your requirements and venture slightly out of a specific area. As an example, only one home in Alys Beach has sold for under $1.2mil in the past two years as an REO. Currently, there are four homes for sale for $1.7mil and higher. It is highly unlikely that another foreclosure under $1.2mil will come on the market in Alys Beach…trust me as I have scoured the court records for it. If another property does not come on the market in Alys Beach under 1.2mil will this end your search for a beach property? Or are you willing to raise your budget to own in Alys Beach? Or are you willing to venture outside of Alys Beach for a home within your budget? This price bracket scenario can be applied to any area along Scenic 30A, Destin or Panama City Beach.
How are you going to purchase your Dream Beach Property?
There are a multitude of ways to purchase your dream beach property. Each purchasing scenario offers unique pros and cons and different negotiation tactics for each. Many of the properties that I represented buyers on in 2013 were multiple offer scenarios. I won everyone of those deals for my buyers. I will not cover my negotiation strategies here but will cover the different ways to purchase.
- I am a cash buyer – Cash is an easy way to purchase property and an excellent negotiation position to present a strong contract with a quick close typically in 10 days or less. Over 60% of my transactions in 2013 were from cash buyers. A popular misconception of a cash buyer is that their “Cash” is worth more than “Financed Cash”. The bottom line of the Seller’s closing statement will be the same whether it is a financed contract or a cash contract. The only difference is the convenience and mitigation of risk from a cash buyer. If you were a seller and were offered 300K cash to close in 3 days or 330K to close in 30 days would you wait the extra 27 days for $27,000 more? Hell yes!
- I am a finance buyer – Interest rates are low and financing your dream beach property is an excellent idea even if you have the cash to purchase. It is best to speak with a financial adviser to determine what is the best scenario for your current financial position. Financing a second home has become significantly easier since the financial market crash. Loans on second homes, condos, land and new construction can be obtained with good credit and acceptable debt to income ratios. Working with a lender familiar with the 30A, Destin and Panama City Beach market is critical to a successful closing. If you want to find a beach property and have your toes in the sand in less than 45 days, a per-qualification letter from a lender that works our area is of the utmost importance. Close on a condo with a loan in under 17 days? I have done it. It was not easy, but it can be done. A pre-qualification letter from a lender will let you know how much you can afford as a second home purchase and sets the framework of your purchasing budget.
- Can I purchase with my IRA or 401K? The short answer is yes for Investment Properties. It is called a self directed IRA and you simply transfer funds from your existing IRA or 401K account to a self directed IRA to purchase the property. This is an excellent option for those that want to diversify their retirement account with investment property. This option is only available as a pure investment property and there are very specific guidelines on personal use…as in there is NO personal use allowed on the property. Imagine paying for an investment property with your IRA and netting 15K to 20K back into your retirement account every year while the property also increases value and your equity position. Amazing!
- Multi-buyer / Multi-family – You want a super swanky coastal chic cottage on 30A but your budget says no. You plan to use the property a few weeks a year and hang out with family over the holidays. Turns out your brother-in-law and sister also want a beach house on Scenic 30A…they also like that super swanky coastal chic cottage but their budget says no. Together your budgets say YES. Browsing through the county property tax records you will find this to be the norm for second homes on the beach. Families, friends and even business partners have combined resources to purchase property on the beach for decades. Purchasing the property as a multi-buyer or multi-family is straight forward and typically results in a smooth transaction that can close in quick time frame. The hardest part is deciding on paint colors or who get the house over the 4th of July.
Toes in the sand in less than 45 days is easy once we narrow down location, budget, purchasing method and how you ultimately want to use the property. This is when the fun begins. It is like a treasure hunt finding the perfect hidden gem for a client. We are here to make your dream of purchasing a beach property a reality so give us a call @ 850.583-1640. Hurry, we have less than 45 days before its beach time!