1 Bedroom at Ten Museum Park Sells for $137,000

January 18th, 2010 · 219 Comments

Ten Museum Park

Earlier today I was going through the recently closed sales in the MLS and came across a 1 bedroom at Ten Museum Park that closed for $137,000, or $173 per square foot, on January 11, 2010. This is by far the lowest that a one bedroom has sold for in the building. The previous low was $215,000.

The unit that closed last week is located on the 19th floor and it was a short sale. Interestingly the unit was listed for $312,500 when the offer was made.

Tags: Downtown Miami Condos · Miami lofts · Miami real estate · Ten Museum Park · short-sale

1 Joel Maher /Jan 18, 2010 at 2:43 pm Vote:

is this the beginning of the next round of price drops? Have we worn out the ~170/sq.ft and need to lower it <$140/sq.ft.?
2 Jonsey /Jan 18, 2010 at 3:21 pm Vote:

Is $125 a sq. foot on the way??? SCAREY
3 We've seen this movie already /Jan 18, 2010 at 3:22 pm Vote:

Must be an error.
4 Jonsey /Jan 18, 2010 at 3:37 pm Vote:

It’s a sign of the times.Things will get a LOT WORSE than that.On the other hand….they are getting BETTER for buyers…..only the Speculators are LOSING!!!!!!!
5 Miami Skeptic /Jan 18, 2010 at 4:13 pm Vote:

Interesting find Lucas. Any idea what happened with Met1 in December? There were a few dozen closings on the MLS, but haven’t seen any reports of a bulk sale.
6 Mr Waverly /Jan 18, 2010 at 4:22 pm Vote:

fishy business.
7 F-35 /Jan 18, 2010 at 4:29 pm Vote:

Sweetheart deal, or fraud. Nobody can reliably buy at this price. Non-event.
8 gables /Jan 18, 2010 at 7:47 pm Vote:

F-35, so do we not treat it as a comp? we already ignore short sales and foreclosures. will we continue to ignore low sale prices when comping a property? yet we do include properties which were purchased under mortgage fraud. severe bias in this procedure does not seem to benefit the consumer-only the RE complex-banks, brokers, agents, etc.

while this price does seem low, can anyone seriously believe that 1b units, of which exist thousands in the downtown area, should not drop in price? the asking price of $312k is just absurd-more so than the sale price of $137k.
9 F-35 /Jan 18, 2010 at 8:49 pm Vote:

gables, please find me an unencumbered deal like this, with guaranteed closing. I’ll pay cash. Thanks.
10 Joel Maher /Jan 18, 2010 at 9:36 pm Vote:

gables, yeah I find it interesting that people through out distressed homes for comps when they make up the majority of comps for a given area. That is not the case in all of Miami, but in many neighborhoods it is. The way I look at it is somebody is paying money for a home and even the banks have to lower their foreclosed price to get that buyer. To me that is the market price for that home and it is what people are realistically going to pay in a market like this for a similar home as they could just go down the street and buy another foreclosure instead of the much higher priced non distressed home.

I bet there are many other deals like this out there. You just have to find a motivated buyer and be ready to move ASAP.
11 Wild Bill /Jan 18, 2010 at 9:59 pm Vote:

I’m assuming the sales price reflects that no financing is available for this building. Blacklisted building? Somebody please correct me.
12 Juan Carlo /Jan 18, 2010 at 10:07 pm Vote:

F-35 WHY DON’T YOU CONTACT LUCAS!!!!!!!HE WILL FIND A UNIT FOR YOU…..if you have any money!!!! WHY WOULD YOU ASK GABLES????????
13 gables /Jan 18, 2010 at 10:31 pm Vote:

F-35 if i could find a deal like this i would buy in cash as well. are these deals common and everywhere? no. but they do exist. they are not figaments of yours and my imaginations. you need to be at the right place at the right time and know the right people. this is quite typical of how business operates in miami.

its quite possible neither of us can get this deal because it requires making offers on many short sale properties at low ball bids, and having the time and resources to wait for a positive response. most folks, i included, wont be willing to play that game. hence we miss out on the opportunity. but as can be seen by this and other sales, the opportunities do exist.
14 Juan Carlo /Jan 18, 2010 at 10:37 pm Vote:

There are Deals everywhere….just be prepared to get the HOA’s shoved up your sweet A@#^!!!!!Because thats whats going to happen in 99% of the DEALS.
15 F-35 /Jan 18, 2010 at 10:56 pm Vote:

Juan Carlo, why are you screaming? I can hear you. Lucas seems to find these deals only after they are done and gone. Can you find me a deal like that?
16 F-35 /Jan 18, 2010 at 10:57 pm Vote:

gables, as I understand you can’t find me a deal like that, right?
17 Juan Carlo /Jan 18, 2010 at 11:15 pm Vote:

F-35…..I will find you a similar deal of equal value.NOT at the same location necessarily though.There are 100’s of deals all over .Give me your specs and I will get to work.
18 Mr Waverly /Jan 18, 2010 at 11:27 pm Vote:

Common.. The unit went into contract and closed THIRTY THREE days later? An unapproved short sale? Agent Joel Kruger acted as both the Seller’s and Buyer’s Agent for this sale.
Really,? Looks like Joel closed another nine units in the last six months and acted as Agent for both sides on four of the ten. Another Agent acted as the Selling Agent on two of them. Really,,does anyone think Chase would allow the unit to close at almost $100K less than the last most recent comparable?
Do the math..
19 F-35 /Jan 18, 2010 at 11:44 pm Vote:

Juan Carlo, if you can find unencumbered, clean-titled, waterfront, bay view condo, 12 th floor and above, in a building like Ten Museum Park for under $180/sq ft, or Marquis or Marina Blue for under $220/sq ft, don’t hesitate to alert me. I’ll be reading this blog.
I prefer new construction, 2007 and later. 2 bedrooms is perfect, but 1 and 3 bedrooms I’ll consider as well.
20 F-35 /Jan 18, 2010 at 11:47 pm Vote:

Mr Waverly, good sleuth work. It’s a fraud, there is no other explanation. People would kill for a deal like that.
21 F-35 /Jan 18, 2010 at 11:51 pm Vote:

Juan Carlo, my mistake. Ten Museum and Marina Blue for 180, Marquis and 900Biscane for 220. Sorry ‘about that.
22 DJ /Jan 19, 2010 at 12:09 am Vote:

How anyone could think this “deal” is even remotely legitimate is beyond me.
23 gables /Jan 19, 2010 at 12:31 am Vote:

F-35 i wouldnt even consider looking for a deal like that for you.

DJ, remember this is miami. not many legitimate deals anywhere in this city.

interesting news recently regarding short sales. second lien holders are forcing cash payments under the table to complete the paperwork and allow the short sale. very illegal, and apparently having an effect on some of the big boys like chase. over time these types of “fraudulent” transactions will end up contributing to a fair amount of purchases in mia.
24 F-35 /Jan 19, 2010 at 12:55 am Vote:

gables, no problem, I knew right away you are a clown. No surprise there.
25 gables /Jan 19, 2010 at 1:30 am Vote:

f35, i’ve been a contributor to this blog for a long time. guaranteed to know more about miami condos than you do. my guess is you are a recent arrival, or plan to move to sofla in the near future. recent law grad? because your comments indicate you have absolutely no idea of the way miami works. give it time. you will learn, possibly the hard way. we dont operate the way the rest of america does.
26 F-35 /Jan 19, 2010 at 1:41 am Vote:

gables, take a deep breath and let all of your hot air out. Your puffed up chest is starting to scare me. Your contributions to this blog don’t make it better, let me assure you. I knew you are a clown, now I’m sure of it.
27 Joe /Jan 19, 2010 at 2:47 am Vote:

I think BottomFeederNumeroUno has resurrected himself as F-35. Either that, or the trolls are really coming out in full force in 2010.
28 F-35 /Jan 19, 2010 at 3:09 am Vote:

Huh? gables, did you come back as Joe, only now twice as boneheaded?
29 JL /Jan 19, 2010 at 6:07 am Vote:

“Really,,does anyone think Chase would allow the unit to close at almost $100K less than the last most recent comparable?”

Mr Waverly, it closed so they did allow it… No?

Anyway, on it’s own merits this “deal” is nothing to scream about. $173 sq/ft sounds low BUT the 1 BR’s in Ten Museum unfortunately face North or South and you get no view because to the South is 900 and to the North is Marquis (The north side is much worse as the 2 buildings are practically on top of each other and you also will pick up Express-way noise).

I’d rather try to work a deal at $270 sq/ft with a direct East bay view than a unit like this with no view at $170.

Also, realize Ten Museum is recessed far away from the Bay so you need a direct East view to get a decent water shot.

At $170 sq/ft there’s plenty of competition for Non-waterfront/Non water view.
30 gables /Jan 19, 2010 at 9:34 am Vote:

reinforces the idea that prices are not supported by building alone. ten museum is a nice building (or was designed to be so), but buildings contain a mix of premium and average units. during the boom all units sold as premium. now people are discovering lower units facing a parking garage should not sell for the same price as waterview units. but at $170 it is affordable for an aspiring professional.
31 scrivener /Jan 19, 2010 at 10:24 am Vote:

Juan Carlo raises an interesting, instructive and IMPORTANT point here.

When one finds a “deal” in Miami (whatever that means), one must factor into the “sticker price” the value of uncertainty. The uncertainty is not whether or not the value of the condo will appreciate but the hidden costs (carrying costs, HOA fees, and, my favorite, the “special assessment” (trust me, there ain’t nothin’ special ’bout ‘em)(smile))

Let us be clear on this point: the days of ostensibly “day-trading” condos as if they were securities are over. One of the problems that existing sellers are coming to grips with (the proverbial “Come to Jesus Moment”) is the change in the market: the “day-trading” investors are gone (or the smart ones are) and are being replaced by purchasers seeking value. In a market place filled with too many available units, the majority of which, for a variety of reasons (location, amenities, etc.) have little value to such a purchaser (e.g. my favorite unit in Epic – - the unit just above the street level, faces west, above the bridge’s bell – - look right as you drive over the Brickell Ave bridge heading north: it ain’t hard to miss the balcony located just above the crossing arm and bell).

And, as Juan Carlos correctly, and artfully, points out – - even if such a purchaser finds a deal, they are going to be railroaded by the hidden costs which not only increase transaction costs but may also kill the deal.

scriv
32 Brody /Jan 19, 2010 at 10:35 am Vote:

The more people living in Downtown, and Brickell, the better!
33 Drew /Jan 19, 2010 at 10:53 am Vote:

Completely off-topic, but worthy of discussion due to the appaling nature of the story:

http://www.miamiherald.com/460/story/1432778.html

1. Since when is a fire station only open during normal business hours? If Walgreens is open 24/7, 365, I would think that the Key Biscayne fire station could match that.

2. EMT’s from South Miami to an accident on Rickenbacker? How efficient.

3. Suspect is DUI at 8am. Surely another Club Space deal….

4. Suspect (punk Venezuelan national) has over 40 traffic citations. Obviously no regard for US driving laws and no concience by failure to stop and help. This guy should be locked up for at least 20 years.
34 scrivener /Jan 19, 2010 at 11:03 am Vote:

Drew:

Wow! Wow!

The immigration consequences of this – - if PROPERLY handled by the local LEOs – - could be enormous. Hopefully the local LEOs will not settle for less than the maximum.

This story shocks the senses – - though honestly, it ain’t surprising.

scriv
35 Drew /Jan 19, 2010 at 11:33 am Vote:

Not very familiar with immigration law but what is the scenario if the suspect is deported after conviction?
If he’s convicted of DUI manslaughter, vehicular homicide, whatever, then shouldn’t he be imprisoned in the US?
If he’s deported, will there be any punishment in Venezuela?
What’s the purpose of such a conviction if there’s no US imprisonment?
What’s to stop Venezuela from disregarding the US conviction?

Very curious.
36 scrivener /Jan 19, 2010 at 11:58 am Vote:

Drew:

It all comes down to the conviction. If the crime for which he is convicted qualifies as an “aggravated felony” for purposes of immigration law (see, e.g. http://www.nilc.org/immlawpolicy/removcrim/removcrim026.htm) then the individual could be looking at being removed (the new term for “deported”). I believe murder and homicide are enumerated crimes under the definition of “aggravated felony.” However, as I have seen in other cases, if the prosecutor backs the charge down to a lesser crime, it may not meet the requirements of an aggravated felony under immigration law. Granted this will require a hearing before an immigration judge – -known as removal proceedings.

But I believe that this will not occur until after the individual serves their sentence.

Punishment in Venezuela? Certainly not. I doubt that any conviction in the US will have any weight or effect in Venezuela — why would they care.

BUT there is a hidden consequence/(BONUS POINTS!): the individual could be barred from EVER entering the US in the future. (Ok, and in this case, he would have to go back to Venezuela which some could argue is punishment, in-and-of-itself. (smile))

If I recall correctly, conviction of an aggravated felony is an enumerated statutory ground under which the individual could be denied admission. Given that this individual is a rising musician – - I’d say this is a huge problem for him. Granted there are ways for musicians, artists, etc. to get in the US under special visas – - conviction of an aggravated felony would probably preclude him from ever entering the US – - as an individual, artists, refugee, asylee…whatever. As Billy Joel once sang: “Say goodbye to Hollywood.”

scriv
37 Drew /Jan 19, 2010 at 12:09 pm Vote:

Great insight, Scriv. Thanks.

Its truly remarkable (and scary) that one’s life can be so significantly altered (destroyed) in the matter of seconds based on a bad decison. Apparently this guy had some promise as a recording artist, and he effectively flushed it all away, forever.
38 scrivener /Jan 19, 2010 at 12:15 pm Vote:

“….one’s life can be so significantly altered (destroyed) in the matter of seconds based on a bad decision.” – -Drew

Words to live by my friend. Words to live by.

scriv
39 AJ /Jan 19, 2010 at 12:25 pm Vote:

Finally a topic worth jumping in while on vacation.

JL #29 absolutely spot on. This deal is not a big deal at all (coming from a housing bull like me!).

First of all, TMP is a lousy building. Have you seen the grounds? The HOA is a wretch and the building’s finances are iffy. So a non water view flat in that building selling for $173/sf is no biggie. You have thousands (about 7000) non water view flats in Greater Downtown Miami looking for a buyer.
On the other hand, as JL said, if a direct East view goes on sale for $270/sf (sub $300), then that will make news.
It just goes to say that same building, same neighborhood etc will not produce uniform prices. The prices are very very custom made. You can probably find $150/sf and $300/sf coexisting in the same building or adjacent buildings. It all depends on the unit.

As far as gables is concerned, he is no clown. gables has been a consistantly sane voice on this blog for a long time.
40 Wild Bill /Jan 19, 2010 at 12:29 pm Vote:

One’s life can be flushed away by purchasing a Miami condominium.
41 SouthBeacher /Jan 19, 2010 at 1:07 pm Vote:

Why do people pay a premium for 900 Biscayne over Ten Museum? 900 seems way more generic. Like the loft style of Ten Museum. Is 900 Biscayne ‘Designer Ready’ also?
42 Wild Bill /Jan 19, 2010 at 1:33 pm Vote:

I’m going to laugh at the people that claim this is no big deal. When their buildings units start selling under $200,000 they will also claim it’s no big deal.
They will secretly be calling a real estate agent trying desperately to get out of their own units with a short sale.

What is the unit number of particular post?
43 Angel /Jan 19, 2010 at 4:20 pm Vote:

SouthBeacher #40… 900 is a designer ready building. With that being said the quality off 900 far surpasses that of TMP. Keep in mind that TMP is more of a boutique building in that it is made up of all lofts, while 900 is comprised of more tradionally designed units. I may be a bit biased in my review since i live at 900 but i have friends that live at TMP and the buildings are worlds apart in terms of fit and finish.
44 Joe /Jan 19, 2010 at 5:19 pm Vote:

Another bang-up job by the Herald. Is this clown in jail, or immigration detention, or what? The story just says he has an “immigration hold” on him, but does that mean he’s being held pending trial? I sure hope so. This jerk sounds like the type who’ll skip out on the trial and head to Mexico or the D.R. or some other place with lax law enforcement.
45 Kramer /Jan 19, 2010 at 5:28 pm Vote:

Yup – Ten Museum is the building that for the past 6 monts or more has been pimping out their backside garage wall with huge Calvin Klein Ads and the like. You have to know the HOA is in deep trouble. Too bad – nice building but possibly in a free fall like One Miami.
46 Kramer /Jan 19, 2010 at 5:44 pm Vote:

BTW – If convicted – You serve your time here and then are deported back to your homeland country. Just like the Marielito criminals were and Panama’s ex – El Presidente Manuel Noreiga.
47 Annamaria Capicchioni /Jan 19, 2010 at 5:47 pm Vote:

OK 137.000 $ declared how about under the table?
48 southbeachsand /Jan 19, 2010 at 6:46 pm Vote:

HOA doesn’t own that wall with the Ads. The commercial space does. It would actually be huge if the HOA could earn the money off that Ad space.

The building does look unfinished and unkept from the outside. I’m sure the loons hanging out at the BP station are entertaining though.
49 Lara /Jan 19, 2010 at 7:16 pm Vote:

All 1 bd in TMP have water views. Not direct ones but all of them have nice water views. TMP was supposed to be a great building but because of the torubled market a lot of owners do not pay HOA I guess. $137,000 is a dramatic fall from original prices. Seems like 30c/$1.00.

Just returned from Belgium. Beautiful civilized european country. In big trouble though coused by demographic changes and financial crisis as well. Every 4th person in Brussels lives below poverty level and unemployed. It is scary. Wealthy people are taxed at 80% which tells me that it does not make any sense to even become wealthy.

IT does have a lot of social services: healthcare, higher education, great public transportation. But as you can see everything has its price.

Re prices are in the range of 300,000- 500,000 euros on 2-3 bd townhouses in relatively decent areas.

As you can see though crisis is everywhere in Western world.
50 jcrimes /Jan 19, 2010 at 9:22 pm Vote:

not sure why some folks are screaming fraud on this deal. perhaps the purchaser had someone on the inside at the bank to get the deal done. perhaps a bit shady…but not fraud. i do remember at the peak, the cheapest 1 bdrm unit was priced in the low 400s…now that was insane. i echo the earlier sentiment – the 1bdrms at TMP are entirely underwhelming (the shower setup still kills me). the 1900sq ft units directly facing the bay are the only units worthy of being called a Baird man.
51 Mr Waverly /Jan 19, 2010 at 10:53 pm Vote:

Yes, Chase allowed the sale but was it clean and why did they allow it? Big Banks Accused of Short Sale Fraud – CNBC
http://www.cnbc.com/id/34877347?source=patrick.net
52 JL /Jan 20, 2010 at 12:46 am Vote:

The 1BR’s in Ten Museum Park either have a bad view or an atrocious view. There is no way to spin the 1BR’s as having a waterview or being waterfront. You would be living in a 1BR in a high rise that is 3 blocks + a 6 lane street away from the Bay where the view directly in front of you would be 900 just 1 block away (if you faced South) or Marquis 1/4 block away (if your unit faced North).

Paste this link as-is in your browser to see what I mean. Do not add “www” ( static.panoramio.com/photos/original/22072608.jpg )

The pic is taken from the Marquis Condo looking South. The immediate building in front is the North face of Ten Museum and the building in the background is 900. You have a 6 lane street to the East (left) + 3 blocks of land then the Bay.

The North facing Ten Museum 1BRs in the picture would all be in 1 column smack in the middle of the building structure looking smack at the side of Marquis.

This is not waterview unless the water you are talking about is the Marquis Pool. The South facing 1BR’s would be more palatable but still not desirable. $173 sq/ft is not a deal for this IMO.
53 scrivener /Jan 20, 2010 at 2:31 am Vote:

“There is no way to spin the 1BR’s as having a water view or being waterfront. ” – - JL

BRILLIANT!

If it walks like a duck and talks like a duck….it ain’t an elephant.

scriv
54 scrivener /Jan 20, 2010 at 8:29 am Vote:

Mr Waverly:

Great find! Thanks for the terrific link!

The seeds of fraud in the mortgage industry. Say it ain’t so. (wink)

scriv
55 gables /Jan 20, 2010 at 9:19 am Vote:

scriv and waverly,
thanks for the link. i had mentioned this in a previous post, but did not have the link to share with everybody. the arena of short sales will get quite interesting this year. many units are now going into their third year with owners underwater and not much of a future. the short sale leading to foreclosure very well could go into high gear in 2010. many units will have $700 HOA + $$700 taxes + $1800 mortgage = $3200 a month of carrying cost, or nearly $40k a year in cost. After two years this is $80k, and going into year three the units will have wrought over $100k in losses. Even well heeled folks will seriously reconsider an investment which has cost them $100k. Very hard to return to black with these kinds of losses and no relief in sight (tax, hoa, and mortgage will not change with the market-these are relatively fixed costs). year 2010 will be interesting.
56 scrivener /Jan 20, 2010 at 9:27 am Vote:

“year 2010 will be interesting.” – - gables

Indeed my friend. And I think that “interesting” may be an “understatement.”

scriv
57 scrivener /Jan 20, 2010 at 10:34 am Vote:

Ok, here is a topic for discussion. Think of it this way: Par 5, 645 yeards. You have to carry the first 160. The catch, you lie 220 out and in a sand trap. The green is protected by bunkers on the right and water on the left (much like the 18th at Doral or TPC at Herron Bay, as I recall)

Question: Gables has astutely noted that the fixed costs (tax, hoa, mortgage, etc.) associated with real estate transactions in newly constructed developments will not change, even in a market that is deteriorating by the second.

Fine. Here’s the challenge: How should the deal be structured?

Pick your side. (Buyer, seller, both)

Pick your entity: individual, business entity (Be specific (Partnership, C-corp, S-corp, LLC, LLP, FLP, trust) – - bonus may be awarded for originality, creativity – - but remember, substance always prevails over form. Gregory v. Helvering, 293 U.S. 465 (1935))

Who takes the hit/gets the hair cut/eats crow. How? Why?

A rule of engagement here: We’ve all read the great article posted by Mr. Waverly. (If you have not; Why not?!?) Fraud is NOT a playable lie.

Ok? ¿estás listo?

GO!

scriv
58 DJ /Jan 20, 2010 at 10:34 am Vote:

The fact that this short sale closed after three days is very suspect. I closed on a short sale in Auguest, also with Chase, and even though I was paying cash, they weren’t taking too major of a haircut, and recent comps supported the offer price, it still took them four months to approve it .

Also with regard to the article that Mr. Waverly posted in #50, this is exactly what happened in my case. Chase Bank was the holder of both the primary mortgage and second mortgage (HELOC). We got the approval on the first mortgage after about three months and then the person negotiating for the second started demanding cash from me. I told him (through the realtor) to go fuck himself, so he ended up getting the seller to pony up an additional $16k cash. This was not on the HUD.
59 scrivener /Jan 20, 2010 at 10:57 am Vote:

DJ:

Good call on your part – - this was exactly the time when the “BS Penalty” flag needed to be thrown.

However, I think – - just spit balling here – -the problem you ran into was that the second “mortgage” here was a HELOC (Home Equity Line of Credit) rather than a mortgage. The difference is substantial – - higher risk, interest is charged daily rather than monthly, etc. The person negotiating it – - no surprise – -did not want to take a hair cut on the outstanding line of credit. (See, e.g., http://www.mtgprofessor.com/a%20-%20second%20mortgages/what_is_a_heloc.htm)

scriv
60 scrivener /Jan 20, 2010 at 11:08 am Vote:

“HELOCs In the Financial Crisis

The financial crisis that erupted in late 2007 revealed another risk in HELOCs, which is that the lender has the right to cut an unused credit line. With property values declining during the crisis, many lenders did this, with the result that the borrowers found that they did not have the loan commitment they thought they had.

On the other hand, the crisis also saw a marked decline in the prime rate to which HELOC rates are tied. In the first 6 months of 2009, borrowers with a margin of zero were paying the prime rate of 3.25% on their HELOC balances. Those with negative margins, negotiated during pre-crisis years when prime was higher, were paying even less. The temptation to convert other mortgages to HELOCs, however, was tempered by the knowledge that the advantage could be transformed into a disadvantage very quickly if market rates suddenly rose. See Take a Flyer With a HELOC?”

Taken from: http://www.mtgprofessor.com/a%20-%20second%20mortgages/what_is_a_heloc.htm

See also, http://www.mtgprofessor.com/a%20-%20second%20mortgages/take_a_flyer_with_a_heloc.htm

scriv
61 AJ /Jan 20, 2010 at 11:12 am Vote:

I consider this purchase just a bargain, not a steal. If I could explain;

My general rule of thumb for a building that is in at least semi decent financial condition, not a foreclosure pit and decent amenities (The Club at Brickell and similar do not qualify) is :

For non water view or partial water view flats:

Less than $125 : A Steal
$125-$175: A bargain
$175 – $225: Ok to buy to live in if you really like the flat
$225+ : It better be outstanding

For direct water view flats:

Less than $250: A steal
$250-$325: A bargain
$325-$400: Ok to buy to live in if you really like the flat
$400+ : It better be outstanding and in buildings like Paramount or Marquis
62 gables /Jan 20, 2010 at 11:32 am Vote:

AJ, agree with your non water views. my feeling has been anything under $200 should be considered. Bottom floors under $150, and upper floors floating perhaps slightly above $200. This price range is reasonably affordable (around $200k for a typical 2B) which would be of interest for younger professionals, not the wealthy (who want water view anyway). From a risk perspective, i make the assumption that nice 2B units will definately not fall to $100k, and most likely not below $150k. These prices then seem reasonably safe for a buyer like myself. Even if I lost $50k in appreciation over a period of time, i minimize the loss since the purchase price would be less than rental over that time period. ballpark.

Not even considering water views since they are mostly out of my price range. At $300 sf, coupled with hoa and taxes, this is above what I want to spend on housing per month.
63 DJ /Jan 20, 2010 at 11:36 am Vote:

Scriv, all that may be true, but the fact is what they did (at least according to that article), by demanding and accepting cash under the table to release the debt, was fraudulent. Remember, this extra cash was not reflected on the HUD. In any case, they were a junior loan so they would have been wiped out anyway if the property had gone into foreclosure. Also, my offer was structured in such a way that they were already getting $10k out of the sale price, which was reflected on the HUD.

This is the banking industry we’re talking about here, so I guess this should all be expected.
64 gables /Jan 20, 2010 at 11:36 am Vote:

DJ, that behavior is exactly why 2010 will be so weird. RE will not play by the same rules typical in the business world. there will be alot of shady back room activity. holding up a short sale for concessions under the table is not legal, but very difficult to enforce the laws in these situations. will make it hard for banks to move all of this stalled real estate-or force them to take over in foreclosure. and as we have seen the banks are very reluctant to go this route unless absolutely necessary.
65 Gixxer 1000 /Jan 20, 2010 at 12:42 pm Vote:

I would like to point out that maybe this condo does have a horrible view or something else wrong with it because it always sold less than similar 1 bedrooms.

It originally sold for $315k on 12/07. Unit 4205 (another 1 bedroom with the same square footage) sold for $395k the same month, 12/07. It was later sold 06/09 for $235k. That’s a loss of $160k. Since this unit was purchased at $315k and sold for $137k the loss was about $178k. Also unit 4105 was purchased in 09/07 for $375 and sold in 11/09 for $215 at a loss of $160 as well.

So when it was originally purchased it sold for $80k less than a similar unit the same month and now when its sold again, it sold for $98 less than that same unit.
66 scrivener /Jan 20, 2010 at 1:15 pm Vote:

$395k?!?!?! Man, what were they smoking?

What is interesting in all the transactions listed by Gixxer is the similarity – - near uniformity – - in the losses taken. Coincidence? Conspiracy?

Things that make you go….hmmmm.

scriv
67 computer consultant /Jan 20, 2010 at 1:32 pm Vote:

$8 mil in assets and no mortgage

http://money.cnn.com/2010/01/20/real_estate/mortgage_woes_for_wealthy/
68 scrivener /Jan 20, 2010 at 1:52 pm Vote:

“Still, that people with high six-figure incomes, stellar credit histories and gobs of assets get mortgage requests turned down seems weird.” (http://money.cnn.com/2010/01/20/real_estate/mortgage_woes_for_wealthy/)

Not really.

The banks are unwilling to accept the risk and, let’s face it, thanks to the pin-head investors who purchased too much fully-leveraged real estate – - the banks won’t take the losses this time around. I think the theme is: fool us once, shame on us. Try to fool us twice, shame on you.

To quote the Who: “…we won’t be fooled again.”

scriv
69 Wild Bill /Jan 20, 2010 at 2:04 pm Vote:

1800 Club will be joining the $100,000 plus price discounts soon.

Akoya just had a jumper. Murder-suicide.
70 Gixxer 1000 /Jan 20, 2010 at 2:11 pm Vote:

The problem seems the be the property and not the wealth, credit or assets of the individual.

Look at it this way. Would you knowingly lend someone $1M on an asset that you know is probably worth $500k even if you knew the person had the income and assets to cover the loss. Probably not. There is a reason they want 50% down on a $1M property because they know that’s probably what its worth.

The luxury market hasn’t taken a haircut and is still overvalued. If these same people wanted to buy houses that have been reduced to $200k there wouldn’t be any problem.
71 Juan /Jan 20, 2010 at 2:21 pm Vote:

Wild Bill, I heard someone jumped off Tequesta 2 on Saturday also
72 DJ /Jan 20, 2010 at 2:22 pm Vote:

Schiv, or this…

http://politicalhumor.about.com/od/bushvideos/youtube/bushfoolme.htm
73 scrivener /Jan 20, 2010 at 4:18 pm Vote:

DJ: Come on man! I wasn’t even going to go to there-s-ville.

scriv
74 Joe /Jan 20, 2010 at 4:43 pm Vote:

Gixxer 1000 — If the luxury market is even remotely overpriced to the tune of the 50% you used as your example in post #68, then how can you be so bullish on the under-$500k segment, as you are in the other thread? It’s borderline impossible for one market segment to be massively overvalued while other segments have reached their floor, especially in a relatively condensed market like Miami, where 90% of the new r.e. is located in a few areas/corridors.
75 JL /Jan 20, 2010 at 5:36 pm Vote:

I could see the Jumbo+ market having another 30% down while the regular conforming loan market maybe another 10% down… with the caveat you may be able to get much better outlier deals on a foreclosure/short sale.

It’s just really tough to get a loan on a $1mill property so unless the loans get significantly eased at the high end, prices need to drop steeply. Asking a qualified buyer to put down $200k on a $1mill property is one thing, but asking them to put down $300-$400K is a totally different animal. It just ain’t going to happen. So what’s going to have to happen is that $1mill property will have to drop to $700K so a 30% down would be $210K (or roughly the same as 20% on a million).

For a “qualified” jumbo buyer, +/- $1,000 on monthly payments is not a big deal (ie. +/- an S550 lease) but what is an extremely big deal is having to put down $200K versus $300 or $400K.

Higher end house prices need to get reset if downpayment requirements stay at 30%+… $700K will be the new $1million in the jumbo market.
76 Kramer /Jan 20, 2010 at 7:31 pm Vote:

Has everyone seen the 5000 Sq ft penthouse at Star Lofts for $210. per sq ft. posted on the CONDO DEALS page.
77 gables /Jan 20, 2010 at 8:13 pm Vote:

JL, the jumbo market is getting killed because it is a move up market. That cash would be available if one could sell there existing home. but they cannot sell. thus no cash for the down payment. this is a big reason why lower priced units sell but luxury units dont. not many first time buyers can buy directly into a luxury unit. if you have that cash on hand you probably were not a first time buyer to begin with!
78 JL /Jan 20, 2010 at 8:34 pm Vote:

Effect of mortgage rates on the housing market gets all the attention, but interest rate concerns are way down the list in the Jumbo market.

5% vs 6% vs 7% on a 30 yr jumbo is almost a non-issue. The real elephant in the room is if you have to put down 20% or 30% or 40% + to get the loan.
79 Not A Deal /Jan 20, 2010 at 9:54 pm Vote:

This is not a good deal. Here’s why:

- TMP is valet-only.
- The 1 bedrooms are a joke, and as jcrimes noted, the shower design is a joke (imagine floor-to-ceiling windows and a glass-walled shower separating you from neighbors one block away).
- No water view to speak of.
- Ridiculously high HOA fees.
- Location next to a gas station.
- This unit is vastly inferior to 1 BR bulk sales at Marina Blue (MB is a superior building and bulk sale 1 bedrooms went for approx. $187 about a year ago… the current market is worse).

Bottom line: the lender was smart to get out quick and avoid horrific carrying costs.
80 Not A Deal /Jan 20, 2010 at 9:55 pm Vote:

Distance to neighbors is less than a block… just one narrow street over.
81 DML /Jan 20, 2010 at 10:12 pm Vote:

Lucas:
I just saw your news alert about the Ten Museum Park unit selling for $173 psf. Very interesting development! I notice that there are 48 active listings for Ten Museum out of 200 units. That’s 24% of the building for sale (mostly re-sales?). Any ideas on why so many are heading for the door?
Thanks,
DML
82 Mr Waverly /Jan 20, 2010 at 11:11 pm Vote:

DML … That’s because most were investors. Developers and their sales teams were a bunch of liars when the question was possed ” who was buying these buildings”. Most including Whore Perez stated the majority of buyers were end users and that they were very careful not to allow to many investor buyers.
83 DML /Jan 20, 2010 at 11:48 pm Vote:

Mr Waverly

RE: Ten Museum Park

I’m not sure that your reasoning stacks up. My question is “any ideas on why so many are heading for the door?” Your answer is “That’s because most were investors.” If many of the owners are investors and a high percentage of these investors are the ones selling, then at the time they purchased from the developer, why would these investors ever even ask the question “who was buying”? They didn’t have any interest understanding what the unit owner profile looked like.

There has to be reasons for the mass exodus by these investors. Any other ideas? Anyone else have any ideas?

Thanks,

DML
84 Joe /Jan 21, 2010 at 2:41 am Vote:

“There has to be reasons for the mass exodus by these investors. Any other ideas? Anyone else have any ideas?” — DML

Yeah, they’re investors. They bought units during pre-construction when they thought they could flip the units at a profit, and now they’re trying to get the hell out before they lose even more money than they’ve lost already (taxes, HOA, lost interest income, etc., etc.). The same is true in many, many Miami condo buildings right now.
85 Paul /Jan 21, 2010 at 6:30 am Vote:

DML. What is it about “investors” that you don’t believe? I can tell you the same thing happened in Vancouver BC many years ago. The condo market started booming in downtown Vancouver, as Hong Kong developers built upscale buildings on vacant land from the old EXPO site. Prices went up and up… fueled by speculators and slick salesmen (the slickest being the developers themselves). We bought a condo on spec… when the building was just a hole in the ground. Shortly after construction – boom – the bottom fell out of the market. You couldn’t give a condo away. We took a $150,000 loss on ours. The good news? The condo market eventually came back and prices are higher than ever. They are way overpriced in my opinion and another correction is around the corner (maybe after the Olympics). But the point is, these boom and bust times seem to have a cyclical nature to them. I don’t doubt Miami will see good days again. The question is how many years will the recovery take? It won’t happen overnight. I love Miami. I’d like to move there one day. The action, the excitment, the weather, the women. My God in heaven… the women! I had a business meeting downtown and almost got whiplash! You lucky bastards. Great website and comments. I’m learning a lot. Some folks commenting here really seem to know their stuff.
86 scrivener /Jan 21, 2010 at 8:42 am Vote:

“Prices went up and up… fueled by speculators and slick salesmen (the slickest being the developers themselves). ” — Paul

Ain’t it funny. In the securities world, this kind of activity would be called a “pump and dump” and the investors would be prosecuted and face incarceration, fines and banned from the industry.

I agree that there were a lot of “slick salesmen” – - I dealt with several of them. Let’s be honest though, the majority of them were “pretenders” – - incompetent, unqualified idiots who were just along for the ride.

Historically speaking, I have been told that a similar pattern occurred in Miami during the 1980’s. (Can anyone verify and comment?) The difference between that housing boom/bubble/ponzi scam was that when the market cooled, I am told, the developers got stuck with unsold properties, which they had to unload at a substantial loss. This time around the developers showed they learned their lesson: they structured the sales transactions so that the banks got stuck without a chair when the music stopped.

What intrigues me is how these developments will get sorted out by the free market. I agree that the unit prices are horribly artificially over inflated – - by the developers, the investors and the flippers. The only reason why they remain so today is the owners ignorance and financial dire straits. I would also note that a true “investor” would have dumped their property – - loss or not. Unfortunately, the majority of these “investors”, to use a securities term, are “unsophisticated investors” and therefore were not competent, qualified, or experienced enough to watch the market for signs that it was time to “cut and run.”

But, to quote Obama, “those days are over.”

Now the free market economy will finally be setting the fair market value of these condo units. Some of these so-called “luxury” buildings (and yep, that’s sarcasm!) are going to get hammered/lambasted because, for example, they are in the wrong neighborhood; they don’t have on site parking (I believe there is one building downtown like that – - the developer was negotiating with a neighboring office building…am I correct?); the units are in a truly dumb place (like above a bridge’s warning bell – - e.g. Epic); etc.

I eagerly await the crying, howling, and hair pulling that will occur when, for example, owners in Condo X or Condo Y on Brickell Avenue find out that their $300k one-bedroom (for example) is really worth, at most, $100K.

Bring on the pain!!!!!!!!!!!!

scriv
87 Drew /Jan 21, 2010 at 9:29 am Vote:

Scriv:

“Those who cannot remember the past are condemned to repeat it.” – George Santayana

http://www.nytimes.com/1982/03/07/realestate/miami-market-readjusts-as-surge-in-buying-ends.html?&pagewanted=all
88 scrivener /Jan 21, 2010 at 9:35 am Vote:

In other news, FOLKS, the real estate value of the White House (yes, 1600 Penn Ave) has fallen 5.1%.

See: http://www.zillow.com/blog/one-year-into-obama-presidency-what-is-the-white-house-worth-now/2010/01/20/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ZillowBlog+%28Zillow+Blog%29

scriv
89 scrivener /Jan 21, 2010 at 9:38 am Vote:

See also http://www.businessinsider.com/value-of-the-white-house-has-fallen-51-since-obama-took-office-2010-1

5.1% decline since Obama’s election.

So I guess we have another example of the adverse impact of investor speculation on real estate values? (wink)

scriv
90 Miami Skeptic /Jan 21, 2010 at 10:06 am Vote:

“There has to be reasons for the mass exodus by these investors. Any other ideas? Anyone else have any ideas?”

DML if you have to ask this question, you should stay far far away from Miami real estate for awhile.
91 DML /Jan 21, 2010 at 11:54 am Vote:

Thanks Miami Skeptic.

I know it appears that I am asking questions as if I am uninformed but I am really asking the questions to generate a valuable and informative discussion. That is the purpose of these comments.

Again, why is almost 25% of Ten Museum Park for sale? Let’s look at a comparison (although not an exact comparison). Look at Brickell on the River North. This is a new building, lot’s of investors bought early, lots of owner/rentals, etc. But nowhere near 25% of the building is for sale.

If some of the units at Ten Museum Park end up being “re-priced” at around $173 psf, this is a significant adjustment in the market. Maybe this is a good sign for potential investors?

Is something wrong with the building? The location is excellent, but maybe the building has big problems. Any thoughts?

DML
92 scrivener /Jan 21, 2010 at 11:55 am Vote:

“There has to be reasons for the mass exodus by these investors. Any other ideas? Anyone else have any ideas?”

Here are some:

1. Just like at a closed brothel: The ride is over.

2. The hedge funds that fueled the demand for mortgage-backed securities which built the housing boom’s real estate developments have folded because the securities produced massive losses.

3. The Banks are not giving out “free money” any more.

4. Developers have run out of credibility with lenders.

5. Bankruptcy and foreclosure are no longer “unrealistic” risks as investors previously thought.

6. Not that many people are truly interested in moving to Florida, a state whose tourism and service-based economy is in shambles.

7. Federal law enforcement agencies are actively investigating ponzi and pyramid schemes similar to those that built many of the condo developments. (Sorry, was that too sarcastic?)

scriv
93 scrivener /Jan 21, 2010 at 12:05 pm Vote:

8. Bernie Madoff is in prison.

9. Alan Stanford is in prison.

scriv
94 DML /Jan 21, 2010 at 12:15 pm Vote:

Thanks scrivener.

Although your answers are more general in nature, I agree with you that the current market conditions are a result of the points that you mentioned. They are the reasons for the overall U.S. housing crash. My question specifically concerns Ten Museum Park.

Let me ask the question another way. Show me another building similar to Ten Museum Park that was completely sold out and now 25% of the building is re-sale in an excellent location?

Thanks,

DML

P.S. I do disagree with you when you state that no one wants to move to Florida. If you lived in a horribly cold and gray climate for as long as I have, then you will really appreciate Miami. I am sure others agree.
95 Lara /Jan 21, 2010 at 12:35 pm Vote:

DML,

You are right TMP was sold out. The prices were very high. Developer built it up at the beginning of the crash. One of the first buildings. Some people closed, some investors lost their deposits and did not close. Since it was at the very beginning developer managed to sell these not closed units at a significant discount but still at very high prices if we look back from where we are now.

Why 25% of apartments on sale? They are not cashflowing. So if you rent it you have to add significant amount of money every month. The building looks like run down which means that management is in big trouble. They promised spa and a social club/high end restaurant. As far as I know none have been implemented.
96 Drew /Jan 21, 2010 at 12:45 pm Vote:

DML
Your assertion that TMP is “in an excellent location” is wrong. The location sucks. A condo’s location must at least be walkable to be satisfactory, let alone excellent. TMP is in no-man’s-land. But you can walk to a crappy BP gas station overrun with panhandlers, crack addicts and other nefarious characters.

Personally I think it is failing b/c that schmuck nightclub-turned-condo promoter Michael Capponi was probably unable to deliver on his promise of special VIP access to the hottest clubs all over the globe for TMP residents. And that is not a joke. But it is another example of the irrationality of the market a few years ago.
97 Gixxer 1000 /Jan 21, 2010 at 12:46 pm Vote:

For once I’m going to agree with Joe here.

191 of these units were bought in ‘07 and ‘08 at an average of $456 sqft. Since then only 15 in ‘09 at an average of $290 Considering most investors are positioned for a short return and not a long one,when when prices fall, most look for the exit.

DML

Why do you consider TMP such an excellent location? Lets use your example of Brickell on the River North. Would you want a 1 bdrm with no water views at the north end of downtown or a 1 bdrm with river views in Brickell at a lower price.

Then add to the fact that most of Brickell on River North was mainly purchased in ‘06 at an average of $368 and has already begun to adjust downward (35 sales in ‘09 at an average of $195). As Lara has mentioned the lower pricing means the investors aren’t hurting as bad as the ones at TMP.

Can anyone describe the set up of this Clinique spa. Is it up and running? Are the services free to residents, does it sell services to the public, etc. It seems odd to have a 25,000 sqft spa with 8! POOLS in a building with an HOA in terrible shape. Especially when the building only has 20,000 sqft of office space. Thanks.
98 Renter Tom /Jan 21, 2010 at 12:47 pm Vote:

I think I will coin a new phrase….. to be “Trumped” is to have overpaid for an overhyped condo or condo-hotel and lost a lot of money on it, see also bad investment, underwater and over-leveraged, and I was a sucker . As in “Rex Goldsborough got Trumped on his Chicago condo” or “The condo market has crashed, however you still need to exercise caution so you don’t get Trumped.” or “There are a lot of people who got Trumped in Ten Museum Park and have put their units on the market.” or “I’m renting until the market bottoms since I don’t want to get Trumped and eat cat food when I get old.”

It isn’t just in Miami, but Miami condo sales at a loss by celebs don’t make the newspaper as much down here…..

Rex Grossman takes a loss on Trump Tower condo
Topics

By Bob Goldsborough
Special to the Tribune
8:05 a.m. CST, January 21, 2010

Former Chicago Bears quarterback Rex Grossman has taken a major loss on the sale of his 36th-floor condominium unit in Chicago’s Trump International Hotel & Tower, unloading it for $2 million.

Now calling plays for the Houston Texans, Grossman, 29, closed on the sale of the 3,437-square-foot unit on Wednesday. The buyer is not yet identified in public records.

Grossman purchased the two-bedroom Trump unit in September 2008 for $2.681 million. Less than a year later, after the Bears informed him that he was not in their plans for the 2009 season, Grossman signed with the Texans and then placed the unit on the market for $2.349 million. He later reduced its asking price to 2.295 million. Features in the unit include Snaidero cabinetry, upgraded appliances, his-and-hers baths, hardwood floors and two parking spaces.

Grossman continues to own a three-bedroom town home in Lake Forest, which he currently has on the market for $849,000.
99 Renter Tom /Jan 21, 2010 at 12:48 pm Vote:

oppps meant Rex Grossman got Trumped….
100 Miami Skeptic /Jan 21, 2010 at 12:48 pm Vote:

DML

All of the individual buildings are in a slightly different position depending on when they opened, how many units closed initially etc. Basically just depends on timing and on their history.

Some buildings “sold out” but had few closings so the developers were able to pawn units off on bulk buyers and other vulture investors (see 50 Biscayne). Other developers stuck with units decided to try renting them out (see Icon). Maybe TMP was able to get more closings than some of the other buildings but now the bagholders are all trying to bail at once?

Also note that many developer units don’t appear on the MLS, part of the mythical shadow inventory you hear about, so some buildings are grossly underrepresented. Everglades on the Bay, Icon and others each have many hundreds of units left but show little evidence of this on the MLS. A building with mostly individually owned units for sale is obviously more likely to have them all listed on the MLS, so this might be the case with TMP as well.
101 Renter Tom /Jan 21, 2010 at 1:16 pm Vote:

*** A MUST READ! ***

http://money.cnn.com/2010/01/20/real_estate/mortgage_woes_for_wealthy/index.htm

“$8 million in assets – and can’t get a mortgage”

“NEW YORK (CNNMoney.com) — The wealthy have money problems, too — yeah they do.

Even refinancing a mortgage for their fancy digs or getting a new loan can be near impossible these days thanks to skittish lenders. And the higher the loan value, the more they worry. …”

Click link for the rest of the article…a must read for the Miami luxury market crowd (and the bag holders).
102 scrivener /Jan 21, 2010 at 1:22 pm Vote:

I hate to join in the “DML pile-on” but….you asked for a development that was completely sold out and is now largely in resale.

Ok.

How about Asia (http://www.miamicondoinvestments.com/for-sale/Brickell-Key/Asia/) This building is EMPTY – - but for a few alleged tenants who are paying WAY too much rent.

The reason I say that it was completely sold out was my understanding of the rules imposed on developers – - that a large percentage of the units had to be “sold” before construction could commence.

Well, the Asia development is built. And from the looks of Lucas’ page showing units available for sale – - it looks like the whole building is available for sale. But I also imagine that one could look at most of the developments out there (The Plaza, 500 Brickell (what the heck is with the “halo” over the pool?), etc. ) at any given moment and level the same charge because one would have to factor in the units available for sale plus the effect of shadow inventory.

Right?

scriv
103 Gixxer 1000 /Jan 21, 2010 at 1:24 pm Vote:

Renter Tom

That article was already posted twice in this thread and discussed. The high end market is still over valued. We get it.
104 southbeachsand /Jan 21, 2010 at 1:33 pm Vote:

The developers of 10 Museum still have original units for sale. And there have been multiple bulk purchases at the building. You can search the property records for all this.

For instance, it shows Miami Magna LLC purchased 12 units for $4.5 million. There were a few other bulk buyers as well.

Few people bought into this building to move in. The “loft” design with open bedrooms/bathrooms is a deal killer for me. This building would have sold much better with a typical floorplan.
105 Visionary /Jan 21, 2010 at 2:18 pm Vote:

Intersting article:

Buyer gets 19 units in Quantum for $5.2M
South Florida Business Journal – by Brian Bandell

A Miami-based bulk buyer snagged 19 condos in the Quantum on the Bay condominium in downtown Miami for a total of nearly $5.2 million.

That was significantly less than previous purchases in the 698-unit building, according to research by Bal Harbor-based Condo Vultures Realty. There are only 18 unsold units in the building, according to the real estate brokerage and research firm.

Miami-Dade County Circuit Court records show that Miami-based developer Terra-Adi International Bayshore sold the 19 units to Rei Quantum on Jan. 8. The deal covered 16 units in the north tower and three units in the south tower of Quantum.

Rei Quantum is managed by Miami-based Real Estate Investment Consulting Group, which is managed by Paul A. Jarquin, and Miami Beach-based MIG US, which is managed by Mathieu Massa, according to Florida corporate records.

While the Rei Quantum bulk deal was a discount for that building, it was higher than most recent bulk deals in downtown Miami condos, Condo Vultures principal Peter Zalewski said. Of the 15 bulk deals he has tracked, the average price per square foot was $181.

“I can’t envision how someone would buy units for north of $240 [a square foot] and then turn around and flip it,” Zalewski said. “This is a longer-term purchase.”

Zalewski said buyers from Europe can afford to pay a little more for Florida properties because of the low value of the U.S. dollar.

In the north tower of Quantum, the average sales before the Rei Quantum deal were at $318.35 a square foot, according to Condo Vultures. The bulk buyer bought 16 units at $245.82 a square foot.

In Quantum’s south tower, unit sales averaged $303.03 a square foot before the bulk deal. Rei Quantum picked up three units at $225 a square foot, according to Condo Vultures.
106 Visionary /Jan 21, 2010 at 2:18 pm Vote:

Intersting article:

Buyer gets 19 units in Quantum for $5.2M
South Florida Business Journal – by Brian Bandell

A Miami-based bulk buyer snagged 19 condos in the Quantum on the Bay condominium in downtown Miami for a total of nearly $5.2 million.

That was significantly less than previous purchases in the 698-unit building, according to research by Bal Harbor-based Condo Vultures Realty. There are only 18 unsold units in the building, according to the real estate brokerage and research firm.

Miami-Dade County Circuit Court records show that Miami-based developer Terra-Adi International Bayshore sold the 19 units to Rei Quantum on Jan. 8. The deal covered 16 units in the north tower and three units in the south tower of Quantum.

Rei Quantum is managed by Miami-based Real Estate Investment Consulting Group, which is managed by Paul A. Jarquin, and Miami Beach-based MIG US, which is managed by Mathieu Massa, according to Florida corporate records.

While the Rei Quantum bulk deal was a discount for that building, it was higher than most recent bulk deals in downtown Miami condos, Condo Vultures principal Peter Zalewski said. Of the 15 bulk deals he has tracked, the average price per square foot was $181.

“I can’t envision how someone would buy units for north of $240 [a square foot] and then turn around and flip it,” Zalewski said. “This is a longer-term purchase.”

Zalewski said buyers from Europe can afford to pay a little more for Florida properties because of the low value of the U.S. dollar.

In the north tower of Quantum, the average sales before the Rei Quantum deal were at $318.35 a square foot, according to Condo Vultures. The bulk buyer bought 16 units at $245.82 a square foot.

In Quantum’s south tower, unit sales averaged $303.03 a square foot before the bulk deal. Rei Quantum picked up three units at $225 a square foot, according to Condo Vultures.
107 scrivener /Jan 21, 2010 at 3:17 pm Vote:

“I can’t envision how someone would buy units for north of $240 [a square foot] and then turn around and flip it,” Zalewski said. “This is a longer-term purchase.”

Maybe yes, maybe no. It could also be an investment group creating an opportunity to farm a capital loss; an investment group hopping for a §1035 exchange at a later date; or, in the alternative, a bunch of idiots with money burning a hole in their pockets. (wink)

scriv
108 scrivener /Jan 21, 2010 at 3:57 pm Vote:

“I can’t envision how someone would buy units for north of $240 [a square foot] and then turn around and flip it,” Zalewski said. “This is a longer-term purchase.”

Could it not also be part of a concerted action – - one group buys a chunk, another group buys a chunk, a third group buys a chunk and then all three form an affiliated group – - to gain control of the building and then have the consolidated group’s assume the management contact?

scriv
109 DML /Jan 21, 2010 at 6:38 pm Vote:

Thanks scrivener:

I am trying to understand as much as possible about Ten Museum and asked for comparables. A new condo similar to Ten Museum that sold out and 25% of the building is now on the market. However, Asia should not be considered a comparable. You are comparing an apple to an orange. Asia condo’s are listed in $600 and $700 psf range. Rents for Asia are around $5,000 (or more) a month. Ten Museum Park’s pricing is more than half of Asia. I used Brickell on The River North as a comparable. Any comparables to Ten Museum with 25% of the building on the market? Please “pile-0n” I can take it.

Thanks,

DML
110 Joe /Jan 21, 2010 at 6:45 pm Vote:

DML — From what I’ve read, there aren’t many true comps to Ten Museum due to Ten Museum’s design. Designer-ready, loft-style buildings are intended for end users, not 6-month or 12-month rentals, so I imagine the rental (and, thus, cash-flow) situation there is brutal for investors who expected to buy and flip.
111 Paul /Jan 21, 2010 at 6:49 pm Vote:

Renter Tom. I agree. The name Trump makes me cringe. He used to invest himself. He would put his money where mouth was. Then he almost went broke when the market collapsed many years ago. So he came up with a new strategy. He decided to just license out his name to developers. That way, he didn’t have to invest a DIME in a project and still got paid. When the market crashed, again, he walked away with nothing more than a tarnished reputation (which was already tarnish – but apparently a sucker is born every minute). The name Trump makes me sick. I appreciate that he helped shape the NYC skyline back in the day, but he has since shown himself to be nothing more than a slick salesman and a reality TV star. He did more for country than some punk like Tom Vu ever did (remember that POS from TV?), but the Trump name is tarnished beyond repair in my view. However, given enough time more suckers will be born. He may have a future yet.
112 DML /Jan 21, 2010 at 7:27 pm Vote:

Joe:

Thanks. I think you are very much on to something! I just did a what-if calculation. Here it is. The current rental market at Ten Museum Park is around $1,500 per month for a 1 Bedroom (for example a 830 sf unit). Taking into consideration operating costs (HOA fees, property taxes, liability insurance and a 5% vacancy factor) and assuming the investor should get a return (i.e., annual cash yield on amount invested) of 2.5% (maximum), then this 1 Bedroom should be valued at $158,000 or $190 psf. This is not very far off from the recent sale at $173 psf.

In conclusion, if you use the rental market at Ten Museum Park to determine the property values for the same units, as any smart investor should, then the $173 psf valuation should be considered very realistic.

Any thoughts on the valuation conclusion?

Thanks,

DML
113 Joe /Jan 21, 2010 at 7:43 pm Vote:

DML — Not sure how realistic those projections are but you could be right. Just from glancing around the rentals on this site, it seems like many if not most are vacant for 90-180 days before being rented. But assuming vacancy rates drop, keep in mind that there are strong rumors that Ten Museum’s HOA is in very bad shape, so your HOA fee calculation might take a hit if there are increases and/or special assessments.
114 Joe /Jan 21, 2010 at 7:46 pm Vote:

DML — Just as a quick follow-up, you’ve asked for reasons why so many Ten Museum units are for sale. Aside from the building’s design style, it could also be due to the HOA situation I mentioned a few seconds ago in post #111 above. Even in the best of times, whenever a condo has a higher than average percent of its units for sale, the HOA is the first place to look for signs of trouble. Like rats scurrying for higher ground, condo owners tend to bail when they know tough times are coming for their HOA.
115 DML /Jan 21, 2010 at 8:13 pm Vote:

Joe
Any ideas or thoughts on why Ten Museum Park’s HOA fees may go up? Or why the owners may see a special assessment. I used a $0.75 psf number in my valuation calculation in post #110. This is quite high already for a new building in the same category of properties. Are they having a problem with some unit owners failing to pay their HOA fees and those who do pay will have to shoulder the deadbeats? Any thing you can think of causing a need for an upcoming special assessment?
Thanks,
DML
116 Joe /Jan 21, 2010 at 8:35 pm Vote:

DML — I have no specific info. on Ten Museum. All I know is that people here keep saying the building isn’t being kept up very well and that promised amenities haven’t been implemented. Plus, with 25% of the units for sale, I’d also have to guess that a lot of HOA fees are going unpaid right now, which will have to be recouped somehow.
117 Kramer /Jan 21, 2010 at 9:06 pm Vote:

DML – The answer to your question is – First In – First Out. One Miami and Ten Museum were the first in and therefore are the first two out. Large percentage of listings and a free fall in prices. The reason is two -fold. Many of these two buildings had significant re-sales. Lot of flippers. So the eventual end user ended up with high property taxes based on the higher re-sale price they paid while at the same time his unit was gradually going down in price. So they are stuck with higher property taxes. Secondly the eventual end-user who bought from the flipper is now stuck with a monthly HOA fee roughly twice what the sweet sales lady told the original buyer. Now as Jeremiah has said – “The Chickens Have Come Home To Roost”. We are seeing both these buildings slide down only because they were first and it takes a while for people to admit to themselves that they have made a mistake and will try to hold on as long as possible – unwilling to admit their mistake. It’s human nature. The last buildings to go up haven’t had enough time to start the slide down yet. My guess is that Quantum is next only because it was the third building to go up. Then Marina Blue – 50 Biscayne etc. Ironically both Icon and Everglades may avoid the spiral down because they came in last and those units will come down in price to the person purchasing today at substantial discounts anyway.
118 Renter Tom /Jan 21, 2010 at 10:45 pm Vote:

Here is a good question for scrivener or jcrimes (or anyone else that knows):

When I look at the ownership records of condos I find a ton of units owned in the names of LLC’s or corps. Why so many? Is this what most foreigners do? Or was it because for example people pooled money for an investment property, etc.? I have even seen a corp with all the homestead exemptions too. Oddly if banks were lending to these business entities too. So, if I go to buy a condo (or a SFH) what advantage would there be for me to title it in a newly formed LLC if it is my primary residence??? The high numbers have me stumped and cause me to be concerned…
119 Joe /Jan 21, 2010 at 10:59 pm Vote:

RT — It’s not uncommon for investors to use a separate LLC for every property they buy, which shields each potential liability from all of the others.

At this point in the Miami r.e. cycle, I’d say the vast majority of the LLCs you’re seeing in the property tax records are for people who intend (or intended) to flip the units as soon as the condos opened.

At the personal, end-user level, given that Florida already has what I believe to be the nation’s highest and/or best personal homestead exemption(s) (for purposes of protecting one’s primary residence from lawsuits, liens, etc.), I’m not sure what the benefits would be for an end user to buy as an LLC rather than simply in their own name (or in the name of a trust). Maybe scrivener or someone else can chime in on that.
120 Drew /Jan 21, 2010 at 10:59 pm Vote:

RT
Its better to hold an investment property in an LLC for liability purposes. If a tenant or tenant guest is injured and wants to sue, they’ll have to sue your LLC rather than you personally. Even if your LLC has no assets, they can’t touch your personal assets. Same thing for HOA liens or foreclosures: any judgment attaches to the LLC not the individual. Wouldn’t you rather have your single-purpose LLC be foreclosed on rather than you individually? It makes it alot easier to walk away from a mortgage.

There are other tax benefits I believe, though shielding liability is usually the primary factor.
121 Renter Tom /Jan 21, 2010 at 11:25 pm Vote:

I appreciate the responses. I was aware of the reasons for limiting liabilities, didn’t really think about regarding not paying HOA but that would be a lien against the unit, not a personal liability, no? I have seen LLC’s buy with all cash without a loan… I was thinking perhaps foreigners were using this set up to prevent (or make difficult) to figure out who owns a unit and for others to not figure out what properties they owned….i.e. hiding assets? I suppose if banks were lending money for 100% financing to an LLC at competitive rates I would also set it up as an LLC as the borrower and title it accordingly….you can always then transfer title to yourself personally if things turn out well. Another advantage, albeit limited, is you can change ownership via shares or membership interest without having to change the title for single purpose LLC’s. Limiting liabilities from tenants is sorta not too important if you have insurance….there has to be more to the story…
122 Renter Tom /Jan 21, 2010 at 11:52 pm Vote:

By the way, I recently saw a short sale in a newer building (built after 2000) and the foreigner who got 100% financing…and had bought a new larger SFH nearby (so why the short sale?)…was in the process of striping the unit. I am not joking. Already took out the light fixtures, washer and dryer, SINKS, closet doors, swapped out the SS refrig with what looks like a $100 frig from the junk yard. There was even an old A/C condenser which I suspect he was going to swap with the newer one on the roof. Where are the police???
123 Joe /Jan 21, 2010 at 11:59 pm Vote:

RT — Knowing Miami, I’m sure a lot of the LLCs are precisely for hiding assets and/or hiding the true owner’s ID.

As for financing, even in the best of times, I’m not aware of any banks that were giving anywhere near 100% mortgages to single-purpose LLCs for residential r.e. without a co-signer, so I doubt that aspect is or has been much of a factor.
124 Joe /Jan 22, 2010 at 12:02 am Vote:

“There was even an old A/C condenser which I suspect he was going to swap with the newer one on the roof. Where are the police???”

And where is the HOA? Tenants in HOAs aren’t supposed to tack a piece of paper onto the wall of a common area without prior HOA approval, so if this guy is swapping out A/C units, that’s a potential liability for the HOA.
125 Renter Tom /Jan 22, 2010 at 12:04 am Vote:

Joe – It is in a small condo building in SoBe (under 20 units). I found it unbelievable….the “bank” (that is, us honest taxpayers) is gonna get stiffed $300K on this unit.
126 Joe /Jan 22, 2010 at 12:24 am Vote:

Wow … 25 developer-owned units were listed at Continuum North today.

25!

The asking prices are outrageous, but it looks like the high-end bloodbath has commenced. Otherwise, there’s no reason at all to mass-list so many properties on the same day.
127 Joe /Jan 22, 2010 at 12:33 am Vote:

As a quick follow up, with the mass-listings at Continuum North, at least 1/3 of the building is for sale or known to be investor held. MLS has 58 units for sale out of 203 in the building, while a bunch of others are listed for rent. I find these numbers astonishing, even in an r.e. market as bad as Miami’s.

Incidentally, is Continuum North yet another building where the developers managed to screw up the penthouse level(s)? PH-1 is listed as 6,300/sf with a price tag of $17 million, while PH-2 is listed as 6,900/sf — or 600 more square feet than PH-1 — but the price is $13.5 million, $3.5 mil less than the much smaller PH-1. What gives?
128 Joe /Jan 22, 2010 at 12:39 am Vote:

One last Continuum North note, at least for now: All 25 of the new listings have the same five pictures attached, and I didn’t see any that had accurate tax info. Seriously, how lazy can these Realtards ™ get?
129 Renter Tom /Jan 22, 2010 at 12:51 am Vote:

Joe – I also noticed another building with the penthouse units (on different floors, upper lower, AND all different s.f. some double in size) ALL use the exact same photos even though the floorplans are totally different etc. I agree LAZY! I hate when realtors do this or borrow photos from other listings which include totally different views, etc. I guess it shouldn’t surprise me…
130 Joe /Jan 22, 2010 at 1:10 am Vote:

RT — It’s a joke how lazy these r.e. agents are these days. Most MLS listings get the most attention on Day 1, when they pop up as new listings on everyone’s RSS feeds and whatnot, so why blow that opportunity by listing 25 units with the same generic pictures and with missing info.? If I was the seller/developer, I’d fire that Realtard ™ on the spot.

By the way, I was able to answer my own question about the Continuum North penthouses. According to the Continuum site, PH-2 faces due west, so it has NO OCEAN VIEW. Can you believe that nonsense? Who in their right mind builds a 6,900/sf penthouse in South Beach that has NO OCEAN VIEW (and then prices it at $13.5 million)? Un-freaking-believable. Instead of slicing the penthouse level north/south and giving both penthouses a direct ocean view, those morons split it east/west and left one PH with no ocean view at all. Unreal.
131 Paul /Jan 22, 2010 at 2:33 am Vote:

Here’s a scenario maybe one of you experts can address re: HODs. This must be happening in Miami too. This is happening in a condo development in Orlando for which I am a unit owner and a reluctant board member. A lady owns a condo in her name, and stopped paying the HODs. Five months later she filed Chapter 7 and forfeited her condo in bankruptcy. A few months after that her debt was discharged. We had a lien placed against her unit for past due HODs before she even filed for Chapter 7. So what happens to the five months she owed prior to filing bankruptcy? And what happens to the HODs that will accumulate from her filing date to the date the bank resells her condo, and the deed (which remains in her name) changes hands? Who pays us back? The law suggests that we are out of luck for all but maybe 6 months of payments. Maybe the bank will pay all the HODs to get a clean title, maybe not. Can we sue, or otherwise go after the condo owner herself for any of the past due HOD payments? Or does her bankruptcy filing prevent us from touching her? I’m told we should not even call her. The bank which financed the condo is currently paying us nothing in HODs. A big fat zero. As I mentioned, title remains in her name. As I believe it will until the bank resells her condo. Any suggestions? Advice? Back to bed.
132 Joe /Jan 22, 2010 at 3:13 am Vote:

Paul — First of all, I mean no offense in saying this, but if you’re on the HOA board, you should have an attorney answering questions like the ones above rather than soliciting feedback from a bunch of blowhards like us.

That said, and keeping in mind that I’m not a lawyer, I believe Florida law limits recovery of HOA fees to either 6 months of payments or 2% of the mortgage amount (or sale price, can’t remember which) in the event of a foreclosure. In a straight non-bankruptcy foreclosure, I believe Florida law allows HOAs to go after the owner for overdue HOA fees that aren’t covered by the foreclosure sale, but if this owner filed bankruptcy, that option is almost assuredly unavailable. *PERHAPS* the HOA’s lien(s) will survive the eventual property transfer and the HOA can recover the back dues from the new owner, but that seems unlikely. Good luck.
133 Renter Tom /Jan 22, 2010 at 3:58 am Vote:

I do not know the specifics regarding FL BK law, BUT the lien is against the condo (real estate), not her personally. I would think the amount secured by the lien would survive. For example, if you have a car loan and go through BK you might get out of the car loan contract BUT you have to give the car back…you can’t keep the car. I would think that HOA fees secured via a recorded lien would survive. This is something that a real estate attorney would need to address specifically as the specific statutes rule.
134 AJ /Jan 22, 2010 at 4:57 am Vote:

I used to wonder who is this guy so hateful about the 1800 Club that posts all these untruths about the building. And then Wild Bill posts “1800 Club will be joining the $100,000 plus price discounts soon “, – totally uncalled for, totally unsubstantiated and totally out of conext.
Wild Bill, I hope you are not the one posting all those ugly posts on different handles.

Firstly, 1800 Club is practically all sold out (90%). The developer has purposely held on to the last 10% so that he can retain control until Dec 2010. He can sell of the remaining 45 units in a heartbeat with out resorting to any discounts what so ever. Every renter in that building harbors a desire to buy in that building and they know a good thing when they see one. The developer instead chose to rent a few units he holds and all those units are rented.

A building with 469 units have only 36 units listed for sale in the MLS. That is a fantastically low percentage of 7.6% units for sale.
You may have a glut of flats elsewhere but we do not have that problem in our building.
135 scrivener /Jan 22, 2010 at 8:31 am Vote:

Drew:

I need to correct you concerning use of LLC’s as an investment vehicle. You correctly state that if a tenant is, for example, injured and wants compensation he would have to go after the LLC, not its owner. However, the LLC’s shareholders would be liable – - and their personal assets at risk — if, for example, the LLC had no cash in it (thinly capitalized) or was used as a device to perpetrate a fraud. The principle is known as piercing the corporate veil – - it allows a court to effectively disregard the corporate entity and hold its shareholder(s) personally liable.

scriv
136 DML /Jan 22, 2010 at 10:43 am Vote:

AJ:
Very interesting to read your post #132 concerning the 1800 Club. Your statement that many of the renters have a desire to buy is very encouraging! The 1800 Club location is excellent. Yes – only 7.6% of the units are listed for sale is a very good ratio in this Miami Condo market. What are some of the other advantages of the 1800 Club? Look forward to your comments and observations.
Thanks,
DML
137 Gixxer 1000 /Jan 22, 2010 at 11:10 am Vote:

“I can’t envision how someone would buy units for north of $240 [a square foot] and then turn around and flip it,” Zalewski said. “This is a longer-term purchase.”

“In conclusion, if you use the rental market at Ten Museum Park to determine the property values for the same units, as any smart investor should, then the $173 psf valuation should be considered very realistic.”

DML

These two statements sum up what is going on here. I know most people can’t remember past a few years but real estate has been and will be a LONG TERM investment.

Flipping is over. It only worked because prices were appreciating so rapidly. Why would anyone purchase bulk units (or any units) to flip in market where the units are decreasing to the bulk price that you bought them at????? And in a declining market where do you think they are coming up with these bulk prices?

Investors are figuring out what number makes sense for them to buy and hold these properties. When they hit that number they might as well jump in now and grab the best units available. Who cares if you miss the exact bottom. If the market was rising you would never be able to buy at the bottom anyway. Investors DO NOT try to time the market. They instead employ some form of dollar cost averaging.

So the problem with TMP is that the majority of people are holding these units well above these prices. Looking at the tax records the assessed value of 1bedrooms at TMP are between $200 and $280 so the taxes are two high and as mentioned earlier the HOA is high as well. So given what the rental prices $170 sqft is closer to where they need to be.

I think I saw that one person owns 5 of these exact same units and bought 4 of them for $442 sqft and the fifth one he bought at $373.
138 AJ /Jan 22, 2010 at 11:33 am Vote:

DMP, reasons you should consider 1800 Club,
1. Low HOA
2. Pace Park
3. Arts District Location
4. Superb Views
5. Very low to nil HOA delinquencies
6. No foreclosures
7. Excellent management, board and developer
8. Almost fully sold out, very favorable investor/end user ratio

and I can go on but just listed a major areas of concern to most.
139 Wild Bill /Jan 22, 2010 at 11:41 am Vote:

AJ,

I looked up some figures. Those figures show that the asking prices are getting close to the $100,000 discount window every other building is going through. That’s a fact, not hate. Don’t pitch that 1800 Club is different than all the other cookie cutter buildings that have turned into rentals. You rent your own units. You’re getting slaughtered.
140 Gixxer 1000 /Jan 22, 2010 at 11:42 am Vote:

Don’t let AJ fool you. He’s not telling the whole story. It may be a nice building to live in but its not in as good a shape as he’s describing.

There a website that provides a health index for condo buildings that is based on price trends and the stability of the condo association. It ranks the 1800 club pretty low. In fact it actually ranks the 1800 club below TMP. It basicly says that 1800 club is only healthier than 18 percent of condos in Miami. Now before AJ goes ballistic and says that I’m also “wild bill” trying to trash his building I’m not say this is fact. But the site does seem to be objective and credible and is quoted in places like the Miami Herald, New York Times, etc.

There are only about 30+ units available for sale and 15 units available for rent but what seems to be odd is that 73 units are owned by 1800 Club Ltd. And another 37 units are also owned by multiple owners. The records indicate that 93% of its users are non-primary.

It seems that the low HOA fees and the fact that there were a lot of sales in ‘o9 (96) at lower prices just make it easier for owners in this building to rent.
141 Wild Bill /Jan 22, 2010 at 11:48 am Vote:

http://www2.miami-dadeclerk.com/public-records/Search.aspx
Search for yourself.
1800 Club is no different.
142 Renter Tom /Jan 22, 2010 at 12:32 pm Vote:

AJ Wrote: “Firstly, 1800 Club is practically all sold out (90%). The developer has purposely held on to the last 10% so that he can retain control until Dec 2010. He can sell of the remaining 45 units in a heartbeat with out resorting to any discounts what so ever. Every renter in that building harbors a desire to buy in that building and they know a good thing when they see one. The developer instead chose to rent a few units he holds and all those units are rented.”

—- Hahahahahahaha. Thanks for making my day. I am SUURRRRE (sarcasm) the developer who built a building to sell the units as fast as he can is intentionally holding onto units just so he can continue to control the HOA. From experience I know builder LOVE to remain in the building for years and years and years, not! Why do you post such nonsense?!?!?! It really ruins your credibility and puts in the same basket as all the other RE marketing frauds.
143 Miami Skeptic /Jan 22, 2010 at 12:51 pm Vote:

“The developer has purposely held on to the last 10% so that he can retain control until Dec 2010. He can sell of the remaining 45 units in a heartbeat with out resorting to any discounts what so ever.”

AJ this is just silly. If the developer could sell these tomorrow without discounting they would. Period. End of story.

and Gixxer it sounds like you have stumbled upon some shadow inventory in 1800 club. This just shows why the already huge MLS inventory is just the tip of the iceberg. The building I’m currently in is still about 50% developer owned with dozens of vacant units, all “for sale”, but little or no trace on the MLS…
144 Gixxer 1000 /Jan 22, 2010 at 1:17 pm Vote:

From Condo Vultures:

“At the end of 2008, developers controlled 43 percent of the new condo inventory in Greater Downtown Miami submarket, according to the report.

Of the 82 projects constructed in the past seven years in Greater Downtown Miami, 34 of the new condo towers have been completely sold out. Of the remaining 48 projects with some available developer inventory, the closed sales ratios per condo tower are as follows:

- nine projects have closed between 90 percent and 99 percent of the developer units;

- six projects have closed between 80 percent and 89 percent of the developer units;

- six projects have closed between 70 percent and 79 percent of the developer units;

- two projects have closed between 60 percent and 69 percent of the developer units;

- three projects have closed between 50 percent and 59 percent of the developer units;

- five projects have closed between 30 percent and 39 percent of the developer units;

- three projects have closed between 20 percent and 29 percent of the developer units;

- three projects have closed between 10 percent and 19 percent of the developer units;

- four projects have closed between one percent and nine percent of the developer units;

- and closings have not yet begun at seven projects that have been built or are still under construction.

It is worth noting that nearly half of the remaining new condo product in Greater Downtown Miami is controlled by two groups.”

Things are getting better however:

“Between 2003 and 2010, developers constructed 82 project with nearly 22,250 units in Greater Downtown Miami.”

“The 2009 buying activity combined with the recent cancellation of the proposed 32-story Loft III project in Downtown Miami by the Related Group, South Florida’s largest condo developer, leaves less than 7,300 new condo units, or 34 percent of the product, still in the hands of developers and lenders.”

So the iceberg can’t be any bigger than this. A portion of these units are listed in the MLS. So take the MLS and add maybe 5,000 units.
145 computer consultant /Jan 22, 2010 at 1:40 pm Vote:

FL unemployment at record high

http://finance.yahoo.com/news/State-Unemployment-Climbs-cnbc-1904305502.html?x=0&sec=topStories&pos=2&asset=&ccode=
146 Joe /Jan 22, 2010 at 1:52 pm Vote:

Gixxer 1000 — Um, I just spent a week trying to convince you that you needed to add at least 5,000 condos to the MLS numbers, and you ended the discussion by calling me an “idiot.” I guess you’ve finally seen the light.
147 Joe /Jan 22, 2010 at 1:59 pm Vote:

By the way, I’m not surprised 1800 Club ranks low in HOA stability. By AJ’s own admission, 1800’s HOA deliberately underfunds it’s reserves, which AJ has repeatedly tried to defend as being “smart.” It sounds like the allegedly benevolent developer is fleecing the HOA in order to save HOA fees on the huge number of units it owns. No surprise there.
148 Wild Bill /Jan 22, 2010 at 2:13 pm Vote:

Gixxer 1000,

Thank you for providing more information than I did about 1800 Club. The numbers speak for themselves.
149 Gixxer 1000 /Jan 22, 2010 at 2:28 pm Vote:

No, you’re still and idiot who doesn’t know simple math. I was telling trying to show you that even with these additional units we still only have about 14 months of supply currently.

About 9,000 condos in MLS.

9,000 + 5000 = 14,000 total condos

Last six months of sales

July 926
Aug 942
Sep 936
Oct 964
Nov 907
Dec 976

Total = 5651

5651/6 = 941 Average monthly sales

14,000/941 = 14.9 months supply

And we were only talking about condos $500k and below. As admitted I don’t know these numbers are facts. They are simply what many realtors are reporting on blogs like this one. However even if they are off by a few thousand that’s a far cry from the almost 36 month supply of condos $500k and under that you indicated we were at.
150 Jonsey /Jan 22, 2010 at 3:13 pm Vote:

WHO IS ……”GIXXER 1000 ” alias for???????He has NO CLUE what he’s talking about!~!!!!!
151 Miami Skeptic /Jan 22, 2010 at 3:33 pm Vote:

Gixxer

Out of curiosity where are you getting your monthly sale figures? and what area do they cover? Are they for the City of Miami, downtown+ the beach, the whole county or what?
152 Gixxer 1000 /Jan 22, 2010 at 4:01 pm Vote:

They cover Miami-Dade County.

I’m getting them from another realtors blog. I’ll add that the this persons numbers were 3% lower than what Lucas reported for the first half of ‘09 here:

http://www.miamicondoinvestments.com/2009/07/28/miami-miami-beach-condo-trends-july-2009/
153 scrivener /Jan 22, 2010 at 4:43 pm Vote:

Jonsey:

You raise an interesting question: what does “Gixxer 1000′ mean?

scriv
154 scrivener /Jan 22, 2010 at 4:43 pm Vote:

Jonsey:

You raise an interesting question: what does “Gixxer 1000″ mean?

scriv
155 Joe /Jan 22, 2010 at 5:01 pm Vote:

“5651/6 = 941 Average monthly sales”
“14,000/941 = 14.9 months supply” — Gixxer 1000

Gixxer, Gixxer, Gixxer. You’re still using voodoo math to sell your point here. Why are you pretending that ZERO new condos are being added to the market each month? Why are you pretending that foreclosures aren’t adding hundreds of units to the market each month? Why are you pretending there aren’t thousands of units in non-developer-owned shadow inventory?

Why, why, why? Please tell.
156 Joe /Jan 22, 2010 at 5:03 pm Vote:

scrivener, jonsey — A “Gixxer 1000″ is some sort of motorbike. (I had to Google it myself after this guy appeared on the site.)

Anyway, I hope our Gixxer drives his bike more carefully than he posts “facts” on this site.
157 JL /Jan 22, 2010 at 5:05 pm Vote:

I’m pretty confident the sales numbers for the “new construction” that is the focus of this blog is much worse than the overall average where the pricepoints tend to be much lower.
158 Angel /Jan 22, 2010 at 5:07 pm Vote:

Gixxer = GSX-R 1000
159 scrivener /Jan 22, 2010 at 5:10 pm Vote:

Angel:

Ah Ha!

Really?

It’s just that simple?

scriv
160 scrivener /Jan 22, 2010 at 5:11 pm Vote:

Happy Friday to all.

Ok, I definitely need a drink – - a BIG one.

scriv
161 Gixxer 1000 /Jan 22, 2010 at 5:22 pm Vote:

Joe,

Lucas’ calculations for condo supply in July ‘09

Total Condos In July ‘09 = 18,916

Number of total condos sold over the previous six months = 5007

5007/6 = 834 monthly average of condos sold over previous six months

18,916/834 = 22.6 months supply

http://www.miamicondoinvestments.com/2009/07/28/miami-miami-beach-condo-trends-july-2009/

These are HIS exact numbers. So I’m using the same “voodoo” math as Lucas.That is how supply is calculated. If any additional unit come back on to the market they will show up in the new inventory numbers.

Months supply is based on the current inventory and the rate at which you will use that inventory. Its an indicator not an exact time line for how long it will take you to sell the condos.

Yes I ride a GSX-R 1000.

Happy friday to you to scriv. I’ll be tossing back a few here soon, as well.
162 Joe /Jan 22, 2010 at 5:41 pm Vote:

Gixxer 1000 — I know how absorption rates are calculated. My point is that you seem to be ignoring the non-developer-owned shadow inventory that we all know exists. Of course, it took you until today to admit there was developer-owned shadow inventory, so maybe next week you’ll come around on the non-developer-owned.
163 makes me think /Jan 22, 2010 at 9:52 pm Vote:

post#135
scriv, I believe you can only go after the owner of a LLC if it a single entity LLC. In that case it is treated as passthrough, the owner is essentally the LLC. You can’t go after the owners if it is a multi-member LLC. The whole idea of putting real estate into a LLC is to prevent lawsuits. Equity Stripping is one technique used to remove most of the equity from the LLC so when someone looks at it for the purpose of suing they see there is nothing to be gained, why bother? That is why most people hold real estate in LLC’s
164 southbeachsand /Jan 22, 2010 at 10:53 pm Vote:

Quiet funny.

J-LO was photographed poolside with the family today at Fontainebleau. So much for lounging by the Icon Brickell gigantic pool where she supposedly purchased a PH. Perez can’t be too happy.
165 AJ /Jan 23, 2010 at 12:50 am Vote:

Bah humbug. dont just quote some ghost website and then fail to provide the link to substantiate your claims. show me that silly site which ranked 1800 low and i will pick it apart.
as far as the other jealous hate posts regarding the 1800 are concerned, they are not even worth my time. We have tackled all those topics previously. Who gives a crap if losers like you who dont have 2 red cents like and appreciate 1800 club.
My posts are for those who are actually in the market and looking to buy. If there is a building with all the good parameters as I discussed, I would definitely tell gables or dml to consider those also. after all if they have their hearts set on Brickell or Park west, I cannot convince them to go to pace park. But I do not know of any other building with such good parameters. Educate me if you do.

The proof of the pudding is in eating it. Go to the 1800 Club and ask any renter in elevators, pool side or the lobby or the pace park. They will telll you how happy they are living there. Angel plans to move from 900 to Marquis after his lease is up, even though 900 is a fabulous building. We do not have such turnover rpoblem.
The renters love the building so much, they hope to buy there one day when they can afford it. The only time I ever heard a renter bad mouth 1800 club is that they do not let renters keep pets.
Let me nerrate my own experience. When my tenants lease was up, they asked me to reduce the rent as they can get a similar 2/2 in Brickell for $300-400 less. I politely told them, Brickell is Brickell and Pace Park is Pace Park. If you want a low rent, please go to Brickell but I cannot match it, the most I could do is keep the rent at the same level as last year. The coversation was very cordial. Needless to say, they signed on for another year with no changes.
166 Wild Bill /Jan 23, 2010 at 7:24 am Vote:

The renters at 1800 Club are so happy because they aren’t losing $100,000 like the investors. You don’t see any owners in the elevators because 1800 Club is a rental building.
167 Angel /Jan 23, 2010 at 10:42 am Vote:

AJ #165- Allow me to clarify. I love 900, the building, the people, the location, everything! I just prefer the size of the 1 bedroom units in Marquis. Marquis one bedrooms are significantly larger than the 1 bedroom I have now at 900. My unit at 900 is a line 10 with 1140 sq. ft. (not small for a 1 bed room IMHO). The smallest 1 bedroom at Marquis is close to 1500 sq.ft. If Marquis did not exist I would not even be considering moving from 900. My only concern with Marquis is its proximity to the highway and the noise it generates. This could definitely be a deal breaker for me which would ultimately result in my signing up at 900 for another year, at a much lower price ofcourse.
168 DML /Jan 23, 2010 at 11:05 am Vote:

Angel:
As an investor in 900, what level of rental rate decrease should I expect a tenant to ask for when re-signing? Also, at Marquis can’t you find a line of units away from the highway noise?
Thanks,
DML
169 Angel /Jan 23, 2010 at 12:03 pm Vote:

DML #168- Let me give you some real numbers to work with. My unit was listed at $2100 per month, I signed on at $1900 per month. As I stated in my earlier post this is for the larger 1 bedroom with den and 2 full baths (line 10) 1140 sq ft. That was six months ago. My lease is not up for another six months but right now there are a few units comparable to mine listed for $2000. I saw a line 10 last week (same unit as mine on a slightly lower floor) that was listed for rent at $1800. However this unit is no longer listed so I wonder if it was quickly leased out. On a side note it has yet to appear on the recent rentals link. At this rate I suspect that six months from now the going rate for my apartment will be around $1800-$1600 per month. With that being said I will ask my landlord for a $300 a month reduction in rent from $1900 to $1600. I will settle for $1700 a month and sign on for another year since i really love the unit i am renting and she did fabulous job building it out (porcelain 24 x 24 floors, black out shades, frosted glass den door etc). If she does not accept my deal I will simply look for another unit to lease at 900 or go up the street to Marquis as I have been contemplating for some time. I suspect she will take the deal since I am a great tenant. She lives in Venezuela and I basically take care of this place as if it were my own. The rental inventory is growing by the day driving lease prices down! Not to mention Marquis units have not even gone up for lease yet!

With regards to the noise at Marquis I am two blocks away from the highway and you can still hear the traffic noise. Marquis is right up against the highway so I suspect the noise will be considerably louder. I will have to wait for some units to come on line so I can start checking them out and survey the noise level associated with the placement of different units within the development. I will tell you one thing. The fit and finish of Marquis is spot on and rivals that of 900, and I am one of 900’s biggest fans!
170 Drew /Jan 23, 2010 at 3:29 pm Vote:

motorbike dude got his info from:

http://www.condoreports.com/
171 Tom C /Jan 23, 2010 at 3:54 pm Vote:

“The fit and finish of Marquis is spot on and rivals that of 900″ jajajajaja how delusional!!!
172 Angel /Jan 23, 2010 at 4:21 pm Vote:

Tom C can you add more to your comment as to why you think my statement is delusional? I live at 900 and love it. I have toured Marquis on two occasions and can honestly say 900my opinion is purely based on my superficial observations. I am interested in hearing your thoughts as to why you think one is far more superior than the other. What are you basing your comment on?
173 Angel /Jan 23, 2010 at 4:37 pm Vote:

Sorry for the typo above line should read…

I have toured Marquis on two occasions and can honestly say that my opinion is purely based on my superficial observations since I am neither an architect or engineer.
174 Tom C /Jan 23, 2010 at 6:03 pm Vote:

Leaving taste aside, so we don’t get into subjective issues….it’s quite simple, MONEY, they spent more psf on marquis and it shows in the details, also it’s made for a different type of customer (a richer type). Units as you mentioned, the smallest one is around 15oo sqf. no studios etc….
175 Joe /Jan 23, 2010 at 6:17 pm Vote:

AJ said: “The renters love the building so much, they hope to buy there one day when they can afford it.”

Seriously, AJ, do you not understand how stupid comments like that sound? Renters love 1800 Club because their rent is being subsidized by investors like you. Otherwise, why would they rent rather than buy?

AJ said: “Let me nerrate my own experience. When my tenants lease was up, they asked me to reduce the rent as they can get a similar 2/2 in Brickell for $300-400 less. I politely told them, Brickell is Brickell and Pace Park is Pace Park. If you want a low rent, please go to Brickell but I cannot match it, the most I could do is keep the rent at the same level as last year. The coversation was very cordial. Needless to say, they signed on for another year with no changes.”

Well, I admire you for playing “chicken” well, but it sounds like your tenants are idiots, and you’re not exactly Warren Buffett yourself. Just as an example, if your unit is renting for $2,000 per month and your tenants moved out, you probably would have been lucky to re-rent the unit within 60 days, so the two months of lost rent would have wiped out the $4,000 you saved by not reducing the rent. And from the tenants’ standpoint, they sound like lazy bastards if they just quietly acquiesced to your refusal rather than pursue cheaper options, *especially* in this rental market.

I do have to give you credit for chutzpah, though. It takes some big cojones to say, “the most I could do is keep the rent at the same level as last year.” Seriously, are we (and were your tenants) supposed to believe you were thinking of RAISING their rent this year? That’s hilarious.
176 Funny Man /Jan 23, 2010 at 8:23 pm Vote:

Perhaps someone should send AJ’s tenants a copy of this thread!!! They need to be educated for sure.
177 DML /Jan 24, 2010 at 2:00 am Vote:

Joe:

You queried “why Renters love 1800 Club because their rent is being subsidized by investors like you.” Otherwise, why would they rent rather than buy?

The reason they are not buying now is because of the financial crisis that we are digging our way out of and, most importantly, financing has reduced to a trickle. If a lot of the renters could get financing, whether they could afford the monthly mortgage payments or not, they would be buying right now. Look at the majority of foreclosures, short sales, REOs, etc. The story around them has to do with people borrowing beyond their means. When the financing situation does improve, people will be buying instead of renting.

DML
178 Joe /Jan 24, 2010 at 3:21 am Vote:

DML — I don’t follow your logic. Are you expecting that, someday soon, people will once again get easy-money loans “whether they [can] afford the monthly mortgage payments or not”? If that’s your premise, I’d have to disagree vehemently. Regardless, I stand by my original point: Renters in 1800 Club, and ostensibly many other new condo buildings, love their situations because their rents (and, thus, lifestyles) are being heavily subsidized by their investor landlords.

Look at it this way: If the renters in 1800 Club and other condos were so hell-bent on buying, and if they already have the $2,000 or $3,000 per month to rent, then why don’t they go rent some studio apartment for $500/mo. for 6 months, save the difference, and then go right back to 1800 Club and buy a place using the $10,000 savings (and the $8,000 first-time buyer credit, etc.) as their down payment?

Either these renters are stupid, or the splits between rental cost and ownership cost are still too wide to make buying a smart decision. Right now, the market seems to be telling us the latter is true (as Renter Tom has been saying for 1-2 years or more).
179 AJ /Jan 24, 2010 at 5:39 am Vote:

wild bill,
Hate and jealousy are like cancers to ones mind and soul. get rid of those toxins or you will self destruct. Peace and happiness do not co exist with the former.

Angel,
thanks for the informative post on 900 and Marquis.

Joe,
I did not play a game of chicken with my tenants. They are not lazy bastards either. Who would not want to save $300-$400 per month by moving to Brickell? But as your knowledge seems to be limited to SOFI and you do not know much about downtown market, let me explain. My tenants have confided to me after the lease is signed that they tried their luck to get the rent reduced and who in their right mind would not. But they also confessed that 2 things made them stay.
1. Unparalled views unlike elsewhere in miami
2. that they are totally addicted to having the Pace park at their front yard and all its activities

and to a lesser extent they also mentioned that they absolutely love the gym but that was not an overriding factor in their decision. After all said and done, I threw them a freebie out of good will but it was not part of the negotiation.

And for that someone who wants to refer this thread to my tenants, thank you very much, they are very well aware of the miami rental market and which building rents for howmuch. They voted for their favourite building with their lease renewal and all you talking heads can say what you want.
180 Juan Carlo /Jan 24, 2010 at 10:08 am Vote:

HI………..that site CONDOREPORTS .COM is BRILLIANT!!!!!!! check it out if you haven’t yet….it;s FREE and easy
181 gables /Jan 24, 2010 at 10:35 am Vote:

dml, there will not be a large return of renters to the buyers market in the near term. we got into this mess because too many people received loans who were not credit worthy. that wont happen again for at least 5 to 7 years-need time for the event to leave the business memory of managers and regulators. money is still cheap, and I am in the position to easily qualify for a mortgage. yet i have not bought yet? why? because you still cannot purchase a unit at a fair price (outside of some select short sales and REO units). Compared to buying, i am still renting and pocketing the spare change. granted that gap is closing. Two years ago I pocketed over a grand a month in rental vs buying. today the number is under $500. but most of those folks renting are not pocketing the savings-they are maxed out on their budget as is.

AJ played the game of business correctly assuming he was truly willing to call the bluff. Feels good when it works out your way (did the same when I released at a lower rate) but is really a bummer when your bluff is called (need to move to another unit, or look for another new tenant). As he notes correctly, he has a building on the water-that is a true bargaining chip. If this game was tried at Plaza on Brickell (which I do like), may be a different outcome. Because there are 8 other buildings (500, 1060, infinity, club, vue, emerald, sail, solaris, etc) in Brickell not on the water.
182 DML /Jan 24, 2010 at 12:02 pm Vote:

Joe:

I did not use the word “someday soon. ” What I said was “when the financing situation improves.” I am not saying it will happen quickly. The recovery will take a while. I have been through quite a few recessions and I know that recoveries don’t happen overnight. Yes, after a while when the lending market opens back up, some people will borrow to buy assets (condos, houses, cars, washing machines, etc) beyond their means. It’s part of our culture.

You make an excellent point about rent versus buy. As the prices of Condos continue to decline (many have declined up to 60% from their 2006 highs), the rent vs buy analysis becomes more interesting. In fact, we are arriving at a point in the cycle when it is becoming very interesting. Let’s take your 1800 Club example and run with it.

I see that the some units (1 BR/1BA) at 1800 Club have very recently sold in the high 170,000’s and low to mid 180,000’s. Let’s say a renter decides to buy a unit at $182,000 and takes the $18,000 down payment that you calculated from both savings + tax homebuyer credit and finance the remaining $164,000. At a market interest rate of 5% for 30 years, their P&I payment is $880 a month. Their real estate tax is $340 per month. Their association fee is (about) $480 a month assuming a 870 sq ft 1 Bedroom at $0.56 psf. In total their monthly cash outflow for “ownership” is $1,700 a month. Since the interest and real estate taxes are tax deductible, the owner will get a cash flow tax benefit of about $300 a month assuming a 25% federal tax rate. All-in, the new owner (instead of being a renter) now owns their own condo across from beautiful Pace Park which requires a net total cash outflow of $1,400 a month. The math is done (with my hp 12c), you just compare to whatever rental rate is appropriate and then make a decision.

My quess is, at the prices that we are beginning to see, some renters may begin to see the opportunities and start buying? Others may decide to stay as renters. In addition to the financial analysis, personal preferences have a lot to do with the rent vs buy decision.

DML
183 AJ /Jan 24, 2010 at 12:15 pm Vote:

gables,
you are absolutely correct. I was indeed a bit anxious “what if they moved out”. It was a calculated risk. I knew I had a product that is kind of unique and geared to a niche group and that niche group who would insist on a great view and the wonderful park/playground in the front would pay the asking price to live in such a flat. If my flat was in plaza or 500 or latitude as you mentioned and I try this stunt, probably they would have laughed on my face.
184 gables /Jan 24, 2010 at 12:20 pm Vote:

DML,
Agree with you on the 1800 club buy vs rent. The numbers are fairly accurate for a 1B-these will be the first units to satisfy equality in buy vs rent. 2B units are still off base and it is still cheaper to rent than buy. a major drawback to buying right now is if a better job opportunity arises in the next year, can you relocate and easily unload your unit? in the past relocation was a nonissue because you could always sell your house. that characteristic may be gone for a while. and who wants to be a landlord in today’s environment? Also, dont forget that special assessments will be required when the HOA is as low as noted for 1800 club (not that it would not occur at other buildings as well).
185 AJ /Jan 24, 2010 at 12:29 pm Vote:

DML,
HOA is 42 cents/sf. The monthly HOA is $365 on a 1/1 and $520 on the larger 2/2. So the net total cash outflow on your example would be $1285. If he was a renter, he would be paying between $1350 to $1450 on rent for the same unit.
And to the bozos who keep harping that the 1800’s Quarter Million Dollar reserves are not enough, even if we tack on the industry standard 10% surcharge over the HOA towards the reserves, it would just add a mere $40 to the monthly bill on this unit. Still a bargain.
186 AJ /Jan 24, 2010 at 12:39 pm Vote:

gables, not all 2Bs are off base. The 2bs on the west side are very competetively priced.
The East facing ones have a high premium attached to them. Yes it does not make sense to buy water view flats and rent them. You have to subsidise these. I have bought it to live in it and while i am waiting to move in, in the interim, I am renting it out to recover some costs. When I do live in, I just cannot put numbers like DML did for the 1/1. The happiness quotient of living with a wonderful view cannot be quantified. It just goes with out saying, these are aspirational flats and the premium cannot be escaped. Even if you and me are utopian and listen to jcrimes and Ace who do not put a premium on the view and would not pay a dollar more for a view, there are equally enthusiastic people in this World who would do just the opposite. That is why that water view premium will never go away. So these are only for those who really really want it, willing to pay extra for it and are going to live in it full time or as a second home.
187 Renter Tom /Jan 24, 2010 at 12:58 pm Vote:

DML – Two other factors to consider: (1) Rents are declining (2) Prices are declining (could wipe out any advantage by a long shot).

As such, perhaps in your example it would be better to consider the matter a “wash”. Owning ties you to an asset in a sluggish illiquid market while renting does not. Given your analysis and I was going to live there for at least three+ years and I really like the place I’d buy. Right now I am renting at about half the price and burden of owning since the prices don’t make sense yet in the upper market.

As expected, the high end prices will need to come down a lot more….at least 20% to get that market moving. If jumbo mortgages remain extremely difficult and a 25% to 50% down payment is required, the decline could be more. I laugh when realtors tell me that such and such unit in such and such building was bought…that the cash buyers are out there. Sometimes, I don’t have the heart to tell them that is ONE unit out of 28 for sale in that building and only ONE sold in 12 months! Perhaps SIB is a bad example since there are tons of $1M condos for sale…really, unbelievable. In one year SIB added about $1B to its tax rolls…in ONE year!

By the way, in case you are wondering….prices are not going to “bounce back”…… unless you are talking about a dead cat bounce.
188 Renter Tom /Jan 24, 2010 at 1:01 pm Vote:

AJ said: ” The happiness quotient of living with a wonderful view cannot be quantified. It just goes with out saying, these are aspirational flats and the premium cannot be escaped.”

- People put a price on that everyday AJ. Just look at the sales price between a unit with a view and one without. It is something is quantified all the time in every unit.
189 gables /Jan 24, 2010 at 1:02 pm Vote:

Any thoughts on what a two bedroom rental in downtown/brickell will be in 12 months?
190 Angel /Jan 24, 2010 at 1:36 pm Vote:

Gables #189- That all depends on different factors such as the caliber /quality of building. Upper end or middle of the road? Waterfront or not? Size of apartment etc etc etc.
191 AJ /Jan 24, 2010 at 1:45 pm Vote:

RT,
I tried to quantify the water view premiums as you suggested. I worked this out. The results are very surprising and confusing. I dont know if my meathod is right. I was expecting to see the rental premium to be much less than ownership premium for a water view flat. but the results came out different.

Av. Premium paid to own per SF for water view $90 ($260 vs $350) = 75%
Av. Premium paid to rent per SF for water view $0.20 ($1.60 vs $1.80) = 89%

if you guys think my formula is right, then even renters are paying a premium to rent waterview units. That is a major revelation for me.

gables,
that is a million dollar question and I am afraid to answer that. I think when ICON, Everglades, Marquis start releasing units to rent, that would put a serious pressure on rents. Even in my case, I would be concerned that my tenants just like Angel may find it very hard to refuse if they can rent a flat in Marquis for the same price as my flat. Pace Park can only do so many wonders for me. They just might say, the super duper amenities of Marquis is worth the sacrifise of losing the Pace Park. Or even worse, if Brickell rents further fall and the gap between my flat and a Brickell flat increases from $350 to $500 or more, then I sure may have a problem. But as I am moving to Miami in April 2011, I just might have an empty flat only for a few months. Not a big deal.
192 Renter Tom /Jan 24, 2010 at 1:47 pm Vote:

##### NEWS FLASH!!! #####

2010 will be a buyer’s and a renter’s market!!!

(in case someone believes AJ)
193 Renter Tom /Jan 24, 2010 at 1:51 pm Vote:

AJ – Do the math … again – :Av. Premium paid to rent per SF for water view $0.20 ($1.60 vs $1.80) = 89%”

That is not a 89% difference….that is a 12.5% premium for a great waterview….seems reasonable. I hope you are using actual sales/rental prices (not listing prices) from the last 6 months (not two years ago)…..
194 Meakes Me Think /Jan 24, 2010 at 2:03 pm Vote:

Premiums

Own =90/260= 35%
Rent =.20/1.6 =12.5%
195 Renter Tom /Jan 24, 2010 at 2:25 pm Vote:

We all know AJ’s not a math whizz……I think he has admitted being a tad green on investing in the past, but his post did make me laugh out loud. Hopefully we can do better than a 3rd grader in the future…

Here is a stat, perviously posted, that I still can’t wrap my head around since it is so high. Prime Jumbo delinquencies “California and Florida spearheaded the rising delinquencies seen by Fitch, jumping to 10.8% and 16%, respectively, from 3.5% and 7.3% a year earlier.” (1/13/2010). (Prime Jumbo’s 60 days or more behind in payments)

I would hazard a guess that our area of Florida probably has a higher % then other areas of Florida….so the 16% average for Florida could be substantially higher for our area.

Unemployment may play a large role, but I can’t help but thinking strategic defaults are huge too……if you are underwater 20% on a $100K property….no biggie but when you talk about a $1M, $2M, etc property well it might be worth the trouble to just walk away. These are PRIME borrowers…….PRIME! Not unsophisticated, lesser educated people. We haven’t seen this wave yet as these go into default over the next few years. Prices could tumble on the high end substantially more (unlike previous posts that the “rich” are different and that market won’t be affected). Prime Jumbo delinquencies and defaults are worth watching……very interesting too.
196 Joe /Jan 24, 2010 at 3:06 pm Vote:

I love how AJ goes berserk when people make comments and then, about 10 posts later, lets it slip that the original comment was true all along. Here’s a perfect example:

AJ said: “Yes it does not make sense to buy water view flats and rent them. You have to subsidise these. I have bought [my unit at 1800 Club] to live in it and while i am waiting to move in, in the interim, I am renting it out to recover some costs.”

Um, okay, then why did you take us off on this 20 or 30-post tangent to argue that rents are being subsidized if you knew it was true all along?
197 gables /Jan 24, 2010 at 3:28 pm Vote:

Joe, you subsidize with rents if you plan to move into the unit within the next few years. The unit is not an investment unit, and you are simply covering costs until you are truly ready for the unit. If your time frame is beyond say 5 years, not such a smart move. but this happens all the time-allows you to buy early and get the unit you want rather than parsing through limited inventory when you are truly ready to buy. Its the premium you pay for the unit of your choice. If you truly bought as an investment unit and are subsidizing, then you are a fool and poor investor.

Angel, you will find the large majority of units in Brickell and Dowtown area rent for a somewhat common price regardless of building and view. Premiums are not exceedingly high for the majority of the market. This is because truly only around 10% of available units are premium-contrary to what your real estate pro will say. 2B units seem to list between $2000 and $2500 throughout the area-actual rentals are less. How much lower or higher will the trend be in 12 months?
198 Joe /Jan 24, 2010 at 3:36 pm Vote:

gables — I understand what AJ is doing, but that doesn’t change the fact that rents are, for whatever reason, being subsidized, which is why AJ’s tenants “love” their situation.
199 Gixxer 1000 /Jan 24, 2010 at 4:51 pm Vote:

“Bah humbug. dont just quote some ghost website and then fail to provide the link to substantiate your claims. show me that silly site which ranked 1800 low and i will pick it apart.”

http://www.condoreports.com/real-estate-reports/1800-club-condo_miami_condo_5835

AJ, as you can see with my debates with others here I’m more bullish on the market than most. But I’m not in favor of stretching the truth.

“HOA is 42 cents/sf. The monthly HOA is $365 on a 1/1 and $520 on the larger 2/2. So the net total cash outflow on your example would be $1285. If he was a renter, he would be paying between $1350 to $1450 on rent for the same unit.”

From the information that I’m looking at 1/1 are going for about $185k. With 20% down I’m getting :

$795 mortgage
$365 HOA
$325 Taxes
$1485 Total

Looks to be plenty of 1/1 units rented between $1200 and $1400 so I’d say $1350 is fair. So at current rates you can own for:

$1485 + $37k for down payment

Or rent for:

$1350

“The proof of the pudding is in eating it. Go to the 1800 Club and ask any renter in elevators, pool side or the lobby or the pace park. They will telll you how happy they are living there.”

I’d be pretty to happy to live their too if I was paying $1350 instead of $1485 plus a $37k down payment.

I’m not trying to say that 1800 club is not a nice place to live. I’m talking about whether or not it is a good INVESTMENT at current prices.
200 Renter Tom /Jan 24, 2010 at 5:33 pm Vote:

Gixxer 1000 – Under your numbers I would probably be a buyer in 1800 even though it is a tad more expensive to own if I planned on living there for 5 years or more and wanted it as my primary. I’m renting because the disparity is so large (around 1/2), I’m not set on where I want to live yet for long term, and I don’t want to absorb the price declines (2008, 2009, and now 2010) for the more upscale properties. I’m sure AJ bought a very nice unit with a very nice view….but at what price? Add the purchase price plus carry costs minus rents….
201 DML /Jan 24, 2010 at 7:30 pm Vote:

Gixxer 1000:

In coming up with a net cash outflow for owning you must take tax consequences into consideration. Using your numbers, my estimate is that you reduce your personal tax liability by about $270 a month (mortgage interest and real estate taxes times a 25% federal tax rate). Therefore, the net cash outflow by being an owner is $1,215 a month versus renting at $1,350 a month. Aside from the fact that you need to make a down payment, the differential or “spread” between rent vs buy starts to make the analysis more interesting.

DML
202 Joe /Jan 24, 2010 at 10:53 pm Vote:

DML — But by the same token, you also have to factor in the lost interest income (opportunity cost) from dumping a huge down payment into a piece of r.e. that might not appreciate over the next 3-5 years (and could even depreciate).
203 DML /Jan 24, 2010 at 11:42 pm Vote:

Joe:

The interest rate on that amount is around 1.25% maximum. If you can get a safe return greater than 1.25% these days, please let me know. Using the 1.25% rate, the interest on the downpayment amount of $37k is $38.54 a month. Don’t forget you have to pay tax on the interest income. So the net interest lost by taking your $37k and making a downpayment is $30.00 a month. I am not sure that this opportunity cost is meaningful because interest rates are almost zero.

Going back to the post # 201, the the net cash outflow by being an owner is $1,245 a month versus renting at $1,350 a month. The “spread” between rent vs buy is virtually the same and still interesting to analyze.

Keep in mind, cash doesn’t appreciate either. If we start experiencing inflation in the future, then effectively cash would be considered as a depreciating asset if interest rates don’t keep up with inflation. That’s reason to favor real estate versus holding certain other types of assets such as cash.

DML
204 Renter Tom /Jan 24, 2010 at 11:56 pm Vote:

DML – Sure….you can get 1.45% easily at ingdirect.com — electric orange checking account. Easy ACH transfers with no limits! The only downside is they don’t allow POD accounts so your limit is $250K for FDIC insurance coverage. There are others too but this is just one of them.
205 gables /Jan 25, 2010 at 12:39 am Vote:

As I noted previously, you will get very interesting numbers for 1B in the rent vs buy argument now and in the near future. problem with owning now is if you need to unload your property to relocate. can you do it quickly and not at a loss? otherwise its almost a crap shoot on the better deal. Two bedrooms still have some downside risk on price drops but are getting much closer to rentals.

As DML noted, missed opportunities on $37k are a nonissue. Not enough to lose sleep over, but that dollar amount gives you the opportunity to buy a home-better use than sitting in a bank. As in, I cant get rich with $37k but i can own a home.
206 Joe /Jan 25, 2010 at 1:02 am Vote:

gables — Not to belabor the point, but for $37k one would own a liability much more so than one would “own” a home, at least in the sense that no one is expecting much (or any) appreciation for Miami r.e. over the next 3-5 years.

…

DML — Point taken re: the interest rates at banks, but there are plenty of other investment vehicles that are at least equally safe as Miami r.e.
207 gables /Jan 25, 2010 at 1:09 am Vote:

joe, one would still own a home and the satisfaction that goes with it. while i rent, and will continue until things work themselves out, there is a sense of stability which comes with home ownership. RE appreciation should not be a primary driver in RE ownership for most people. what it does for most folks is force them to commit money to an asset rather than spend on foolish things-this is beneficial over time. this forced savings (assuming the asset was purchased at a reasonable price) is a good thing.
208 AJ /Jan 25, 2010 at 3:01 am Vote:

MMT,
Thanks for correcting my numbers. I think I had one too many mai tais at the tiki bar I guess.

gables,
regarding the Brickell rentals in 12 months from now, a very accurate picture will emerge if you watch what will happen to the 56 units listed in ICON for rent.
Firstly how long will it take to rent these units? How much discount will be given on the asking prices (which are ridiculous right now).
You will know this info only if these units are listed on the MLS. If the Related office is renting these by bypassing the MLS listing, then we will never know how long these units are on the market and how much they eventually rented for. Probably Lucas can tell us if these units are listed on the MLS.
209 AJ /Jan 25, 2010 at 3:26 am Vote:

gixxer,
I checked out the website. I was LMFAO. I don’t even know where to begin. Every piece of info is inaccurate. They cant even get their sq footage right. They listed a 07 at 900 sf when it is 1222 and showed per sf price at $450 or so. Even all the 1/1 are listed at 645 when they are 841. That is just the beginning. I did not even felt like going through that stupid site with full of amateur info.
I was still trying to figure out where they have the info regarding how they arrived at the bullshit conclusion that 1800 is better than 18% of the buildings in Miami. Maybe they thought 1800 and 18% go well together!
I refuse to even open that shit site and search for the criteria, based on which they ranked the buildings. If you find it, please popst it here and I will gladly spit on all that misinformation.
Gixxer, You have posted quite a lot of good info in the past. I guess you are very smart. But how did you get carried away by this dirty piece of online rag and ended up quoting it, reducing your own stock and credibility? I guess you always knew this was a bullshit site with bullshit info. That is why you did not give the link initially until I challenged you.
210 Gixxer 1000 /Jan 25, 2010 at 11:35 am Vote:

DML,

Please go back through the last couple of months. There was extensive discussion on this and I was ridiculed for trying to show them the risk-free rate. Although I agree with some of your theory you’re not applying the principles correctly.

Real Estate is a Long-Term investment and therefore you should not be using a short term risk free rate. Everyone’s investment time line is different but you’re probably going to need to hold for at least 5 – 7 years minimum in this market. That would put the rate closer to 3%.

When you look at the gain of 3% on $37k over a 7 year period that works out to about $8505. That’s about $100 a month minus any tax depending on personal income.

“Using your numbers, my estimate is that you reduce your personal tax liability by about $270 a month (mortgage interest and real estate taxes times a 25% federal tax rate).”

Just because you reduce your liability by $3240 a year does not mean your going to increase you refund by $3240 a year.

Let’s say someone makes just enough to own this property. $1485/.28 = $5303.
$5303 x 12 = $63,642.

So someone making $63,642 with a $37k could own this unit provided the rest of their debt isn’t to high.

$63,642- $5,700 (standard deduction) – $3,650 (standard exemption) = $54,292

Tax on $54,292 = $9,754

$54, 292 – $3240 = $51,052

Tax on $51,052 = $8,944

So while it reduces this persons tax liability by $3240 the difference they see in their pocket is $810.

So $1485 -$67 ($810/12) = $1,418. And this is also assuming that you will have to make zero repairs as an owner, which is a stretch. Most people who own rentals anticipate at the minimum $75 a month for minor repairs.

$1,418 + $100 (lost interest on $37k) = $1,518 to own

Or $1,350 to rent.

If I wanted to live here that seems pretty reasonable. But when comparing this to another investment it seems pretty weak. The 1/1 don’t have a water view.

Let’s take Vue at Brickell. 1/1/1 are going for $100k. Close to metro rail, Mary Brickell Village, etc.

So your talking about a $20k down payment and:

$430 mortgage
$450 HOA
$262 Taxes

$1142 Total

They seem to also be renting at about $1350. Renters aren’t going to pay that much of a premium on rentals. For investment purposes I’d rather take Brickell at $150 sqft than Wynwood/Edgewater at $220 sqft.
211 Gixxer 1000 /Jan 25, 2010 at 12:27 pm Vote:

AJ,

I’m not declaring everything on that site as fact. But I find it hard to believe that the site was created for the sole purpose of discrediting a few specific condos.

Furthermore that site was quoted in the Miami Herald, New York Times , Daily Business News and Multi-Housing News.

“I refuse to even open that shit site and search for the criteria, based on which they ranked the buildings. If you find it, please popst it here and I will gladly spit on all that misinformation.”

It says the health rankings are based on pricing trends and condo association stability. But I agree that its not very clear. I wouldn’t take it as gospel but it is a valid objective source for someone gathering information.

I would assume the fact that 1800 Club Ltd owns 73 units has something to do with the low score. The buildings where there are more primary residents seem to rank higher.

For someone so quick to spit on objective information why don’t you provide criteria on how you came to these three conclusions:

“Firstly, 1800 Club is practically all sold out (90%). The developer has purposely held on to the last 10% so that he can retain control until Dec 2010.”

“You may have a glut of flats elsewhere but we do not have that problem in our building.”

“Almost fully sold out, very favorable investor/end user ratio”

I find it hard to believe that 423 (90% of 470) units are in the hands of investor/end users when there are only tax records for 199 units. And 1800 Club Ltd owns 25 of those 199 units.

http://www.miamidade.gov/proptax/home.asp?Searchby=address&Process=List&SQLSearchCriteria=address&SearchAlt=1&NavParam=Browse&WhichPage=1&PageSize=15&SearchCriteria=1800%2CN%2CBayshore+Dr%2C%2C
212 Gixxer 1000 /Jan 25, 2010 at 12:53 pm Vote:

I almost forgot. I don’t think anyone is worried about your credibility because it obvious your only here to push 1800 because you own there. But these calculations seriously call into question you math skills:

“I dont know if my meathod is right. I was expecting to see the rental premium to be much less than ownership premium for a water view flat. but the results came out different.

Av. Premium paid to own per SF for water view $90 ($260 vs $350) = 75%
Av. Premium paid to rent per SF for water view $0.20 ($1.60 vs $1.80) = 89%”

How on earth did you ever confuse yourself enough to think that paying $90 extra was a 75% premium over $260????

But regardless of your faulty math it clearly contradicts your own previous argument for pricing:

“For non water view or partial water view flats:

Less than $125 : A Steal
$125-$175: A bargain
$175 – $225: Ok to buy to live in if you really like the flat
$225+ : It better be outstanding

For direct water view flats:

Less than $250: A steal
$250-$325: A bargain
$325-$400: Ok to buy to live in if you really like the flat
$400+ : It better be outstanding and in buildings like Paramount or Marquis”

$125 – $175 + 35% premium would be $168-$236
$175 – $225 + 35% premium would be $236-$$303

Your placing 80% to 100% premiums on water views. And if you don’t understand the math, you’re basically saying someone will pay DOUBLE just for a water view.
213 Renter Tom /Jan 25, 2010 at 1:20 pm Vote:

Gixxer 1000 – That’s just AJ, he is a long time known shill for 1800. He also thinks comments on this blog can swing the RE market substantially. He has accused people that post realistic, blunt comments of trying to talk the market down in order to snap up a condo at a discount….as if. Which explains his shill posts on 1800 which he probably thinks props up prices there. Heck, you can charge 89% more for that water view! LOL
214 DML /Jan 25, 2010 at 2:05 pm Vote:

Gixxer 1000:

Let me try to help with your understanding of the tax calculation. Ownership in our example provides a $270 a month real tax savings (this is real cashola!). The $270 tax benefit is attributed to $12,960 of tax deductions (mortgage interest and RE taxes annually). You need to subtract the $12,960 from your hypothetical income of $54,292 which results in taxable income of $41,332. In your example you subtracted the tax benefit of $3,240 ($270 times 12) which is incorrect. You must subtract $12,960 of deductions (not the tax benefit) then you end up with a lower tax liability and you get back to saving $270 a month in real cash!!!!

People overlook the tax benefits. But this is real cash either in your pocket or out of your pocket. All investment decisions should consider the tax consequences, including the rent vs buy decision.

By the way – anyone who ends up with a tax refund is not doing their planning very well. You have in essence made an interest free loan to the government. You should always end up either owing some tax (without penalties) or end up with a zero payment.

Thanks,

DML
215 Renter Tom /Jan 25, 2010 at 2:42 pm Vote:

DML – Don’t forget the phase outs of itemized deductions based on income and of course the dreaded AMT!!! Oh, and all of that is influx under this administration….so how do you plan, how do you plan……
216 Gixxer 1000 /Jan 25, 2010 at 3:46 pm Vote:

DML,

You are correct. I agree that my calculation is wrong. You had already discounted it 25% for that particular tax bracket.

I’m not however overlooking the tax benefit. I tried to argue the savings in tax a few threads back and no one wanted to hear it, so I’m glad someone else is looking at the entire picture.

You were also wrong for using a short-term interest free rate when you have to hold real estate long term. But my argument is not that this is not a good place to own its simply that it’s not the best investment right now. For example looking at the two units in my last post you get:

1/1 @ 1800 club:
Rent $1350
Own $1485 -$270 (tax reduction) + $100 (Loss of interest on $37K) = $1,315

If you hold for 7 years:

Income = $1,350(rent) x 84 months = $113,400 x .75 (occupancy rate) = $85,050
Expenses = $1,315 (mortgage) x 84 = $110,460

$85,050 – $110,460 = -$25,410

1/1/1 @ Vue:
Rent $1350
Own $1142 – $150( tax reduction) + $54 (Loss of interest on $20k) = $1,046

Income = $1,350(rent) x 84 months = $113,400 x .75 (occupancy rate) = $85,050
Expenses = $1,046 (mortgage) x 84 = $87,864

$85,050 – $87,864 = -$2,814

Now I probably should have increased the price of rents in the latter of the 7 years which would easily put the Vue back in the black. And I also didn’t deduct any money for repairs. But this is simply to prove a point.

With rents where they are it makes no sense to pay a premium for things that most renters don’t care about. They all have pools and workout rooms and were built in the last 10 years. You need to be in the right location at the right prices. Brickell is a better location for renting and at $142 sqft you have a much better chance at appreciation in 7 years than you do with 1800 club @ $220 in the Arts District.

A month ago most people were pretty much saying you shouldn’t buy anything, anywhere. I’m glad that you are pointing out that this just isn’t true. If you want to own there are plenty of opportunities and if you want to invest there are plenty of opportunities. I just think that at current prices 1800 club may be one of the former and not one of the latter.
217 DML /Jan 25, 2010 at 7:38 pm Vote:

Gixxer 1000:

Yes – it just seems to start making more sense for buying vs renting as the prices continue to drop. I do understand that rents will also drop, but the analysis now is worth doing. Especially, the after-tax results need to be used for the analysis.

I am going to take a hard look at both the Vue and Infinity. Any thoughts on Axis?

DML
218 DML /Jan 25, 2010 at 7:47 pm Vote:

Tom:

Guessing the future tax rules during any administration is not easy. It’s not as difficult though as trying to guess which way the property prices or rents are going to go, or trying to predict how much the prices will increase or decrease. This is a real challenge!

DML
219 JC /Jan 26, 2010 at 11:58 am Vote:

Info per Blockshopper
Avra Jain is an investor who bought about 14 units in this building. She paid $315K for this unit in 12/07, no details about the financing. Sold to Joeys Grill? Google her name, she developed a high rise in Sunny Isles

Sales History (2001-present)
$137,000 on January 7, 2010
B: Joeys Grill Llc
S: Avra M Jain
$315,000 on December 26, 2007
B: Avra M Jain
S: 1040 Bisc Assoc Llc

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1 Bedroom at Ten Museum Park Sells for $137,000

January 18th, 2010 · 219 Comments

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