If you have read any of the first few posts where I provided our current financial picture and numbers, you may have noticed we have a couple of real estate properties listed in our assets. About 15 years ago my brother and I invested in some real estate properties, purchasing two houses and a lot of land, in an area we expected to grow and develop. These properties were located in a sparsely populated area about 500 feet from the beach in the northwest part of Florida on the Gulf of Mexico. Neither of us had a lot of experience with purchasing properties as investments, but what we did see was an area where little beach communities were popping up all over the place and expected the same in this area. It helped that we were familiar with this area, growing up about an hour and a half away. It might seem surprising to some, but Florida has a lot of rural and undeveloped land outside of the five big metropolitan areas and this includes beach front property. This certainly has become less in the last decade, but the location of these properties at the time was about 30 miles from the closest place to buy groceries, and about an hour drive to any reasonable population center. The seclusion itself was actually quite appealing.
We turned one of the properties into a family retreat allowing any of our family members to get away to a nice secluded beach area for many years. We purchased one house for $105,000 and the other for $98,000 and an empty lot of land next to one of the houses for a little over $35,000. We were correct in our assumptions that sprawl would eventually reach this beach front property and now little communities have popped up everywhere around these houses. If Zillow is to be trusted, one of the houses is currently valued at $450,000 and the other at around $410,000. These turned out to be great investments, but not necessarily a good strategy that I would recommend especially with little to no real estate experience like us at the time. In reality we simply used intuition and guessed correctly, so I attribute some of this to luck. I include both of these properties (with the additional lot wrapped in) in my Net Worth calculations with a significant discount. My brother and I bought these properties jointly so we each have a 50% stake in all the properties. Given that, and being conservative valuing real estate I only include what I consider 50% of the fire sell price of these properties in my Net Worth.
We have been using one of the houses as a rental for most of the time, and are about to start doing the same with the other since neither of our families vacations there anymore. To be honest it has lost its charm with all the build up and increased density in people (mostly vacationers) so our interest in “getting away” is minimal. Plus for me it is about a 7 hour drive from where I currently live. With the rental income, we have been able to renovate both properties and have now paid off all the mortgages. I expect both of these properties to start adding to our cash flow during the next rental season which starts in the spring. As I continue down the path to financial independence I will have to consider and study whether I want to keep these properties to generate income, or if I could do better selling and putting the cash to work somewhere else.