Miami condo buildings that once topped 2008’s foreclosure list are now hot-price tickets items in the area’s multifamily market. Who is bold enough to buy condos in Miami’s still-shaky market? According to the area’s real estate brokers, investors—not homeowners—are snatching up these units left and right.
“Without a shadow of a doubt, investors are buying these units knowing they can generate more money than what they are worth,” says Miami real estate broker Peter Zalewski and founder of CondoVultures.com. “The majority of these properties are selling for less than $100,000. At the end of the day, they are just rental properties. That is really all they’re worth.” Most investors are estimating it will take three to five years for prices to return to or near replacement costs. So for now, Zalewski says investors will just rent out their units and wait for the market to pick up.
Many real estate experts, however, see no coincidence in Miami’s recent sales activity. Banks that have seized these properties are determined to sell the units as quickly as possible, so as a result, they will price units in order to move them quickly. “[Banks] don’t want to be landlords. They don’t want the costs and liabilities associated with owning real estate. They are the sellers that have been and will continue to be the most willing to meet the market in terms of pricing,” says CondoReports.com president Adam Cappel. “In many of these buildings, lenders are competing with other lenders to sell their inventory, which means that in many cases, they have to be aggressive in terms of pricing to move their units.”
Aggressive may be the understatement of the year. Properties such as Venetian Gardens in Homestead, Fla., listed a two-bedroom unit for $24,000, while a three-bedroom unit at the same property listed for $120,000.
With condos selling for the same price as a Chevy Impala and reports of investors purchasing blocks of units at time, it's no surprise that the majority of these buildings are either completely sold out or have only a few units remaining. Miami's Blue Lagoon has 46 of its 611 units still on the market, while Venetia Gardens has only 17 of its 216 units left to sell. There are still properties that have hundreds of units remaining; Cappel says this is because developers still have ownership of these buildings and have not placed the units on the market. He also says Miami-Dade County may not see stabilization in its condo inventory levels for a while. “Should [developers] be forced to sell by their lenders, then there is potential for another large wave of inventory [to flood] the market,” he says.
In other words, don’t expect this recent boom of Miami condo sales to be over just yet.