patrick.net

gabbar says

WookieMan says

Another office space in the building. Only $400 cash flow, but only $110k at full list. Reinvest the cash flow over 2-3 decades and inflation and it would have been a low risk $500k to who knows what above that by the time I'm 60-70.

So is office space building the best investment in commercial real estate? If not, then what is?

TL:DR - I wouldn't touch office spaces unless you have a long term, solid tenant.

I was more or less being super specific to my location. The main tenant was USPS and they never move. The town it's in doesn't build new construction. The other small office would have been a bonus. $20k down. $400/mo in cash flow. Was a safe and solid investment, I inquired, but didn't pull the trigger. Would have reinvested the cash flow. Appreciation over 20-30 years and it could have easily added 5-8 years of retirement money beyond what I already have going.

I wouldn't touch office space right now without a solid lease from a tenant you knew was going to stay I guess is my point. I think the snapback from covid and WFH is going to piss off employees. At least the ones that got their job done during covid.

Not going to name the company but the the town I was looking to buy the building in, another office has about a 70 space parking lot. This is rural, so that's big here. Lot was full every day. Maybe 5-10 cars parked there every day now. Company owns the building outright. They can just move the people that show up to a section of the building and shut down the rest.

But this is my anecdotal evidence that WFH is here to stay. Companies trying to bring it back are dealing with pissed off employees that now have to pay commuting costs again doing the same job they were for 2 years at home.

https://www.dailymail.co.uk/news/article-13739993/florida-real-estate-crisis-condo-owners-slash-prices.html

Florida hit by 'worst real estate crisis in decades' as desperate condo owners slash prices by up to 40%: 'It's paradise lost' ...

Florida condo owners are slashing prices by up to 40 percent as they strive to dodge massive incoming repair costs.

Some units have had almost half a million wiped off their asking price as safety fears trigger a wave of sell offs in what realtors have described as the worst real estate crisis in decades.

One three-bedroom, two-bathroom condo in Saint Petersburg was listed at around $1.2million at the start of the year.

But still without a buyer, the owner slashed the asking price first to $898,000 and last week to $715,000.

State legislation brought in following the 2021 collapse of the Champlain Tower South in Surfside, Miame-Dade County, which killed 98 people, means hundreds of thousands of condo owners must now fork out hefty sums for previously neglected maintenance.

Many could face fees greater than their mortgage payments, sparking a wave of distressed sales in the Sunshine State.

I think the fundamental issues are much deeper than just deferred maintenance. Prices are grossly beyond the fair value as determined by annual rent divided by current long-term mortgage rate.

Example crude fair value calculation:

$2,000 / mo rent = $24,000 /year

$24,000 / 0.06 = $400,000 fair value

Of course that's just a first-order approximation. There are many more variable to consider, but they won't change the result all that much.

Patrick says

I think the fundamental issues are much deeper than just deferred maintenance. Prices are grossly beyond the fair value as determined by annual rent divided by current long-term mortgage rate.

Example crude fair value calculation:

$2,000 / mo rent = $24,000 /year

$24,000 / 0.06 = $400,000 fair value

Of course that's just a first-order approximation. There are many more variable to consider, but they won't change the result all that much.

here is a good example and gem which is only about a 2 mile walk to the beach and 10 minute walk to the nearby Dollar General and strip mall (vape/smoke shop, Guthries Chicken, laundry mat, nails saloon, Jamaican grocery store, Cricket Wireless, and Asian massage parlor)

it likely could sell for $260,000 easily , which was same price likely back at high-water mark of the housing bubble in 2006 , and its monthly expenses are $425 HOA fee, $150 property tax, and $150 property insurance (plus $300 a month for rental property management and maintenance/repairs if the landlord rather not directly manage it)

it could easily rent for $2000 so if someone lays down $270,000 in cash (includes closing costs), then their monthly net income based on 10% vacancy is $1800 minus $1025 which is $825

($825 x 12) / $270,000 x 100% = 3.7%

Conservatively assume a 3% annual appreciate rate, and hence the total ROI would be 6.7%

https://www.zillow.com/homedetails/1702-Annabellas-Dr-Panama-City-Beach-FL-32407/87637913_zpid/

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My father saved a combined $12,000 per year in income and property taxes by moving to Florida around 2012.

The Florida real estate trend will continue as those who 1. have money 2. can do arithmatic move away from states like New York, New Jersey, Connecticut, etc.

Around North Palm Beach County I have seen numerous residential projects in just a few years, with thousands of units.

An example is Nautilus 2020, another one nearby is Ritz Carlton Residences; in Jupiter Azure and Alton, Caretta under construction in Juno Beach.

Locals will not be buying the new ones, nor Azure; some locals and young transplants are in Alton.

clambo says

My father saved a combined $12,000 per year in income and property taxes by moving to Florida around 2012.

The Florida real estate trend will continue as those who 1. have money 2. can do arithmatic move away from states like New York, New Jersey, Connecticut, etc.

Around North Palm Beach County I have seen numerous residential projects in just a few years, with thousands of units.

An example is Nautilus 2020, another one nearby is Ritz Carlton Residences; in Jupiter Azure and Alton, Caretta under construction in Juno Beach.

Locals will not be buying the new ones, nor Azure; some locals and young transplants are in Alton.

That is true, but it makes real estate in places like Connecticut cheaper, where nice Waterfront mansions have slipped below $2MM over the years of the business and people exodus from the state.

mell says

That is true, but it makes real estate in places like Connecticut cheaper, where nice Waterfront mansions have slipped below $2MM over the years of the business and people exodus from the state.

just like housing is "cheap" in the high income, property and sales tax shitholes like Illinois

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in Florida, housing is making more people more "house poor" because of increase in property insurance and HOA fees

but just as in Nassau County, New York (Long Island), housing prices will go down if property tax goes up a lot more as the pricing point accounts for the home ownership costs.

I had to make an adjustment to my property insurance (HO-3) for our 3 bedrm, 2.5 bath, 2 car garage townhome about 2 miles from the beach of Florida panhandle, whereas the deductible was increased from $1000 to $2500 so my annual property insurance premium is $1900, and not $2300 for a replacement value of $250,000.

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AD says

mell says

That is true, but it makes real estate in places like Connecticut cheaper, where nice Waterfront mansions have slipped below $2MM over the years of the business and people exodus from the state.

just like housing is "cheap" in the high income, property and sales tax shitholes like Illinois

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Relatively, yeah. Only CA is perma expensive so far. $800k gets you a nicely upkept 3-4 bedroom house in the IL burbs, in CA a 2 bedroom starter shack in need of renovation.

mell says

Relatively, yeah. Only CA is perma expensive so far. $800k gets you a nicely upkept 3-4 bedroom house in the IL burbs, in CA a 2 bedroom starter shack in need of renovation.

that cause of the weather, beach, mountains, and culture there ... I'll admit California is still attractive as you can go to hike the mountains within a 2 hour drive or got to Catalina Island and it has a lot of cultural appeal

let alone it is a major job center as far as tech jobs, Hollywood, etc

whereas Illinois is hemorrhaging jobs

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AD says

whereas Illinois is hemorrhaging jobs

No. There's plenty of jobs. Maybe Chicago. The rest of the state is fine. Has been for a couple years. We already had our exodus. I don't like our governor, but things are much better here. Still have the pension debt issues, but housing is fine. It's actually doing well. mell says

Relatively, yeah. Only CA is perma expensive so far. $800k gets you a nicely upkept 3-4 bedroom house in the IL burbs, in CA a 2 bedroom starter shack in need of renovation.

Way cheaper than $800k. $400k gets you a new home here. Sure you can spend more in uppity suburbs, but the schools are shitty even though they say they're good. There are areas by me that a 3/2.1 is going for $250-300k brand new. Not a shitty neighborhood either.

Coastal areas just pay more for homes. When the buyers dry up, the prices will crater and they will. CA is unique with foreign buyers so that's a hard market to predict. FL is at the end of the covid and boomer buzz and ran out of booze in my opinion. I don't think prices will do well. I'm usually looking at vacations and not housing prices, so I could be wrong.

The housing collapse is going to happen a couple of months or so after the rate first cut.

That's when the sellers won't see a sudden onslaught of buyers they're expecting, and realize they need to cut prices deeper.

WookieMan says

FL is at the end of the covid and boomer buzz and ran out of booze in my opinion. I don't think prices will do well.

A 3 bedroom , 2.5 bath, 2 car garage townhome in my neighborhood in Panama City Beach sold for $299,000 two months ago when the 30 yr mortgage rate was at least 7%. It could have sold for at most $335,000 back in early 2022 when the 30 yr mortgage rate was 3%.

I think a townhome like this will bottom around 80% of the peak price, so around $268,000 by spring 2026.

This is based on 30 yr mortgage rate of around 5.5% and that price is at an affordability level similar to with the 3% rate in early 2022.

The same townhome sold for $187,000 in 2016 so that means around a 4% annual appreciation from 2016 to 2026.

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What I hope is household income continues to increase in the Florida panhandle while housing costs (mortgage or rent as well as property insurance) remain flat for the next two years.

Household income in Panama City Beach increased about 20% since early 2022 to present day, while a townhome sells for about 10% less than it did in early 2022 and rent seems to be at summer 2021 price level.

I was able to keep my property insurance (HO 3) premium the same at $1900 for 2025 for our townhome about 2 miles from the beach by increasing the deductible from $1000 to $2500 for a replacement value of around $275,000.

My wife & I knew a lady that was a long time former Florida resident. She was a very sharp business lady. While discussing a possible move to Florida with her, she emphatically told us "don't ever buy real estate in Florida." She went on to describe specific examples of the "notoriously shoddy construction practices," along with her assertion that "most of the housing in Florida is built upon swamp land." We never made the move and I'm glad we didn't.

Regarding the collapse of the Champlain Tower South in Surfside, it often takes time for shoddy construction practices to show up, but eventually they do. I wouldn't be the slightest bit surprised see more of this down the road, and that too will have a major impact on Florida real estate prices in the future.

Hell, since the 1920's Florida real estate has been a scam - over a century. Are we all surprised?

https://nypost.com/2025/01/13/real-estate/homes-are-piling-up-on-the-market-in-florida-there-are-2-big-reasons-why/

Homes are piling up on the market in Florida — there are 2 big reasons why

I'd love it if people listened to me at some point.

Both Florida and Texas led the way in new construction during the pandemic, attempting to satisfy increasing demand from out-of-staters flocking to their warmer shores.

Home Builders Weekly, which tracks new-construction projects in Florida, reported that in 2024, there was a 10% year-over-year increase in new-construction permits—with Northeast Florida seeing a 25% increase year over year.

Zillow
Zestimate®

$505,900

Also Zillow
Estimated sales range

$460,000 - $551,000

But finally Zillow
Estimated net proceeds

$370,505

Meanwhile I tell every picklehead Rent seeking baller that calls me, the house is not for sale, but it would take a million dollars to get me to think about moving. To which one moron asked, "Well has the house been recently updated?" To which I informed her, "You don't get the homework assignment" then hung up.

AmericanKulak says

The housing collapse is going to happen a couple of months or so after the rate first cut.

That's when the sellers won't see a sudden onslaught of buyers they're expecting, and realize they need to cut prices deeper.

Ahem.

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Florida ranks very high for K-12 public education, and higher than California.

Yes Florida is more of a roller coaster economy for residential real estate compared to California, but its still a great state. This makes it an attractive state for those looking to wanting to move from their current state.

https://www.usnews.com/news/best-states/rankings/education/prek-12

https://www.usnews.com/news/best-states/rankings-index

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zzyzzx says

Months of inventory is the better metric. All those houses could sell and stay at that level and prices wouldn't move. If you have 12 months inventory that's a problem. 6 months is a roughly stable market. It's how fast the inventory moves.

Also that's only one metro. Really doesn't mean much big picture. Tampa area is Boomer centric. They're dying. Kids sell the house. Not a big shocker for FL. Visited plenty of times, but wouldn't live there. The beach areas are chaos, no parking and yes, the beaches suck there.

AD says

Florida ranks very high for K-12 public education, and higher than California.

Florida was close to bottom for many decades. The past decade or so of Ed Reform and Higher Standards worked magic.

AmericanKulak says

AD says

Florida ranks very high for K-12 public education, and higher than California.

Florida was close to bottom for many decades. The past decade or so of Ed Reform and Higher Standards worked magic.

I don't see it in the areas I go in FL, but they're tourist areas, so kids could be from out of state. Ultimately schools are local and who they hire and the board.

I've seen dumb ass kids everywhere though. Ultimately younger dads have gotten too passive. I don't put up with shit. I'll get after other people's kids if they're at my house. I will pop off and it's usually only one time and then it become thank you and sorry Mr John Doe. I'm embarrassed by the parents around my age. I should be chewing the adults out and not parenting for them.

Your fifteen minute city dream apartment in Miami.

AmericanKulak says

The housing collapse is going to happen a couple of months or so after the rate first cut.

That's when the sellers won't see a sudden onslaught of buyers they're expecting, and realize they need to cut prices deeper.

WookieMan says

. Ultimately younger dads have gotten too passive.

What dads? Half of kids don't live with one.

Not aimed at you Wook, but it's very hard to get the mindset away from the Ward & June style family when it hasn't been the case in more than 40 years.

The Census is also guilty; what the Census is not considering is that Millies are in their "last chance" era to get married and still aren't marrying. In 2012 the average Millie was still in their early 20s. In 2022 they were in their early 30s. Millies being the largest fertile demographic.
https://www.census.gov/library/stories/2024/10/marriage-and-divorce.html

Ceffer says

Your fifteen minute city dream apartment in Miami.

That is about equal to the studio I lived in for $850 several years in the late 90s to early naughties. Except that looks like it'll get a regular refrigerator where I had one of those under the counter types smaller than a dishwasher with a shoe box freezer where anything not touching the metal defrosted.

I did have several more square feet of sleeping space though and a smaller bathroom.

Maga_Chaos_Monkey says

That is about equal to the studio I lived in for $850 several years in the late 90s to early naughties.

Hah if you were paying that much back then it was for one of two reasons.
It was a MIL quarters of a very nice house in a decent neighborhood, or you were paying by the week.
I remember back then many people that lived hand to mouth would get efficiencies by the week, because $150 to $200 a week was easier to cough up than paying $400 to $700 a month, or find a decent place in that range.
A shitbox multiplex showing in that video was most definitely a shitty ran down section 8 housing, owned by a slumlord. They smelt like bug spray and dog piss. Notice the lady in that video said as she walked out the unit. "Now lets look around outside at the rest of the property it's a nice upkept neighborhood. But she cut off before she ever panned out to the driveway, or the neighborhood.

There aren't any multi unit HUD places painted prison brown, and welfare beige, in any NICE neighborhoods in South Florida.

As for is $900 a good price for that unit. No but it's exhibit A for the trial for the hanging for whoever and whatever Scumbag rent seekers "colluded" to bring us to this point, that anyone would think it is a good price. People should be hung and shot for what they did to the world RE markets.

Tenpoundbass says

A shitbox multiplex showing in that video was most definitely a shitty ran down section 8 housing, owned by a slumlord. They smelt like bug spray and dog piss.

I once saw an apartment in South Florida like you described; there were chicken feathers and a dark red stain in the pantry, probably some Santeria Shrine. The rental agent and I booked it out of there.

Tenpoundbass says

Hah if you were paying that much back then it was for one of two reasons.

The two reasons: (1) It was on the San Francisco peninsula (2) During the dot com thing.

Yes there was section 8 in the building and it also smelled like dog, not dog piss but it had some 1960s nasty shag carpet. That is until the landlord was forced to replace it with the cheapest carpet available after the neighbor upstairs poured beans down the sink and flooded my unit with me in it.

I was a recent college undergrad and not making much money yet.

MolotovCocktail says

Boomers are dying and already bought in those regions. Average boomer is at minimum SS age. I think these builders thought the money train would keep coming. FL and AZ won't be a crash, but they're gonna eat shit for 10-20 years until Millennials start retiring.

I'll admit my lack of knowledge though. I don't think 55+ communities can be used as comps for value in standard residential areas with no age restrictions. So it might not be super bad. We only have I think two 55+ communities in my region. FL and AZ have a large chunk of that market. I never deal with a deal on one of those.

25,000 homes for sale in Lee County, that's crazy. Lee is/was a rural county that boomed mostly during COVID.

WookieMan says

Average boomer is at minimum SS age. I

All Boomers, if you put the stop year at 1960, are basically SS Eligible. The biggest birth year in US History was 57 so all of those are now SS ready.

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Yes demographics (i.e., census bureau data) is destiny as Ken Gronbach, an expert in demographics, stated this on Coast to Coast AM

I know Panama City, Florida and Bay County use that data as far as planning and advising such as for residential development

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https://www.realtor.com/realestateandhomes-detail/2144-Crawford-Ct_The-Villages_FL_32162_M68333-31400

this The Villages 1142 sq ft, 2 bedrm/2 bath single detached home sold brand new in 2005 for $159,900

just sold for $313,500 this month

here is another recent sale in The Villages https://www.zillow.com/homedetails/1918-Walden-Way-The-Villages-FL-32162/66225215_zpid/

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WookieMan says

We only have I think two 55+ communities in my region.

I'm 55-- but am renting a house in a 55+. I like it, it's quiet, no barking dogs, there is privacy and a green belt behind me and lots of wildlife comes through the yard (low rod iron fence that the deer easily jump and the other stuff just slips through) that I catch on web cameras. Also lots of q-tips driving around all over the place in golf carts haha... There were about 30 of them that came by in a Trump parade before the election. I happened to be in the garage cleaning it out so I cheered them on. The neighbor lady across the street with the Kamala sign came out and gave me the stink eye.

Gated too.

Right now I'm in an Olympic IQ competition with some squirrels vs. my bird feeder and I've made a comeback and am winning at this point. I may need to cut another cedar tree branch if they pull ahead again though.

Some of the house design is weird though. The dishwasher is about 3 feet away from the sink and elevated. So I get water all over the floor transferring the plates. I think I get it though. It's so I don't have to bend over so far to set/get dishes from the washer.

My landlord made me promise to keep it on the down low and not go to the quite nice clubhouse.

AD says

just sold for $313,500 this month

Poor fools. In 2-3 years it'll be $250k. This happens every 10-15 years like clockwork in Florida (forget the financial crisis, there was a dip in the 90s and 70s too) and the price downturn is just beginning. Places like Austin and Dallas, TX too.

Inventory is still rising dramatically and buyer interest collapsing.

The Homeloaners and Small Investors keep fluffing a clear correction, while homebuilders have finally cut prices way back after failing to save themselves with teaser rates and freebies. The dumb money will wait and wait until life events force them to act, then they will all cut drastically in tandem. It's already happening with coastal condos. SFHs and Townhomes are next.

AD says

here is another recent sale in The Villages https://www.zillow.com/homedetails/1918-Walden-Way-The-Villages-FL-32162/66225215_zpid/

Oh man, I hope that is a MN or NJ state employee for their own sake. Hoo wee, the prop tax on that must be insane, not to mention the insurance.

BTW, there are some bad things about Florida. For one, they let the shady insurance bankruptcy key personnel and investors come back before the 7 year ban period and only to be fined fractional to their salary and non-salary benefits. They should have imprisoned them.

AmericanKulak says

Poor fools. In 2-3 years it'll be $250k

As far as the fools buying this one: https://www.realtor.com/realestateandhomes-detail/2144-Crawford-Ct_The-Villages_FL_32162_M68333-31400

It's peak market price was likely $430,000 in 2022 so it sold for about 28% less than that this month. It sold for $160,000 in 2005, so a 3% annual appreciation rate equates currently to around a $290,000 market price.

Bay County, Florida and Panama City it at least actively is diversifying its economy beyond the Navy and Air Force bases AND tourism and senior care, such as with Eastern Shipyard, Berg Pipe, Trane HVAC manufacturing plant, the maritime port, the industrial park at the airport, etc

https://www.mypanhandle.com/news/local-news/bay-county/new-projects-presented-at-the-bay-economic-development-alliance-meeting/

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AD says

Bay County, Florida and Panama City it at least actively is diversifying its economy beyond the Navy and Air Force bases AND tourism and senior care, such as with Eastern Shipyard, Berg Pipe, Trane HVAC manufacturing plant, the maritime port, the industrial park at the airport, etc

Millions of jobs to go. A few thousand is a drop in the bucket. FL's top employer is Publix, I guarantee NJ's top employer isn't Pathmark.

This is a subject that has been discussed for 40 years, and for those 40 years there are those who claim the industry in right around the corner to take advantage of Florida's rock bottom wages but fairly decently educated workforce, but it never happens. The state fills up with people far faster, and the mix remains the same. In fact, agra is declining (not that that offers large numbers of middle class jobs) and low-end (non-middle class salaries) services grow. Florida's problem is there is no job to upgrade INTO. There are only so many retail/bank managers for several bank tellers or store keyholders.

With an average income of about 55k - and that itself is fluffed up bigly by retirees bringing big fat Yankee Pensions - the median Florida home should be under $200k. $270k would be about 5x income.

Which it was, before the 21st century financialization era, and will be, once the influx stops, and in fact, it's already peaked and the COVID refugees and investors (both big, very fast, and the small ones in denial, more slowly) are fleeing.

The Affordability Crisis and the Demographic Crisis (with a sprinkle of low-end Service dependency) are hitting at the same time

I prefer asset price reductions and slashing down the pricing power on goods over wage increases. Landlords and Business hate both, they want low wages but skyrocketing asset values. Just like 19C British farmers wanted cheap labor but expensive grain.