How to invest in property in Miami and not die trying

The liquidations have been left only for shopping malls. After nearly three years of value appreciation, it’s not easy to find bargains in South Florida’s real estate market. Although opportunities always exist.

According to the Miami Association of Realtors, an association that brings together 31,000 real estate agents, in January 2014 the number of homes sold rose 9.8 percent compared to January 2013; while in condominiums the increase was 12.9 percent, going from 1,124 sales to 1,269 in January of this year.

This is just a sample of what has been happening in recent years. According to this association, prices have been rising for 26 months for houses, and 31 months for condominiums.

Sun, beach and bricks. Miami’s real estate market presents a large number of options. Photo: Bloomberg.

As Miami’s real estate market continues to strengthen, inventory is also rising. There begins to be a greater balance between buyers and sellers. The average price of the sale of condominiums went from 155,000 to 186,000 dollars in the last year. The average selling price went from $290,378 to $361,000 in the same period.

“Prices will continue to maintain an upward trend in 2014 although the large number of committed projects (pre-construction) constitutes a boost on the supply side that should dampen price growth. It can be a very interesting year to invest given the favorable market outlook,” explains Felix Lopez, president of Saggio Realty.

Something returned to normal on the streets of Miami. They are the cranes and the noises of the engines working, showing gigantographies of luxurious skyscrapers, or modern communities with gardens, homes and shops. A strength that since 2009 and for a couple of years, had disappeared completely.

The inventory of condos for sale grew 20.1 percent in the last year. From 2,790 units to be sold in January 2013, it went to 3,352 twelve months later. This is thanks to the thousands of pre-construction condominiums that are turning to the market, added to the fact that prices have already reached a level more than enough for owners to see that their value has been recovered, and consider that it is a good time to sell.

The average price of the sale of condominiums went from 155,000 to 186,000 dollars in the last year.

“We are seeing a very solid market because more than 50 percent of purchases are made in cash and this greatly eliminates the risk that the market may fall in the future, unlike pre-crisis times where the vast majority of purchases were made with financing,” says López.

A similar vision is cast by Carlos Rosso, President of the Condominium Division of Related Group. “After the crisis, not only the market changed, but also the way of investing and perception. Buyers are stronger,” he says.

The developer is increasingly selling pre-construction or “well” apartments. In this new stage of the real estate market, there is more cash and deposits. “Something interesting that is happening is that, although we are building at a slower pace than before, if before an apartment was sold with a 20 percent deposit, now it is done with up to 80 percent of the unit paid before we finish the building,” he exemplifies.

The real estate market is growing steadily and with a promising future. From the crisis of 2009 to the present day, Miami has rebounded and its development is seen in all areas. From the construction in general, to the installation of good restaurants, hotels and the growth of the cultural offer. For example, with the arrival of Art Basel and the inauguration of the Pérez Art Museum, there is a before and after. “Miami has matured a lot as a city and has become more sophisticated,” summarizes Rosso, adding that “the value per m2 is around U$S 4,000 / 4,500, depending on the area. It is thus a cheap city compared to other cities such as Sao Paulo or Buenos Aires, or even within the US such as New York or Chicago. ”

Up. The prices of the condominiums were remarked in the last time. Photo: Apertura Archive.

From Fortune International, its founder Edgardo De Fortuna says that pre-construction sales are dominating the market. The buyer tends to go for the newest, most technological and creative product.

“The demand for Miami comes from all over the world, including the United States, which is again, very strong. Prices are now above what we had before the crisis, in most Sub Miami markets (Beach, Aventura, Doral). At Fortune we have a wide variety of these types of projects such as Nine Mary Brickell, SLS, 1 Hotel & Residences and Jade Signature,” says De Fortuna.

Fixing a value per square meter is a difficult task. While TheRelated is offering in the market buildings such as BrickellHeights, or Paraiso Bay with panoramic views of Biscayne Bay (here celebrities such as Manu Ginobili or David Guetta acquired their apartment), with a cost of $ 5,000 per meter, Fortune International offers Signature Jade on the sand of SunnyIsles, with values of $ 14,000 per meter and more, which shoots through the sky any possible average.

The same happens in buildings already built. In BalHarbour, resorts like St Regis have units for $15,000 per square foot, CanyonRanch in Miami Beach for $10,000; or Akoya at U$S 7,000.” Taking an average price can be arbitrary. It depends on the location, in the case of being on the beach if it faces the front or the sea, whether or not it allows temporary rent, or in what state the building is, “says Marlis Smith, realtor who works in the sale of used and preconstruction with an important portfolio of Argentine clients. And it shows units listed in standard buildings on the beach at $ 3,000 a meter, such as BurleighHouse or the Seacost of approximately 100 square meters and views of the front or partial to the sea. “You can also get cheaper units away from the sea, even with views of canals or the bay,” he says.

For Smith, the most convenient areas to shop for are north of SunnyIsles. “Hallandale and Hollywood have units on the beach, at lower values than SunnyIsles. It is an area that is being renovated and where large complexes such as Margaritaville and Costa Hollywood are being built,” he says.

From the crisis of 2009 to the present day, Miami has rebounded and its development is seen in all areas.

Elías Perchik, CEO of Remates Miami assures that the values of the properties especially on the beach, have already exceeded and by a large margin, the prices prior to the crisis. “The land on the front line is already scarce and that is the main attribute of the rise. Before the crisis one could buy brand new first-class apartments for $ 11,000 per meter, then in the crisis that same product was at 5000 and now they request from 14,000.Undoubtedly, pre-construction brings us a property with an innovative concept but that is not always the best business, today there are 25,000 units that are preparing to go on the market, ” Explains. For Perchik, there are many more possibilities to do business in used units, and he lists areas with potential such as Bay Harbour, or SingerIsland (Palm Beach).

Jorge Arvelo, president of Arvelo Accouting & Consulting Group, advises his foreign clients who acquire properties in the United States, that before buying they take into account certain potential expenses such as property liens (he indicates that the Government puts a clause in the Property Registry where he has back taxes); taxes on the property (vary by area and type of structure); taxes from the county or city where the property is located; And find out if the previous owner has debt on their maintenance fees, since you have to pay the entire debt when making the transaction.

“There are several legal figures to consider and it depends on many variables. We always ask the purpose, who is involved (if they are family, friends, etc.) if they plan to sell, rent, live it or just for future investment. In addition, it is important to clarify if they want the entity to be created to pay their own tax commitments to the government or if the owners are going to be responsible. The answers to these questions determine the entity that must be created to purchase an apartment. LLCs (LimitedLiability Corporation) are very popular for being simple in their creation and are not expensive, but it must be considered that the members of the entity are required to declare taxes. This is when you can change a decision to create an LLC or a regular corporation, “says Arvelo.

As he says, sometimes it happens to him that he evaluates each case individually and faces the fact that clients come with information that another investor provided them, but it does not necessarily apply to them since each case is different.

Depending on the legal figure with which it is purchased, the taxes that will be paid later when generating an income or a profit on the sale.

“If you rent, earn money and create an LLC, the individual’s tax percentage will be taken into consideration, which varies if they are married, single, with dependents, etc. I could risk saying that it will be less than 12 percent unless the income received is material, which can raise its percentage. Now, if you create a corporation you will pay between 33 to 35 percent of the profit (deducting expenses) but the owners do not pay contributions, “he explains.

In relation to the sale, again there are differences when it is a company that sells or is a natural person. “Normally companies are entities based in the United States and for that reason their retention is less or none. But when it is a non-resident foreigner, financial institutions retain a good amount, which is close to 20 percent,” says Arvelo.

The city of Miami ranks second in real estate sales in the United States and holds the third place as the most populous Dowtown in the country. The main foreign investors today come from Brazil, Venezuela and Argentina. It was the “rich Latin Americans,” as they call them, who helped quickly resurrect the market. And Miami was once again thriving and powerful as it was. Or even more.

Pre-construction options

Brickell Heights: A condominium located in Brickell, composed of two towers designed by David Rockwell, with more than 690 residential units, with office spaces, award-winning restaurants, recreation spaces for adults and children and art spaces. Some units in the first tower are still to be sold. Its cost is around U$S 5,000 per m2.

Paraiso Bay: Two towers, 55 floors and 345 residences of between 1 and 4 bedrooms, all with panoramic views of Biscayne Bay. Designed by the award-winning architectural firm Arquitectonica. Amenities include swimming pools, cabanas, gym, spa, jacuzzi, a party room, private cinema, tennis courts and valet parking and security services. Its cost is around U$S 5,000 per m2.

Hyde Beach: It is an apartment on the beach that can be rented by the day. When the owner goes he has all the services and amenities of the resort (concierge, housekeeping, roomservice… etc) And then, the administration takes care of its rent and maintenance. Its cost is around U$S 6,000 per m2.

Nine at Mary Brickell: Residential towers, 30 units available per floor and will be sold in one, two or three bedroom format, with a size of 70 to 195 square meters. Value of m2: U$S4.500

Jade Signature: In SunnyIsles, it has the design of the Herzog & de Meuron studio Sea views, large terraces. Access to the resort, jacuzzi, swimming pools. Jade Signature offers luxurious facilities for all ages. The spa and water terrace offer unique facilities even for a traditional spa, such as a Turkish bath, stimulating tropical showers, beachfront massage beds, and a yoga platform surrounded by a Zen garden. Value of m2: U$S 13.000.

– What to know:

• The buyer does not pay real estate commission. This is only charged to the seller, and is 6 percent.
• The deed, called closing, has expenses that are around 1 to 2 percent of the value of the transaction.
• When the property is rented, the owner is still responsible for paying the expenses.
• Every property has a real estate tax, which is around 2 percent of the tax value (which is sometimes less than the actual value).