Buy Buy, Baby: Your Own Fantasy Island

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Fleeing the mainland hasn't helped private-island owners escape economic reality.

Island investors' dreams of sandy beaches and secluded homes have burst with the real estate bubble, as sellers watch a rising tide of frugality wash away their profit margins. With island owners stranded on unsellable properties, their paradise lost is now available for a relative pittance.

New Jersey's Middle Sedge Island, listed for $6.5 million, is a 20-minute helicopter ride away from Manhattan.

For every new castaway like Johnny Depp, who espoused the virtues of his $3.5 million, 45-acre island in the Bahamas to the British press last month, there's someone like Nick Hexum from Nebraska reggae rock band 311. Hexum put his 5.5-acre island in the Florida Keys on the market for $10 million in 2006, but has since dropped it to a sea-level $3.85 million.

"We've seen an unusual amount of price reductions in the last few months," says Alexis Pappas, director of operations for Toronto-based island real estate firm Private Islands. "In the past three months, we've had islands drop to almost half their price."

Island owners in almost every part of the globe have taken a bath amid recent economic turmoil. The 4.4-acre Monarch Caye, an island and estate off the coast of Belize, was originally listed at $5 million, but sold for $1 million. The sprawling 1,235-acre Nafiska Island in Greece's Ionian Sea was originally offered by the Onassis family for more than $21 million before its price was cut in half. It's still unsold.

Even formerly unsinkable markets in Fiji and the Bahamas have seen prices plunge as the 30-year private-island boom that spawned firms like Pappas' and the multinational Vladi Private Islands goes bust.

"Before the financial crisis hit, prices were through the roof," Pappas said. "This is almost a corrective."

There are now bargains to be had all over the globe - with several private islands in the Philippines, South America and Canada listed for $250,000 to $500,000. Technological advances like laptop wind turbines, solar farms and modular housing can help you get that island home for less than $1 million.

The price of Nafsika Island, owned by the Onassis family, in Greece's Ionian Sea has been cut in half.

If you're looking to take advantage of the correction, look for islands with amenities such as power sources, docks, airstrips or helipads, and water desalinators. These features will save you 30% to 50% in renovation costs.

Also, consider your location. If you're looking for more than a vacation home, proximity to a Target ( TGT) or Wal-Mart ( symbol) might not be a high priority. However, if you're looking for a home to grow old in, you may want to consider an island that's close to a hospital with a helicopter.

Remember: You may own the island, but it's not really yours. Ask embattled financier and alleged Ponzi schemer Allen Stanford, who recently had 250 acres of his 1,500-acre Guiana Island seized by the governments of Antigua and Barbuda, who intend to take the rest eventually.

Monarch Cay was originally listed at $5 million and sold for just over $1 million.

Island ownership isn't without its problems. Campbell Island in New Zealand and the appropriately named Rat Island in Alaska were once teeming with Norway rats, but even the wrong insect can scuttle a private island project.

"There could be sand flies or tarantulas that will require you to fumigate the whole island, which is difficult and costly," Pappas says. "One of the things you want to ask yourself during the island inspection is 'am I getting bitten?'"

Still, some owners are having a hard time letting the good times go. Logging magnate Timothy Blixseth hasn't budged on the $75 million asking price of his Emerald Cay in Turks and Caicos, which features a 27,000-square-foot, 10-bedroom estate. The property features a "floating" tennis court, movie theater, three-story library, wine cellar and retractable bridge.

But it can't hurt to make an offer. So go ahead, talk down the price of that $3.5 million Savannah Caye island that's a stone's throw away from Leonardo DiCaprio's plot in Belize. He may not like that you're bringing down property values in his neighborhood, but it just proves that no man is an island.
Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, The Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.