The U.S. Virgin Islands, particularly St. Thomas, make up a prime investment market for people interested in vacation houses.

There is a wide range of opportunities: Well-managed condominiums here are four-season draws, producing gross rental incomes of $15,000 to $25,000 a year, often netting $1,000 to $3,000 exclusive of tax savings. Prices start in the $40,000s -- for tiny efficiencies in hotels being converted to condominium ownership -- and rise to upwards of $130,000 for luxury units in dramatic settings.

In the past year, the competition for higher-priced housing has been strong. The buyer of a $85,000 studio apartment, for instance, must be prepared to make a down payment of $25,000 to $30,000.

Mortgage financing here is also expensive and loans from commercial banks go for 20 years rather than 30. There is only one savings and loan association on the islands and its terms are the same as the banks. As a result, housing finance here revolves around Chase Manhattan and other branches of large, mainland banks.

Management fees for condominium units can eat up 40 percent of the rent receipts for an investor here and furnishings for a new apartment can cost at least $5,000. Typical property taxes are between $500 and $1,000 a year. Federal tax breaks on this kind of property are only advantageous if the owner occupies the unit for no more than 14 days a year, or 10 percent of the total rental period.

The point, in short, is that vacations condos in the islands are for investors who are flush with cash and aware of the incidental costs. Any ideas about nomoney-down, high-leverage investments in the Caribbean are mostly illusory. With the exception of scattered resale condos and detached single-family houses on St. Croix -- where had publicity about racial tensions has kept prices 30 to 40 percent below those of St. Thomas -- there are no bargain basement investments in the Virgins today.

At the same time, Frank McLaughlin, president of the territorial board of realtors, says that typically, resale values have risen by 20 to 25 percent in the past year for apartments with nearby tennis and swimming facilities.

"By international standards," he maintains, these units are "still underpriced."

The developers of the Point Pleasant condominiums on the eastern end of this island report resale price increases of 30 to 35 percent in a year, with 90 to 95 percent rental occupancy throughout the year. Rents range from $80 to $100 a day in the busy season and $50 to $65 the rest of the year.

Many condominium developers are beginning to contract with travel wholesalers and other travel agents on the mainland to book vacationers into Virgin Island condominiums for one and two-week stays throughout the year. The advent of a 12-month rental market -- it used to run from late fall to early spring at best -- is one of the keys to the local real estate boom.