By
Craig Levine
With financial markets tumbling and corporate
uncertainty looming, you may be looking for other places to invest your money
other than the stock market. I can empathize with you. In the past two years,
my Science and Technology mutual fund has depreciated approximately 80% in
value. At the same time, I purchased 4 townhomes in Smyrna. The properties
together cost about $228,000 with an initial investment of $16,000. Just
recently, I sold the last of these 4 townhomes which I had rented out over the
last two years. I turned that $16,000 into almost $90,000 with minimal effort.
I’m not saying that this can be done on a regular basis, but wise investing in
real estate has always proven more bountiful for me than investing in the stock
markets.
In November of 2001, I purchased a 1 Bedroom 1 Bath
condominium in Destin, Florida as a second home. A second home has significant
financial as well as tangible benefits to the owner. Not only do I get to go
down to Destin, one of the most beautiful beaches in the United States, any
time I desire (when I need a little break from selling real estate), but I have
the financial advantages of an additional mortgage for interest deductions on
my tax returns. Additionally, the property is on a rental program, which we
manage, for the weeks that the condo is not utilized by us, thereby creating
cash flow to help out with the mortgage. The condo is advertised with pictures
and information in a couple of Destin web sites that specialize in rentals. It
is very inexpensive and very effective. If you want to be more hands off,
however, you can enlist the aid of a real estate company to manage the property
for you. Depending on the services offered, they will charge anywhere from 20-40%
of the gross rental amount collected. It’s a lot to pay, but any bit of extra
income generated from rentals will help to defray the condo’s expenses. It may
even turn out to be more beneficial to have a real estate company handle the
rental because the chances of them keeping it rented are far greater than the
chances that you will have it leased up by yourself.
The condo that I purchased in Destin is only a 1
Bedroom 1 Bath unit, however, it is directly across the street from the beach
in one of Destin’s most convenient locations. The unit only cost $78,000, was
bought utilizing a loan that gave me a par interest rate that would have been
the same as if I was buying a primary residence, was furnished, and has a view
(or a glimpse) of the ocean and the neighboring golf course. The monthly
mortgage is about $530 and the monthly association fee is $170, giving a total
monthly outlay of about $900 when maid service and utilities are taken into
account. Presently, the unit is rented out for about $2,000 a month in the
summertime and will be rented out to snowbirds who come down from the north in
the winter for about $500 per month during the remainder of the year
(November-March). It’s only the first year of my experimenting with the market,
so there is a lot to be learned and perfected, but I feel confident that this
second home will turn out to be a great investment, especially now that the
real estate market is booming there and the chances of appreciation, not
depreciation, are abundant.
Note: Not all second home situations are the same. Check with your accountant or tax advisor in regards to all of the benefits and risks associated with any real estate investment.
Craig Levine, a top producing realtor with Remax Greater Atlanta’s Levine Team, will be licensed, shortly, in Florida to help out with all of your second home investment needs and questions. He has been writing real estate columns for Cobb Living Magazine, The Gazette, Cobbonline, The Seasonal Magazine, and various real estate related web sites since 1995. Craig can be reached at 770-222-7406 or by emailing him at Craig@CraigSellsHomes.com. You can also visit his award-winning web site at craigsellshomes.com