9 Newsletter

How do you profit from a cooling real estate market?

The answer is simple. You find a property that is a bargain and you buy it.
You say right….

It sounds too simple but it's true. Some buyers can and will make a lot of money over
the next few years, (3 to 5). This is the time frame I would expect to hold a property I bought today to have a good return.

If you read my last newsletter, you already know what's happening to our beach market and why we are in a buyer's market. For those of you who missed my last newsletter let me summarize.
Also follows is a link to my previous newsletter. http://gotothebeach.net/30_Previous_Newsletter.html

A fall full of storms slowed the market. It cut the number of buyers and increased the number of sellers. It put pressure on speculators, who never planned on holding their purchases for more than a year or two, to sell. We now have a market heavy with inventory. Some homes are still over priced, some homes are now listed at realistic sales prices and occasionally a real bargain hits the market because the seller wants out for one reason or another. I expect this buyer's market to last for another 12 to 24 months. During this time I'm going to see some "true bargains" as they hit the market.

What I would like to do in my future newsletters, as long as the market stays in this condition, is to include some of these bargains and tell you why I call each of them a bargain. I will put a link to the MLS listing for you to view.

My #1 pick for this newsletter is a 3 bedroom, 3 bath home located in Old Seagrove Beach, on Suzanne Dr.. This home is 1915 sq. ft. and has two master suites. It is on a large lot and has a stream running on the back side. The home was built in 2002 by Arbor Homes, the same people who built for me the in the Grove by the Sea. It is currently listed at $598,000. This home sits 3 short, walkable blocks back from the beach. In fact, it is directly across 395 from Canal Street where I live. The MLS number and link to view this home follows, just click on details: Details 419206, 91 SUZANNE DR, SANTA ROSA BEACH, FL - $598,876.00 (If this link does not work for you Email me and I'll E-mail the info directly) Be sure to click on the picture to pull up multiple pics of the inside and yard. Also click on the V for virtual tour to view many more photos.

Ok, so why is this property a value?
First, LOCATION. It is located in Old Seagrove Beach, and is probably the most reasonable property for sale with this sq. ft. It sits just a few houses off 395 between the beach and Watercolors and the new community of Naturewalk. Both of these neighborhoods are much more expensive. It is located approx. ¼ mile south of "Water Color's town square 2" where the new Publixs grocery store is located. It's also very close to Seaside and the Gulf of Mexico.

VALUE & PRICE … The value is there. Lets look at the land costs first. A lot 3 lots down just sold for $320,000. It was listed at $349,000 and sold in less that 2 months for the $320,000. This lot is every bit as nice so let's assign the lot value at $320,000 .

Building costs at the beach for this type of construction is running in the low end, $200 per sq. ft. to more likely $250 to $275 per sq. ft. So, let's be ultra conservative and say $200 per sq. ft times 1915 sq. ft. equals $383,000. In all reality it will cost $250 per sq. ft. to replace, which is $478,750. Building costs are not going down, materials continue to rise as do labor costs.

So, using the land's sale price of $320,000 and the low end replacement cost of $383,000 we have a low end fair market value of $703,000.

WHAT PRICE SHOULD I PAY? Well let's review how this property has been marketed. Originally, it was listed in August of last year at $875,000. This figure was probably close to realistic if it had been a year and a ½ ago before the market started to cool. I also, believe it will be realistic again in my 3 to 5 year time frame. Food for thought…. Keep in mind you have Watercolors behind you as well as Naturewalk. You also have an international airport being built during this time frame. We are going to see a lot more people come to this area who have never visited. Including foreign money.
Ok, so obviously $875,000 is not realistic at this time. What price is? We'll, in July of this year the seller decided it was time to move back to where there kids are located and dropped the price from $695,000 to the $599,000 price range thinking it would sell. They have not yet had the right person walk through the door. So, now the agent has come up with a marketing ploy. He calls it. "VRM - VALUE RANGE MARKETING. THE SELLER WILL ENTERTAIN OFFERS BASED ON PRICE, TERMS AND CONDITIONS WITHIN THE RANGE OF $519,000 - $598,876" The agent is trying to get the pot stirred up. Well he's gotten me stirred up, because if you can buy this home in-between $519 and lets say $550,000 I think you really have bought a "TRUE BARGAIN" I know you have not walked through the inside of this home but you will not find a cleaner, nicer home. It has all the bells and whistles! This house would be great to live in full time or to set up for rental with a pool.

So, what would I do?
I would consider offering the seller $550,000 with a $25,000 pool allowance to be held in escrow to pay to have a pool built at the home. This is what you will need to do if you want to make this property a successful income producing/rental property. I believe this property can gross between $22,000 and $25,000 per year.

So, you will end up with a home conservitively worth $703,000 plus $25,000 pool equalling $728,000 for the price of $550,000. Not a bad investment…. Hopefully, a great investment over a 3 to 5 year period.

Again, from time to time I am going to run into "TRUE BARGAINS" like this home. I will continue to send newsletter updates with value properties to consider. If there is anything I can do to help you or a friend in the real estate market, please don't hesitate to call.

Take care,
Jon Miller
GoToTheBeach.net
850-231-3344
JMAJCJ@aol.com