A comedian sold his house near Los Angeles and wants to buy a penthouse condo north of Miami.
No, there’s not a punchline coming. It’s a legitimate financial question that a listener of the Clark Howard Podcast recently asked.
Can I Afford a South Florida Penthouse?
I’ve been successful in my career and I’ve invested millions for my retirement. I just sold my house in California. Can I afford this penthouse condo in Florida?
That’s what a Clark listener asked on the March 30 podcast episode.
Asked Gregory in Florida: “I’m a pro comedian who just moved from California to Florida. I have $600,000 from the house I sold near Los Angeles. There’s a sweet penthouse condo I can buy in Pompano Beach, Florida, but the cost is $750,000 with a monthly maintenance fee of $1,250.
“I have about $2 million in the stock market after all these years and wonder if I can afford the beautiful views of this place or if signing up to pay $1,250 plus whatever assessments are needed make me the dumbest 60-year-old guy in history. Also, I have no debt, am single, no kids, but that may change if I buy this fancy place.”
Florida Property Has Increased In Value at a Rapid Pace
There are two significant issues that Gregory faces in Clark’s estimation. First, he’s looking at buying a condo in Florida, where residential property prices have increased at some of the fastest rates in the nation.
Look on Zillow, Clark says, and you’d probably see prices in 2018 and 2019 before the COVID-19 pandemic in the neighborhood of $450,000.
“Florida has had a big inflation of home values in a relatively short period of time. Go in with your eyes wide open. Look back in the Zillow records on the condo you’re looking at [and] see what units in that building sold for in 2018,” Clark says.
“The market may have run ahead of what will ultimately prove to be fair value. If this is your forever remaining place, you’re happy with the idea of living in Pompano Beach and you’re not that freaked out about, well, it was $450,000 four years ago and now it’s $750,000, that would be A-OK.”
Be Wary of Required Payments To Ensure Money for Potential Building Repairs
In 2021, 98 people died in a tragic incident in Miami, as Surfside Condo collapsed. The tragedy led to worry about other old structures built in the area.
Lawmakers passed legislation that requires inspections for buildings of a certain age and a certain distance from the coast.
It also became common practice in Florida for condo owners to waive their “reserves” every year. These reserve funds exist to ensure the building owners can afford repairs when needed. The new law changed those reserve requirements.
“The time bomb is the condo fee. You have not said how close you are to the ocean. You said it’s beautiful views. But you’ve not said are you on the intercoastal or are you inland a little. Are you oceanfront?” Clark says.
“The condominiums along the coast are facing significantly higher maintenance issues because of that tragic condo collapse in South Florida. And so you want to know what kind of reserves they have and do they have a five-year plan where the reserves are adequate for that. Does the five-year plan seem realistic?
“As far as the amount of money you have, you’re doing great. You can afford, obviously, to buy this place. You have a lot of cash from the home you sold already. So that’s not a major issue. It’s just what’s waiting there for you with future obligations you may face with that particular building.”
Whether you have enough money to purchase a penthouse condo isn’t the only question you should explore.
Every state and city has its own set of unique circumstances with insurance, fees, property taxes and more.
If you’re making a huge purchase with a large percentage of your net worth, make sure to be thorough in looking into all of those issues before locking yourself into a deal.