INVESTING IN CONDO ON STT - GOOD OR BAD IDEA?
wondering if anyone has any insight on this. That is, can you buy a condo, rent it and break even or even realize a small profit on STT? Is now a good time to buy, or is the market still on the high side? My concern is the high HOAA fees, the new real estate tax rate and electricity and water costs. How truly viable is the condo rental market in STT? Thanks.
Over the years, i have been involved in various condo buys and sales. If you have been following the market, you would have seen a major run up of price on St Croix and a more moderate one on St Thomas over the past few years. At this time condos on St Thomas are still more expensive than those on St Croix.
Homeowner fees/costs/assessments have gone up dramatically on both islands. It is not unusual to see $15,000 to $20,000 a year added on to your mortgage and taxes. Much of the large cost is short term assessments due to upgrade needs. Many condos have at least 8 to 10 thousand dollars a year in condo fees and insurance usually more.
On the St Thomas MLS there are currently about 180 condos listed. About 120 are under $500,000. the rest are more, some a lot more. they price all the way up to the multimillions.
It sounds like you have done some of the math. But lets say that an average condo will cost you about $40,000 a year in payments and fees ( not counting electric/water). I am not current on rental income, but in the past we were getting about $20,000 a year in income on a small condo. Maybe you can do better, and I would like to hear what owners are getting now.
What I'm trying to say is that the condo that I rented out for $20,000 a year was purchased for $150,000. That same condo is $500,000 now.
Depends on the Association. My dues are $200.00/month with about $196.00/month for insurance. Water is .02/gallon up to a certain amount, then .04. Rents go for $1500.00 to $1600.00/month & all rentals have the renter paying the electricity & water. No assessments for maybe 4-5 years & then it was about $1200.00. They're selling in the $200K to $250K range for 2 bedrooms.
If you'll be renting it out you may be paying more in property tax than a live-in owner who can get homestead. There are small condo associations on STT that never have listings advertised such as the one I'm in.
Given all that, I never wanted to own a condo & wouldn't again but it's the most affordable way to own property on STT unless you're handy. Owning homes takes a lot of maintenance.
Also, there is a short-term rental market and a long-term one. I know people with one bdrm condos who get $700 a month WAPA bills because tourists come in, turn on the air conditioning and leave it on all day and night. Most long term renters pay WAPA and therefore have an incentive to "be green."
I guess at the end of the day if you find a good deal then it could be a great investment. I definitely look at my condo as a long term investment more into my family lifestyle then as a $$ investment (hopefully that works out as well)
I purchased my condo on the up cycle and put 20% down. I have it rented out now for $3800 on a long term rental but still have to come out of pocket about $300-$400 per month to cover all the monthly obligations.
I have been told I could make more money from my condo on short term rental but at this point in time I prefer the stability of having renters year to year instead of week to week. Ultimately when I want to use the condo more often I will switch it over to a short term rental but for the next 5-10yrs I would like to have long term renters help me pay the mortgage off.
I am not a realtor but I am guessing if you want to make money on a condo as a rental then you are better off looking at the condos in the $400k and less range. I am sure you will get some good advice on this board as there are plenty of realtors and long time condo owners who post here.
The short answer is......."probably not".
Taking into account mortgage payments, HOA fees, taxes, water, electricity, insurance, special assessments (condos), (internal) repairs (condos), loss of the use of money (the amount you paid for your down payment, closing costs and initial repairs/upgrades i.e. the interest you would have earned here) and vacancies (no income during these times)......unless you're really lucky...you'll lose $$.
That's why it's important to check into the assessment history of any condo you're interested in buying.
If it's a rental you do have tax advantages to it though as far as deductions. Depends on your tax structure. Used to be that you could deduct one trip down per year to check on your investment. Don't know if that's still in effect but I used it when I had rental property in the States.
With any investment property I would look at the equity you will gain here as the investment and if you are able to break even for the year renting it out, then you had a very good year.
Its fairly safe to say you will gain equity here faster then most places stateside (barring huricanes) and the you will gain more equity from a house usually then a condo, but the condo is much easier to manage/maintain from stateside.
STT and STJ have strong real estate markets but even the islands felt it when the real estate bubble popped stateside. Sales have slowed over the last year or more, everything still sales (eventually) but prices did take a little dip and have pretty much stabilized now.
Unless you are buying a extremely desireable condo for vacationers I would stick to long term as there are usually less costs and less work.