Greetings Real Estate Investors!
Today we want to talk to you about one of the best kept (and most complicated) secrets in South Florida Real Estate Investing: 55 and over communities.
If you don’t live in Arizona or Florida you may not even be familiar with what a 55+ community is but the name pretty much tells the story. 55+ communities are condominiums whose by-laws only allow residents and owners who are at least 55 years old. Some are even strict enough that no residents in the condo unit may be under 55 years old. There are even some single-family home communities with these restrictions.
Now before you young whipper snappers get any ideas for a 55 and under community just hold your horses and your cats’ pajamas. Are those enough old school sayings for you? Well if not I am sure you can learn some if you move in to one of these communities! But seriously these communities provide an excellent service to those who have paid their dues in the world and don’t want to be bothered by screaming babies or screaming parties by older babies who have had too much to drink.
Many of these communities even offer entertainment and services for retirees as well as bus services to local attractions. So now that you know what they are how you can as a savvy real estate investor make money off of these communities?
Acquisition Costs are Much Lower than Normal Properties
Because of the strict requirements for entry the vast majority of buyers do not qualify to purchase in 55+ communities. As basic supply and demand are at work the prices are driven down because the demand is lower. Similar properties may trade for 50-70% of the price of standard properties.
The Tenants are Great
Since your tenants will have to be 55+ they are almost certainly much better behaved than their younger counterparts. They already know who they are in life and usually are in a very stable relationship or have even decided to be alone but are happy to be alone. Of course there are exceptions but this tends to be the general trend.
The Pitfalls
Obviously the biggest barrier to entry is your age. If you are not over 55 you basically have no chance of acquiring one of these units (there are some rare exceptions that include inheritance). But even if you are over 55 the investor restrictions are much more stringent in these communities. Whereas standard condominiums may have an 80/20 required owner occupant ratio, a 55+ community may have a 90 /10 or even 95/5 ratio or it may even not allow investors at all. But most will allow investors so long as the other requirements are met. Additionally, if you thought your standard condo had a tough condo board approval process prepare to be basically IRS audited in order to enter one of these gems. Butt…
The Rewards
If you can get past all of these hurdles you can have an amazing investments property with a Cap Rate that would make anyone jealous. And if you get in good with the board at one specific condo association you could reap the benefits of several amazing properties.
So don’t be afraid to go for these diamonds in the rough…as a matter of fact you may be able to get into the good graces of the condo board president if you help them out of a rough spot on the golf course!
That’s all for now check back next week for more Real Estate Investor tips!
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