Dockominiums prices ‘reasonable' in a bear market

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Though dockominiums have slipped in value in the real estate slump, buying a slip still can make sense for the boater who expects to keep it for a long time, says real estate broker Marty Laven.

“It’s still a good idea to look long-term and analyze the care and feeding of your vessel …” says Laven, founder of the Dockominium Group in Fort Pierce, Fla.

Boat owners who expect to use a slip seven to 20 years may find a dockominium or dry-stack “rackominium” more attractive than renting, he said.

But the market in dockominium and rackominium slips — slips that are owned outright or leased long-term, maybe 50 years or more — has suffered from the same “irrational exuberance” that scuttled other real estate, he says. Too many people bought slips purely as investments with the expectation of “flipping” them — selling them quickly — and making a tidy profit.

Developers often bought a marina for too much, converted it to dockominiums, then sold the slips for too much. Meanwhile, rental rates did not keep up with soaring sales prices, which created a widening gap between the monthly mortgage payments on a slip and the monthly rental rate they could fetch.

Laven said in March he doubted the dockominium market had bottomed out yet, but he expected it to shortly. Sale prices of slips already had declined 35 to 40 percent, he said, and they could fall another 10 to 15 percent. He thought at least one or two dockominiums he knew of might even go into receivership. Still, as a long-term strategy for securing a slip for a boat in regions where slips are in short supply, a dockominium can be a reasonable buy, he says.

“I do think that in 10 years there will be a number of [dockominium and rackominium marinas],” he said. “Ask any boatyard or marine owner, ‘Are you considering it?’ The answer is likely to be yes.”

Applied Technology Management says 38 percent of marina operators responding to a survey report they already have dockominium or rackominium slips, and another 23 percent are considering them.

A separate ATM study of South Carolina marinas shows more than half of wet and dry slips are for sale, causing concern there about a loss of slips for rent.

Laven says people should be wary of buying a slip at a marina that isn’t built yet. Anyone who buys in the pre-construction phase should make sure the developer has taken out a big enough performance bond to return down payments if the project fizzles. He also advises doing due diligence on the developer and project or, better yet, work through a real estate broker who knows dockominiums. Finally, be skeptical of promises of meteoric returns, Laven says. He could think of just a few marinas — Ocean Reef Club in the Florida Keys, for one — where a boater could have bought a slip for $60,000 25 years ago and sold it for $1 million today.

Features that help strengthen real value include a good location with quick access to open water, top-flight amenities, money for dredging the marina and access channels, hurricane-resistant structures and good management.

This article originally appeared in the July 2008 issue.

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