Quote from Pa(b)st Prime:
A bit of urban myth in that statement. While it's true that Miami is becoming quite overbuilt and also true that a few projects have been postponed, there's been no wholesaling of new condos. The prices in these new buildings (mid 3's for 1bd's, mid 4's on 2bd's) are not particularly expensive. As has been the trend for some time, the buyers are largely Europeans and South American's using cheap dollars.
I live in Ft. Lauderdale and there's much supply of existing hi-rise units on the market. Prices have come in around 10% in the past year. However rents are PUMPED down here. A friend of mine from Chicago is trying to find a 1bd. Under a thou a month in a "good" neighborhood is unheard of and in hi-rises we're talking 1300-1600 a month. In SoBe a nice 1bd can be 2k a month. So although I think prices will still come in a bit, on a p/e basis things here aren't real stretched.
Hello Pabst. We have some relatives in Ft Lauderdale too, beautiful area.
By your own figures, a 1 bdrm sells for $300K, not too expensive (that's not a very nice 1 bedroom btw... on Key Biscayne, a 1 bedroom went for upwards of a million, 5 years ago). What are carrying costs for a $300K, 1 br? Adding in Principle, Interest, Taxes, Insurance (keeping in mind that every time you buy, the former taxes are adjusted upwards, and all our insurances have gone up an average of 60% this year due to hurricanes).
I would guestimate with reasonable accuracy that your monthly payment would be around $2500-$3000 a month at 5% down and a 6% rate (which as an investor, you will not likely get). If it's a condo, this is not factoring in your monthly fee, which in some upscale units can run $1300 a month alone.
So your monthly payment for a newly bought $300K 1 br condo is average $3500 a month, and you want to rent it for $1400, which is considered 'expensive', right?
So out of pocket, for every month you own this condo, you will pay $2100, if it's rented at a relatively high price of $1400. Rented out, in one year, for the priviledge of owning this condo, you will pay $25,200.
When you sell that condo, you have closing costs, doc stamps, recording fees, and probably a 6% real estate commission, plus whatever repairs (renters usually leave some surprises), so off the top, say 8-10% of your 'profit' before closing. Add in a 1 year carrying cost of $25,200.
So at the end of 5 years, you have spent $125,000 out of your pocket, and will face $30,000 in closing costs if the market remains flat... and you sell for that same $300,000 you paid for it.
On the other hand, if you sell for $450,000, you have made a teensy profit.
Compare this to potential stock market losses if the market remains flat. It didn't cost you $150,000 to sit on a $300,000 investment. Which looks cheaper
?
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