Blue Condominium – 1 Bedroom/1.5 Bath Foreclosure – $229,000

I wonder how long the term “break-even cash flow” will apply to some of these deals. We have to keep in mind there is also going to be an over supply of rentals which should drive rental rates down.

Lucas, what are your thoughts on rental rates into the near future?

Rental prices will go down. I’m telling all of my investor clients to get their units rented right away and to only lock into a minimum of a 12-month lease. The longer the better. As you said, a large portion of the condos hitting the market will end up being rented out by investors turned landlords.

Not bad – you could rent it out for $1600 and probably pay $1250 on mortgage; then again – dont forget assoc fee ($326) and taxes ($ 6,315 / 12).

They say its renters paradise – but can you find 2/2 1200sf+ under $1600 in Grove or Brickell?

I like to pronounce the “Deutsche” in Deutsche Bank as “douche” (the feminine hygiene product). I think they are the biggest bagholder in this whole mess. I see their name come up more than anyone else in these foreclosure listings.

Anyways, yes – looks close to breakeven on the cash flow (still a little high). Still think we’ll see positive cashflow in some of these buildings at some point.

Lucas,

As a realtor I think that is where we are headed. Now the other people who are selling in that building will have to lower their prices! That is the trend unfortunately with foreclosures.

BFG – re: Deutsche. It would be nice to think that DB are the biggest bagholder but look carefully, most of the time DB are actually the Trustee/Agent for some other lender (direct or wrapped up) so it’s not actually on or off balance sheet risk

I used to think the same but it’s not as simple as it seems.

@Generalmagic. Fabulous eh. And why not, seems to work in almost every other country in the world that the rent and mortgage/costs are more or less a wash. Why should it be any different in the US.

More and more of these will be popping up and this is going to create opportunities for those who have the cash (and cojones!) to buy during the market downturn.

The BIG question is: How long should you wait?

Timing is key, but I have a feeling that this is only the beginning. There are still so many new condos in the development pipeline. When that inventory hits the market, shit is really going to hit the fan!

BFG
deutsche is just the servicer for the securitized pool. it doesn’t mean they’re eating a loss here. if anything, servicing is quite profitable – your fees get paid first before any bondholder.

At least someone could afford to fund this. I was just looking at a 2000 sq ft unit at the Bath Club.

At $500 a sq ft, maintenance runs to nearly $2000 a month and taxes would be about the same. Throw in your utility bills and you’re talking $50,000 a year just to run this “home”. That’s a whole lot of pesos.

And these things are built for 2nd homes? I think I’ll come back in 2012…

We’re now including utility bills into the mix? Wow! Don’t forget to include the expense for a maid then.

Regarding Deutsch Bank: you’re right – in the world of collateralized debt securitization, it’s hard to sort out who the bagholders really are. I didn’t even try, to be honest.

However, because I have an immature sense of humor, I am still going to keep pronouncing it “Douche Bank”. It’s funnier to me.

Anyways, anyone want to make any predictions on whether we see a lower price than this in Blue? For the record, I think we’ll see plenty of sub-$200k condos in Blue in the near future.

Aw Lucas – since it’s you I’ll give you a few thousand back in your pocket and call it a round $45,000

My point is that make that kind of money work for you – not pour it down the drain.

(actually the maid was cheaper than the utility bills, it was the butler that was pricey 😉 )

Lucas,

I really don’t see this as a phenomenal deal. The unit is basically priced at 300 PSF. There’s several units which recently sold at Quantum on the Bay for close to 300 PSF. I would consider this a good deal at $250 PSF and a great deal at $200 PSF. I think we’ll be seeing many units selling at $250 PSF in 6 months and possibly sales in quality new buildings at $200 PSF in 12-18 months.

You’re right…them butlers sure are pricey these days.

Alex – New development pipeline turning into mass foreclosures? I doubt it. I would expect if anyone doesn’t have the cojones to close or in a bad position then the developer will take back units and try to sell at the least for pre-construction pricing for the first year. They will shop the units to a bulk buyer also. A majority of the buyers sitting on the sideline today include people looking to purchase to live in the property – I believe they would be very much interested in purchasing straight from the developer a defaulted unit if being sold… Read more »

Wow, I get the feeling with some of you guys that even if it was free you would still criticize the deal and wait around wanting a better deal. Guys the fact is there is a bottom some where however, where it is no one knows. We may be at it, we may not, but to keep things fair lets look at the other side of the picture. I think with the devaluation of the dollar (today we reached an all time low against the EURO) many foreigners will realize this exchange rate won’t last forever and decide to buy… Read more »

To: RG

You think USD can’t go lower – it will drop even lower.
You think Obama won’t be a president – he will be the next president.
You think we dont get hit by meteor – well, take a wild guess what is going to happen

And don’t forget global warming – 40 years from now when all the icebergs have melted – all the new constructions in Miami will be under the water

Hey RG 1. I get 6.3% on my sterling deposits, instant access (check cahoot.com, icesave etc). Take a look at short term deposit rates in all the countries you think are coming to your rescue. USD rates might be low, but hang on, you’re expecting foreigners to help you. Check out Russian, Chinese, Indian, UK, Euro and Brazilian deposit rates. Not 3.5% my friend, not even close. Oh and don’t forget US law requires that foreigners, when they sell their property, not only have to pay full capital gains tax but have to put 10% of the gross proceeds in… Read more »

RG,

You purchase that condo at blue and you get what.? You barely break even as an american if you pruchase it. No way are you flipping it and making a profit. All these foreigners, I see them but few are making offers. I should say offers that represent the real listing prices. By the way if it is free I’ll take it. Holla when it gets there.

“when the opportunity came and went while you were just sitting on the sidelines waiting?” Adjusted for inflation, the Miami housing market was pretty much flat from 1987 to 2001. What makes you think the market won’t be likewise flat for 14 years after hitting bottom? Wouldn’t that be the logical thing to assume, if you’re going to assume anything? There’s never been a housing bubble like this one in terms of the levels of fraud and speculation. Why shouldn’t Miami’s housing market be flat for the next 20 years, adjusted for inflation?… and what happens to all these foreign… Read more »

For those of you who aren’t local to Miami and don’t know Blue Condominium, click on the following link to view a video of a condo unit in the building. Forward to the end of the video to see the amenities. Disclaimer: the unit that you see in the video is a Penthouse unit. It is listed at $1.4M. I don’t want anyone to think that this is a typical unit in the building, because it isn’t.

http://www.galavideos.com/videos/blue_web_Anamorpic.mov

Even though I listed biggest disasters that can happen to SoFlo condo market – there are still peeps out there who want to own a home (or 2nd) in this area [coworker of mine just signed at a dotted line for a condo @ 205$ per SqFt]. Not a bad place to live – just so darn risky investment at the moment.

Lucas – even though I can’t see the video – how would you go about throwing a 600K lowball at them?

Margus, I wouldn’t. I know for a fact that there’s an offer of around $1.1M on the table. The seller is looking for $1.2M depending on how much furniture the buyer requests.

$600K!!!! Come on! It’s a fully furnished Penthouse with over 3,000 square feet. Anything under $1M would just be an insult.

How common is this? I’m considering a new construction building just completed in Broward, and I know for a fact that the developer has a bunch of units unsold and whose contract holders backed out on. I’d love to be able to get one of these at pre-construction prices, BUT being able to use the original contract holder’s deposit. Otherwise the pre-construction price is still too high. Is this common or should I forget this idea? “Those units would most likely fall back on the original contract holders (and in some cases I believe they would get to retain the… Read more »

The housing bubble has warped peoples’ perception of what a good deal is. This reminds me of when i was caugth up in the stock market bubble in 2000-2001. I had recently graduated from college and was buying stocks (YHOO, BEAS). Yhoo was over $200 at one point and when it dropped to $160, I though it was an awesome deal. I didnt have much to lose back then, but i did lose everything in the stock market. One important lesson I learned is that dont judge future value by current or short term past values. I drive by the… Read more »

carbon black cab,

there are LOTS of corrupt politicans and drug dealers all over miami – even that hasn’t helped the real estate mkt !! 🙂

Bulk-Buying Vulture Funds = Welsh Bowmen
Euro-fueled foreigners = Troops from France
Sitting-on-the-sidelines renters = Irish Conscripts…

Even if dispatched weeks ago, we all know how the Battle of York turned out for Longshanks the developer and his Condo-owning minions…

I lived up the street from Blue, and the area around there is just horrible — homeless people sleeping next to the bay, nasty ghetto people at the Denny’s, and beggars at the Taco Bell.

It’s also a royal pain to get in and out of the building – The infrastructure is just not there.

I wouldn’t recommend that building or its sister – Charter Club – to my worst enemies.

A little offtopic.

What happened to that guy that was selling pieces of his condo he had bought in pre-construction?
His website has not been updated in a while

Further signs that Alt-A has cracked this morning. More write downs, more price reductions, more fire sales.

a breakdown in alt-a will be big (bad) news. although not the gold standard of packaged loans, in effect, it represents good credit score borrowers with minimal income documentation. if these folks are defaulting, then the credit and housing downfall is not contained to just subprime borrowers. i think it reinforces the notion that buying real estate right now, whether as an investment or primary residence, is just a bad idea right now (sorry to all the realtors). too much downside risk and prices are still nowhere near matching historical fundamentals. if anything, right now, i’d be hoarding cash and… Read more »

Samir, There will definitely be many foreclosures due to the current gap between rental rates and carrying cost. Some may even result from other increasing financial pressures on unit owners (association fees, special assessments, taxes, etc). Not to mention the economy is not doing so hot right now. My point was that the bulk of the new condos haven’t even hit the market yet. When the supply of units for sale AND rent furhter increases, it will drive prices down even more. There simply isn’t enough end user demand to sustain the current price points. This downward pressure should last… Read more »

You can just pay one of the hundreds of bums and homeless people outside the building to be the maid for cheap. Most of them look like Tyrone Biggums from Chappelle.

That rental stream “might” break-even if you rent it out 12 months every single year with no downtown. But in reality, there will be a few months vacancy, commissions to pay, and thousands of more rental units coming online (look at 50 biscayne, midtown, 10 museum rentals), and money to market and repair that condo.

NY Times article on the increasing number of people walking away from their mortgages: http://www.nytimes.com/2008/02/29/us/29walks.html?_r=1&oref=slogin Pretty scary…and it will get worse. Basically, buy a home with no money down, cash out any additional equity, don’t pay your mortgage, get to live in their free for a few months, then walk away. If value goes up, cash out some more equity, if it goes down walk away. The buyer can’t lose. My goodness the banks were stupid, no we all are paying for it through higher home prices or through taxes. Banks won’t go after these people for the additional money… Read more »

does someone have any info on attorney Cooper. He seems to represent some buyers in Quantum

i’ve seen cooper in action on a specific matter. he got beatdown.

Buyer Tom – I am stunned by the statement in the article that says (for example) in California you are not responsible for your debt. What on earth has been going on in the US? In the UK, if the bank forecloses and you owe more than is raised, you continue to be liable for that amount forever. You have to negotiate with the bank on the remainder or be declared bankrupt. There is also no special homestead protection? What are legislator thinking? An absolute right to own a home, no matter what your worth, and when it goes wrong… Read more »

julian
you’re still liable for any deficiency. thing is, it’s just a bitch to collect on and more importantly, expensive and time consuming. factor in that a person could file for bankruptcy to discharge the deficiency, and it’s usually not worth pursuing it. heck, if i’m a lender, and i can’t effectuate a workout of the loan, i’m doing a deed in lieu just to save on foreclosure costs and expenses and would be willing to forgive any deficiency as part of the deal.

jcrimes,

does it mean that cooper is not so good? what is his reputation. Please advise

From the NYTimes article: “he learned about a new company in San Diego called You Walk Away that does just what its name says. For $995, it helps people walk away from their homes, ceding them to the banks in foreclosure” Not my deal, but anybody who starts a business like that in MIA will make a killing… an absolute killing. Just hire a couple kids that hand out club flyers and some delivery drivers to slide some business cards in condo units. No need for thanks. Just let me have a couple rides on your 90 ft. Predator when… Read more »

This may come as a surprise to many, but California and some other states are non-recourse mortgage debt states meaning the banks ONLY collateral is the real estate, nothing more. That may sound crazy, but what it SHOULD do is make banks less likely to make bad loans since they rely only on the real estate….underwriting should be stricter. But as we’ve seen that is not the case when underwriting went out the window. Sorry to correct you jcrimes, but some states are in fact non-recourse mortgage states (FL is not). Even in recourse states, many banks don’t bother to… Read more »

Think about my above post…think long and hard. Yes, the IRS law change was a major mistake and will only accelerate the price declines for the whole country. It sounded nice for the poor guy that losses his home, but that guy lived it large in a house beyond his means, may have used it as an ATM to indulge in an orgy of consumption, drove home prices up for the rest of us + inflation + now deflating dollar, got to live in his home without making payments for 6+ months, etc. etc. Darn right the IRS should be… Read more »

buyer tom you are right that CA, for purchase money mortgages on your own home, is non-recourse. but any home equity line, or investment property is fully recourse. as for the new irs rule, well, in the old days, i.e., before the rule, there was a way to get around the debt forgiveness being taxable income issue. don’t know the logistics (there’s probably a good article out there about it), but i know it could be done but was a pain in the ass (you had to get the bank to play ball). the new rule just streamlines the whole… Read more »

Is $229k for a 1/1.5 at Blue such a bargain when
you see a high floor 1/1 in the Waverly in South
Beach listed for $305k? I think Blue’s location
is too hybrid for many renters & potential owners despite its proximity/access to the beach. There is however, despite the proximity,
a wider gap in credit access than the Julia Tuttle
can span in my view between the two locations
currently.

Jcrimes – in my experience that approach doesn’t work. The hatches have been firmly closed and whilst neither approach may work in the end, I think, at least outside of downtown, the developers are still smoking 2005 arrogance.

“I am stunned by the statement in the article that says (for example) in California you are not responsible for your debt” Like other posters mentioned, CA has “non-recourse” mortgages. Many other states (such as Florida) do not – you ARE liable for any deficiency. I guess the idea is that the bank is responsible for proper due diligence when deciding to make the loan and that the house is enough collateral if there is default. However, there is still a penalty for walking away in CA in that your credit rating will take a hit, and you won’t be… Read more »

Does anyone have a status update on Met1? Looks like an interesting building and nice location, but have not been able to gather any price info, opening date, etc. Any news?

seanjohn,

That unit is a short sale. I am not sure if they have bank permission to sell at the price. We will see.

BFG – that’s the thinking I was talking about. We need pain in foreclosures. Debt has consequences, it needs consequences esp. if long term to keep committed to their position and making fewer consequences will make things worse. Many people will choose to have their credit dinged instead of being a slave to debt. Not good.

Generalmagic,
Thanks but I’m not sure which unit you mean?