The Impact of Condo Rental Policies

CONDO REPORT
Gary & Sandy Elliott
www.marcoislandcondoguy.net
www.SandyElliottInteriors.com

Today’s Marco Island condo buyers tend to look for a great location, competitive price and an opportunity to rent their condo to help offset the annual cost of ownership including condo fees, taxes, utilities and insurance.

The median price of the 282 condos for sale this week is $549,000, but this price varies widely between inland and beachfront condos. Half of these condos are located on the beach with a median price of $675,000. Owning a condo anywhere on Marco Island satisfies the need for great location, and once you’ve identified your price range, number of bedrooms, inland, on the water or beach location and other desirable condo characteristics, your realtor can create a short list of what’s available. A visit to each

listed condo will help determine those that are competitively priced. However, each condo has different rental policies and that policy may determine which one ultimately gets an offer.

Traditional investors are generally disappointed with the return on equity and cap rate for condos on the market today, according to Skip Lee, a fellow realtor, who helps investors with their purchase. Skip has an extensive financial background and has developed an awesome investment model to determine investor returns and sensitivities. Skip concludes that given today’s list prices and corresponding rents, traditional investors are reluctant to commit from a strictly business sense. Taking their place are quasi-investors who want to be here for a few weeks or months themselves, and rent out the condo to recover the costs of

ownership. The low investor returns generated by his model are offset by the pleasure of using the condo for their personal, family or friends’ vacations and potential escalation of prices.

As an example, many beach condos allow 30-day minimum rentals, 12 times a year. Rental policies vary from condo to condo, and that makes a difference to today’s buyers. The Marco Beach Ocean Resort (a condo hotel) allows daily rentals 365 times per year. The upscale Madeira only allows one rental per year for a minimum of 365 days. A few condos like the Apollo, Seawinds and Somerset allow minimum seven-day rentals, 52 weeks a year. Others like South Seas Towers 3 and 4 allow minimum seven-day rentals, but only 36 times a year. The Admiralty allows

weekly rentals, but only one time a month. Some condos like Riviera, Marbelle and Les Falls allow a condo to be rented only once a year for a minimum of 30 days. The Gulfview allows 30-day minimum rentals, nine times a year. The Prince and Princess limit rentals to four times a year, for a minimum of 90 days. If you want to maximize your returns, Skip suggests those condos with weekly rentals 52 times a year. Their vacancy rates are near zero in season and up to 50% off-season. A condo’s desirability depends not only on the view and amenities, but also how many upgrades it has relative to other condos.

This condo report was written with Skip Lee at Keller Williams Realty. Contact Skip by email at skiplee@kw.com.