Like many people across the country I got caught up in the euphoric real estate bull market in 2004 and 2005. A friend of mine from Sarasota was handling the sales for Solaire at the Plaza and told me about the project. I grew up in Orlando and thought it would be fun to own a weekend condo only 2 hours away. At the time I thought it might make a good investment as well as something I could enjoy.
We all know what happened to the real estate market from the time I put my deposit down to when the building was completed. I put roughly $13,000 down and another $8,000 for some upgrades to the condo. So, I am in the investment for roughly $21,000. When the condo was complete my wife and I had to decide to close on the unit or just let the developer take our money.
By the time the condo was done I was well aware of what was happening in the real estate market. I sell real estate in Sarasota so I keep track of my market as well as Florida and the overall national trends. Several of my friends in Sarasota also bought units in The Solaire. Their feeling was that the property was a great one, at a good price and that the market was stabilizing. They intended to close on their units.
The contract price was $266,000 for a one bedroom/one bathroom on the 23rd floor looking east. The maintenance fees were in the $400 a month range and I figured property taxes would run $4,000 to $5,000 a year. I also had to furnish the unit which would probably have cost from $5,000 to $10,000. The place wasn’t that large.
When it was all said and done I figure the initial outlay would be another $40,000 since I already had $21,000 on deposit with the developer. I estimated the yearly costs were going to be around $25,000 a year. I could go several great vacations for $25,000 a year.
When I figured the ongoing expenses in conjunction with rapidly falling real estate prices the decision to not close was an easy one. Unlike some of my Sarasota friends, we decided to not buy the condo. I knew what my total loss was by not closing. If I closed my losses would be at the mercy of the real estate market. If the price of the condo dropped by 30% my loss would be much larger than $21,000. In hindsight the decision so far has been a wise one. I noticed that some of the one bedroom/one baths have sold in the $160k – $170k range.
Looking back on it the desire to make money was the main motivation for the purchase. If I wanted to have a fun weekend with my family I would just do it at The J.W. Marriott. It would be far less expensive and with fewer headaches. However, with all of that being said, if I wanted to own a 2nd home and had a long enough time horizon this appears to be a good time to start looking. The prices have come back down to reality.