Brickell on the River – 1 Bedroom/1 Bath Short-Sale – $200,000
April 13, 2008 by Lucas Lechuga
I'm quite surprised that the 1 bedroom/1 bath short-sale for $200,000 at Brickell on the River isn't under contract yet. It was offered for sale on April 1, 2008. The next best priced condo in the building, located directly 8 floors below the short-sale condo, is priced at $260,000.
Depending on someone's credit score, this condo should break-even on a monthly basis if you're able to get $1,500 per month for it with a 20 percent down payment. The condo faces west and has a view of the Miami River. The listing says that the monthly maintenance fee is $418 per month.
Last Summer, a client of mine placed on offer on unit 2703 at Brickell on the River, which has a very similar view as 2907, for $240,000. It, too, was a short-sale. The condo was listed for $280,000 at the time. The bank felt that our offer was too low to warrant a counteroffer. I received word that the bank would not accept anything that wasn't "very" close to the listing price. Within a month, the list price was actually increased to $320,000. Needless to say, the condo failed to sell through the MLS, despite the price eventually being lowered to $259,000 on March 12, 2008. The listing was canceled a few weeks later. I'm guessing that the condo went into foreclosure, but I haven't confirmed that.
Close to one year later we have unit 2903 on the market for $200,000. That's close to a 30 percent discount from what the banks, a year earlier, felt that they should be able to get. I think $200,000 for this condo at Brickell on the River North is a very good price. In fact, it is probably one of the best priced one bedrooms currently offered in all of Brickell. I guess time will tell for how much this condo eventually sells.
You’re really “surprised” this hasn’t sold? Lucas, I don’t need to lecture you or anyone else on this board about home prices (most of you are far more knowledgeable than me), but $200,000 for a one bedroom condo is still expensive. It might not be expensive compared to the insane, unsustainable and often fraudulent prices of the past five years, but in the real world, the one where where we’re heading into a recession and banks are holding back on lending — it’s expensive. No one should pay that much for a one bedroom condo unless it (a) has a… Read more »
moretrooops,
I guess the better option would be to rent the unit at a more costly monthly price. That’s the way to go. No tax write-offs either. You’re so right.
BTW, it does have a water view.
lucas
i think you’re being a little optimistic on what you’d be able to rent this place for. with a ton of units coming online in the area (wind, 1060, BOS and plaza) along with the current stock, $1,500 seems a bit optimistic.
I’ll bet it will go lower. Right now, most of these sellers in these have to find a cash buyer due to the banks blacklisting all lending due to high investor to owner/occupied ratio. Despite what people say, finding a cash investor with $200k to spare on a property that “breaks even” on a cash flow basis isn’t that great a deal…especially when appreciation is negative to flat for the next 3-4 years. With break even cash flow, you’re looking at maybe a 2-3% ROI if you consider debt reduction….most CD’s give you more than that now easily.
$1500/month is way too optimistic; these units are already renting for lower (according to craigslist) and should go even lower once all the new inventory hits the market… particular direct competition like plaza on bricell
$200k is about 10% – 15% less than the original pre-construction prices back in 2002 -2003.
the last transaction shows this condo purchased at $305,000 back in March of 2006.
For someone wanting to make this their residence, not a bad deal at all ….
The loan was from a out of state buyer. If they have a first and second loan from separate companies it will never sell at this price. I wouldn’t even bother with it.
Taxes for 2007 have not been paid yet.
Here’s some math for you: Why should I break $200K in CDs (which earns me on a guaranteed basis $8,000 per year in interest – at 4%) and use it to buy this unit (#2703) which costs $9,000 per year in HOA ($5,000/year) and taxes ($4,000/year at 2% of purchase price) just to own (nevermind the cost of furnishings/insurance)? I’d have to rent it to a solid tenant on a 12 month a year basis for $1,400 per month just to break even.
Are banks still offering 4 percent these days for CDs? I thought it was around 3 percent nowadays. Maybe I’m wrong.
Lucas, You’re right. But I’m still getting 4+% because I bought them months and months ago which is just another reason (1%+ interest I lose) if I break them to buy the unit. For what it’s worth, I’m thinking the smartest move for somebody like me – who likes hanging out in South Beach from December to May – is to buy the smallest unit in the nicest building in town that I can find for $500K or thereabouts. I’m out the 4% interest on $500K ($20K per year) and it costs me $22K a year in HOA, taxes and… Read more »
$200K + HOA/taxes. Say it was a primary residence. What type of job would support that? When you had the pizza shop manager buying a $350K condo back in the day, it made it feel like a $500K mortgage was for chumps and that if you earned a $100K/year you should be looking at $1 mill properties. Now that some reality is coming back to the market, what type of salary should a person have to be in that unit? What kind of local job in FL would get you that salary? Is it ideal for the average FL secretary?… Read more »
part of this problem is the banks who are holding properties. LUCAS mentioned that the bank wouldn’t seriously look at his offer last year. this also happened to me twice last summer when i was looking for my place. of the 2 places i offered that were rejected by the banks that selling them…one is now 220k below what i offered and STILL on the mkt…the other sold for 139k below what i offered. i won’t even go into the carrying costs the have/had to keep the properties looking nice for prospects. neither of them would even want to negotiate… Read more »
I lived in Brickell on the River, and when I left 3months ago in Jan…the association had a large deficit. $418/mth does not include special assessments.
That RIVER view is just “ok”..nothing like the BAY view I currently have now. The draw bridge is loud, the pool only receives sunlight 2 hours a day (in the very early morning due to BOR South Tower), valet is expensive, and walls are thin…etc.
Im no RE expert, not even close. Im always interested in hearing about deals like this but, in this case, I dont really think its a “deal”. Sure, the $200K price sounds like a deal at $264/sqft considering the unit is on the 29th floor and has decent views (better once construction has finally ceased in the area). However, while you get a decent price on the unit itself, you get boned on taxes and HOA monthly fees. Thats why this “deal” doesnt make sense to me. Let me ask a question since, again, Im no RE expert… Right now,… Read more »
Interesting to see the virulence displayed whenever Lucas or anybody mentions a “good deal.” I think that $200-250per sq ft in a quality building in Brickell is where things will settle. Just by saying that though I’m sure that I can provoke some heated discussion. My point is that I may be wrong but that’s my view and that’s where I’m willing to stick my neck out and buy. I personally believe that the rental breakeven argument is a hard one to beat (unless its the rent and make some money argument).
Lucas/all – banks in fact *ARE* offering 4%+ CD’s. 1 Year CD’s can easily be obtained offering 4.4% I also see a 4 year CD offering 5% as current best yields. There’s also the Corporate Preferred/ Muni Bond strategy. Yields for relatively safe and tax advantaged Munis are sky high right now due to the AMBAC/MBIA fiasco…plus, I have a 25% (my marginal tax rate) built in yield advantage since some munis aren’t taxed federally or state. Florida negates some of the benefit by not having a state income tax, but in some uber high state tax places (NY, CA,… Read more »
http://www.fatwallet.com/forums/messageview.php?catid=52&threadid=682884
a good resource for the best CD yields out there.
If this rents out for $1300 a month it would make sense for a person to buy it for around $150,000 and I dont personally see it goin much lower than that unless rents drop to $900 . That said I deal with REO departments every day and they are very hard to deal with and have no idea what they have. They treat every property as a file and they all take the same similar approach to negotiating. If the Apartment isnewly listed and they get an offer they counter back with something ridiculous like $1,000 off the asking… Read more »
Interesting video on the history of house prices.
You can buy municipal bond closed end funds that pay 6% tax free as a result of the subprime fiasco. It’s not riskless but a lot less risky than betting on real estate right now.
Interesting video on the historical prices of homes.
I kind of worry about buying any kind of long bonds. How long can the FED keep interest rates down in the face of ripping inflation and with stories of world hunger and starvation on the rise due to pricing of agricultural commodities. If you can find hi yielding medium term bonds wouldn’t it be less risky?
http://www.reuters.com/article/businessNews/idUSL1436950820080414?feedType=RSS&feedName=businessNews
I recall some posts about bubbles taking a decade to shake themselves out. Considering the down is 12500, only about 5oo points higher than the Jan 2000 peaks…it seems like the US econonomy is still struggling to shake off the sins of the past. Two asset bubbles in various states of deflation/recovery at once…wow. I fear a commodities bubble cras
Anyone go to the RE auction in FLL this weekend?
Short sales are usually a waste of time. Most of the sellers haven’t received permission from the bank to do a short sale, or an approved price range. It gets especially hard when there are 2 mortgages on it (which is common). Usually the first mortgage holder is stubborn, since it’s the second mortgage that is really taking the hit. And the second mortgage holder doesn’t really get anything out of the deal unless the first mortgage holder gives them something, so they’re not motivated to do anything, either. Most banks these days have enough writedowns, so they’re not eager… Read more »
Lucas, Thanks for showcasing this condo. While this appears a good deal now, I would imagine this is going to become the average deal over the next year. Not that prices will decrease much further (probably no more than 10% from the price listed), as a realistic bottom must be reached sometime. This price is now attractive to me, an average prospective buyer with financial capital. If the rest of the sellers in the market realize this is a realistic price point, perhaps the market will pick up again. Buyers with cash are out there, but sellers must meet our… Read more »
Brickell had such an overgrowth of building, I’d expect these units to sell south of $200K. Bank mortgage writeoffs have just started.
I just saw this article on msnbc about rents. Here is a chart that shows rents going up and down depending on the city you are in. Miami is down 3%. Miami $1,411 $1,368 -3.0% Rent ONE-YEAR CHANGE Median rents for the first quarters of 2007 and 2008, with the percentage change in valued for 12 metro areas. Area 2007 2008 Change Atlanta $1,007 $986 -2.1% Austin $936 $907 -3.0% Boston $1,593 $1,645 3.3% Chicago $1,328 $1,355 2.0% Las Vegas $1,053 $1,056 0.2% Los Angeles $1,638 $1,699 3.8% Miami $1,411 $1,368 -3.0% New York $1,606 $1,751 9.0% Phoenix $1,035 $939… Read more »
As far as housing is concerned, money has lost its value in the last 5-6 years. 400K used to be a LOT of money for a house. All those big houses in Coral Gables near biltmore hotel were selling in the 400-600K range. Now they are in the millions. This 200K condo seems cheap, but numbers dont add up when you do the math. As an investment, you will lose money for many years. The prospect of property value rising anytime soon is non existent. Event if you get a hot deal on a condo, what about the other empty… Read more »
A review of that pathetic river (with the grey box hotels on the other side) is not a true “water” view — not in Miami at least.
This unit is $50k overpriced — the next six months will prove it.
I went o Fll auction saturday- The club at Brickell-1 bed-185k+ 5%-ridiculous people.
2 beds at the Vue went for 150k + 5%.
2 beds at the club,with a good view-a stupid 280K + 5%.
There is a lot in front of that view-eventually,5 years?,someone will build there.
Kim,
I went. And to add to Eli’s comments. Many bottom feeders. The only problem is buyers would bid on the properties and the auctioner would say…”sold”. The only caveat is that is it subject to seller’s approval. So now the buyer has to wait and see if in fact their bid was approved. Kind of a waste of time and, in my opinion, not a true auction.
The thing that strikes me about this market is that people consistently use historical sales data to make relative comparisons about “a good deal” or “great value.” People, what happened in the past with these buildings is completely irrelevant. Just because they teach real estate agents in real estate agent school to use historical prices of “comparable” properties to set a sales price doesn’t mean its the correct, or only, valuation method. The only thing that matters is what you can sell a property for today, or, taking into a buyer’s expectations, a short time into the future. Period. Historical… Read more »
that is a lot of money for box with high taxes and monthly condo fee.
As a renter, I just don’t see why I’m supposed to get excited about $1500/month for glorified closet space in an as-yet unlivable neighborhood.
Lucas – I dont know how in good conscience you can state that this unit will cash flow positive. Liar loans withstanding, I dont know of anyone offering investment loans right now below 6.4% Based on 20% down payment, 5% vacancy per year (2 1/2 weeks per year), $418/mo HOA dues, $800/year in misc expenses (repairs, advertising and self managed (despite the fact that most realtors take 1 mo rent to list rentals)and 10% ongoing management fee)…this unit is a *WHOPPING* $4700 a year negative!!!! Truth is, in this building $1500 a month may be generous…there are units on craigslist… Read more »
Doc,
I am in agreement with your comments and understand your logical reasons for a buyer to purchase a property. What I don’t understand is when the condo market was going crazy in the years 2004 – 2006 and prices were increasing from one month to the next, the “buyers” did not hesitate to close even at above asking price and in today’s situation the prices have fallen substantially on similar properties and “buyers” are waiting for even lower prices? Is it the fear of overpaying or the hope of lower prices ?
not a great building, not a great unit, not a good location, and not worth 200k. If this was a building in downtown near biscayne like one miami, 50 biscayne, etc. than that would sell REALLY quick. to be on the river and away from the “good part” of downtown i wouldn’t pay 200k.
not worth it at 200k. this is not a luxury property and should go lower.
BILLY K said: “Is it the fear of overpaying or the hope of lower prices ?” The reality is that the Miami market got really disjointed starting around 2001 when investors who never had any intention of living in Miami started buying up property en masse to flip. ie. People who could care less about Miami bought as if they were buying shares of stock to flip to another person. Now, the market has flushed those speculative people out of Miami and all that’s left mostly are people who want to buy in Miami to live in Miami. This situation… Read more »
I don’t believe these buyers on the sidelines will ever step in.
20% down financing requirements eliminates over ??% of locals. Foreign investors have their own problems in foreign economies.
Anything with granite counter tops and European style cabinetry is worth at least $305,000. I would bid this property back up to at least $305,000 if my bank would loan me the money.
i agree that this unit should prob be priced at most 159k – 175k. The prob here is the outrageous HOA fees and crazy taxes. The mortgage is fine fo rmost but when you factor in the other 2 you’re paying a whoel lot more than what you would pay as a renter. Sure you can supposedly gain equity and have write off’s on the morgage intrest but at the end of the day the carrying costs just don’t make sense. Especially locals who make a decent living but cant affort so much $$$. Bottom line prices will have to… Read more »
Bet developers wish they could block this blog from their contract purchasers.
-this sounds too good to be true; r u sure its right?
Anyone know of the possible special assesments when the condo association is turned over to the actual condo owners? I have seen many maintenance fees go up significantly so its very hard for me to do a Pro Forma of cash flows with so many variables
Billy, That’s the irrationality of markets. In classic bubbles, such as tulips in Holland in the 1600s, Texas real estate in the 80s and the dot com’s in the late 90s to 2000, a lot of people got swept up into a panic by fear and greed… greed to get a piece of the action and fear that they’d miss out. Here, its the downside of the bubble, where again fear and greed dictate irrational behavior. Sellers fear the lower prices, causing them to hang on irrationally, buyers fear getting in too early and loosing money, removing liquidity from the… Read more »
save this thread now and tell me how right I was when it happens…..the market will bottom WHEN……………all the remaining buildings get finished in downtown miami i.e. everglades on the bay, 900 biscayne, the met, marquis, and paramount bay. also after the presidential election, people will see change coming, they will be happy, and they will spend money. Late this year or early 2009 will be the absolute bottom……..and for you wondering, Yes I have a crystal ball.
Brickell on the River rentals from Craigslist:
http://www.google.com/search?hl=en&as_q=&as_epq=Brickell+on+the+River&as_oq=&as_eq=&num=100&lr=&as_filetype=&ft=i&as_sitesearch=miami.craigslist.org&as_qdr=all&as_rights=&as_occt=any&cr=&as_nlo=&as_nhi=&safe=images
raffi…I would add one more item to your criteria for prediction the bottom. I would add some additional time to hit bottom and this time would be “the time it takes for the condo market to become healthy enough to make the special assesments more predictable”. Even if a condo is a steal, how do you protect yourself from the possibility of a hefty special assesment for various items including HOA reserve shortfall, cheap materials used in construction, etc. I dont know when we will hit bottom, but when we do hit bottom, we are going to remain there for… Read more »
carboncab,
i agree that real estate has never experienced a V-bottom.