My portfolio? It’s in vacation condos
One of my relatives missed a recent family reunion because he was in Las Vegas buying a condo.
“We’re not planning to live in Las Vegas,” his wife said. “It’s an investment. Everybody is rushing to buy condos in Las Vegas. And we’re taking another trip next week to Miami to buy a condo there too.”
The purchase of condos has set off a travel movement. Last month in Miami, I saw tourists snapping up condo brochures. In a city where thousands of condo units are under construction, real estate agencies can be found all over. “Real estate can go in only one direction,” I was told by one agent. “Up.”
The predictions are even more dramatic in Las Vegas.
“On the day when we were negotiating to buy,” another relative said, “the price was going up almost hourly. Unless we closed by the end of the afternoon, the offer to sell would no longer be good.”
Because I recently spent two weeks in a Miami Beach condo, I have a different take. The landlady was a widow living in Central America who had transferred her savings to Florida by purchasing a condo -- solely as an investment and to live in it. But because there are hefty monthly fees, she needed to rent out the condo to tourists. Her finances are limited, so she must break even in the next several years before she can enjoy her “killing” by selling the condo at an increased price.
And therein lies the problem. Miami Beach is a seasonal attraction, popular in January, February and March but lightly visited in other months.
What’s more, the devastating hurricanes that hit Florida last year diminished Americans’ desire to vacation there in August, September and October. Those hurricanes may discourage tourism in those months of 2005 too.
Also, the constant addition of condo units has lowered the appeal of the slightly older buildings, even those on the beach.
The landlady was forced to reduce her rental price for a spacious one-bedroom apartment to $600 a week. My wife and I had two weeks of these excellent lodgings for about $86 a day.
When I hear of Americans with modest incomes rushing to make condo investments in popular places where they have no intention of living, I think of the word “bubble.” It’s clear that condos in both tourist locations are being priced at substantial levels, making the possibility of profitable future resales iffy.
The late Joseph Kennedy, father of President Kennedy, used to tell about having his shoes shined the morning before the stock market crash in 1929. The man shining his shoes told Kennedy about all the investments he planned to make that day in stocks. He had a portfolio. When he heard that, Kennedy realized that stock-market dreams had become a national mania; he sold his stocks and thus preserved the Kennedy fortune.
If you plan to vacation for substantial amounts of time in Miami or Las Vegas, you might buy a condo for that purpose. But if you’re traveling there to “make a killing,” reflect on the story told by Joseph Kennedy.
