Naples, Florida Provides a Lesson in What Vacation Rental Investors Should Avoid
Jan. 14, 2007. Naples, the once-sleepy retirement haven on Florida's west coast,was perhaps the hottest housing market in the country in 2005. However, it has also become an object lesson in what vacation rental investors should avoid.
A recent Wall Street Journal (Subscription Only) article reports, “The frenzied run-up prompted economists at banking concern National City Corp. and the economic consulting firm Global Insight Inc. to label Naples "the most overvalued" housing market in the U.S. in the second quarter of 2005, a dubious honor it retains. Today, prices are dropping, the number of unsold homes on the market has swelled to more than twice the national average and investors are scrambling to unload their properties.�
As anyone who has visited Naples knows, it was an especially desirable place to invest, with its fine restaurants, stretches of pristine beaches and less congestion than Florida’s east coast. But it is also obvious that investors and speculators played a large role in pumping up the real-estate bubble, especially at the end of the run.
This is a perfect example of what savvy vacation rental investors will avoid---paying too much. They will carefully evaluate whether they can expect to cover costs with rental income. They will assiduously avoid overheated markets and look instead for bargains in markets that have not yet peaked. They will avoid getting caught up in a speculative frenzy by making their decision based strictly on the numbers.
