Flavour of the Year in South Florida Real Estate?

by Dave Peniuk

I find myself all excited by the prospect of buying real estate in Florida. If it weren’t for the fact that it’s a pain to get to from Vancouver, the insurance on properties is really high, and the taxes are painfully steep for an out of state buyer I might actually have done more than just look at books, pictures and listing sheets on my recent trip. The fact is, I like it there, and it’s easy to get excited by South Florida real estate because it seems like it’s ‘on sale’.

Even on a windy day I think South Florida is beautiful

Julie and I have been there 4 times over the past 2+ years, not for vacations, but rather for various conferences we’ve attended.

And while it would’ve been nice to have enjoyed all the spectacular beaches, Mexican and Cuban restaurants and fun dance clubs to get a real feel for SoFlo (I don’t know if that has been termed before, but I am officially calling it SoFlo!), we still have had some time to enjoy all the eclectic areas from South Beach all the way up to Delray Beach.

But the one thing that excites me the most is the “sale” of Florida real estate.

Now, to be frank, there are still a derth of high end luxury homes all across the South Florida real estate market. There are $1MM, $2MM, $5MM, and even $15MM homes all across this area of Florida. It makes my hometown of Vancouver (largely considered one of the most expensive places to live in the world) seem like a bargain! But what I am finding now is that the “affordable” places are now pretty darn cheap in comparison to 2 years ago (Oct 2007) when we first visited this lovely place.

After scanning through “The Real Estate Book” and “Homes & Land of the Palm Beaches” – two free magazines that show you all the deals, foreclosures, preforeclosures and now SHORT SALES available across Palm Beach County – I have found a considerable number of affordable bungalows, townhomes and condos all in decent areas (from my little research I have conducted) and many only a hop, skip, and a jump from the beach.

<This was confirmed when we met with Shae Bynes of Good Faith Investing. Check out the video Julie filmed with Shae.>

The other interesting finding I observed from leafing through these listings magazines is the number of times that “short sale” is used in the listing!

Two years ago when we first started looking at real estate in SoFlo, you rarely saw the phrase short sale in these magazines.

You saw terms like “pre-foreclosure”, “bank owned”, and “REO”, now, the realtors can’t get enough of short sales. My favourite use of the phrase is “priced as a short sale”.

Oh, and there are Short Sale Specialists now! Now, forgive me for being ignorant (we don’t have short sales in Canada), but have short sales not been around for many years? Why is it that it’s all the rage now (I guess because banks/lenders are more willing to entertain it as there are more borrowers under-water than ever before – oh, I guess I answered my own question!)?

So What Is the Difference between a Short Sale & A Foreclosure?

I had to ask JP Moses over at REI Tips to make sure I didn’t steer you wrong … and he said:

A short sale is in essence a lender agreeing to settle for less than what’s owed on a property.  In order to approve of it, the lender would have to be convinced it’s in their own best interests to do so.  Sometimes it is and sometimes it isn’t.

Basically a preforeclosure seller gets a buyer (often an investor) who’s willing to buy but is only willing to pay $X, which is less than the mortgage balance.  The owner and potential buyer then make their case that it’s in everyone’s best interest (including the bank’s) to go ahead and let the property sell now for a discount than to foreclose and let it become a negative asset for an extended period of time as an REO.  If they bank agrees and the stars align, then a short sale is approved.  The seller will typically get either a 1099a or a deficiency judgment for the amount of the discount granted.

This would all take place prior to the actual foreclosure, while the property’s still in pre-foreclosure status.  Once the foreclosure sale takes place, a short sale isn’t possible – the bank already owns the property and it would move towards being liquidated as an REO.

I can’t wait to see the next HGTV show called: “Susan and Sam – Short Salers from South Beach“. It will last for about 1 season, then the real estate market (and lagging news reporters and media) will find some new term/phrase/new fantastic-never-done-before-strategy that will come to a television set near you! Okay, I digress.

The point I am trying to make, although in a very round about way, is that real estate is not a phase, it’s not a fancy multi-million dollar making “hip” strategy, it’s not what any of these television shows, news reporters, or even realtors considered “on sale now” and the “best opportunity in your lifetime”, it’s an investment that needs to be researched, planned, and taken care of.

And while the SoFlo market could be considered “on sale” at least when compared to the past several years, please don’t think that just by buying something called “priced as a short sale” means you are going to flip that property for $50,000 profit within 2 months UNLESS you know what a real deal looks like and you know what you’re doing.

There is a never-ending barrage of real estate guru’s who tell you they can teach you how to make thousands if not millions in these quick, easy, simple, “passive” real estate strategies. But don’t be fooled. You won’t make a crapload of money just by reading a book or attending one seminar. But you might make a lot of money if you actually “work” at what you are learning. As Julie and I always say, real estate investing is simple, but it’s not easy.

So, when you get all excited about the “cheap” real estate out there. Whether it’s in SoFlo, California, Las Vegas, or anywhere in between, just remember you have to work at it if you want it to be a real investment.

And now that I am back in Vancouver, I’m content to continue shopping for real estate in my local markets. The weather isn’t as warm and there aren’t as many lovely beaches but at least I won’t have to spend 12 hours traveling to see the properties!

If you would like to learn more about real estate investing in the Florida market we highly recommend you check out our blogging pals Steph Davis and Shae Bynes. We think you’ll really like their deal updates and other great posts they share over at their blogs!

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6 Comments

Filed under Blogs, investing, real estate, Recommended

6 responses to “Flavour of the Year in South Florida Real Estate?

  1. Dave, this was an extremely informative post – awesome job! Thanks for the shout out as well!

    Yes, its really important for people to know the values in the area…its easy to get excited about how everything is “on sale” but just as we have the opportunity to buy low, we also have to sell low and the appraisals can be challenging because of the large # of short sales and distressed REOs that sell within a mile of any home that you may buy.

    With that said, I still enjoy investing down here!

  2. Hey, great article, Dave! Especially that part about the difference between a short sale and foreclosure. Very well said. That guy must be a genius or something. 😀

    Seriously, great post. And special kudos to you for using one of my favoritest phrases ever “crapload of money” in a post.

    …jp

  3. Hey Dave- thanks for the shout out!

    One thing that always makes me chuckle about short sale listings, is that 99% of the Realtors put quotation marks around the words “short sale.” Does that mean it’s allegedly a short sale? I don’t know..

    I am easily amused, I guess. 🙂

    Have a great weekend!

    Steph

  4. Shae – good to hear from you and thanks for your comment regarding appraisals in areas where there are a considerable number of ss and reo’s!

    JP – not sure about the geniusness of the guy that wrote about the ss vs. foreclosure difference, but I will say he does seem to know his stuff! 😉

    Steph – it was our pleasure giving you a shout out! And yes, I too am easily amused. In fact, I constantly amuse even myself…just ask Julie. She’s always saying: “what are you laughing at?” and with that I reply “myself!”. he hehe

  5. Brian

    I bought a REO near Ft. Meyers Beach in May 2009 and now have it leased out and turning a profit, and I live 120 miles west of Chicago, IL! Some great deals, but be careful, some ravaged properties too.

  6. Thanks for your comment Brian! So, do you have a Professional Property Manager handling the property? Or, do you give yourself some tax write-offs and fly to the warmth every month or so to check on things?!?!
    Do you plan on buying any more down south?

    Cheers

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