Are South Florida Condos A Risky Gamble Or Stable Investment At Current Pricing?
In this latest issue of the Miami Condo Market Intelligence Report™, we examine South Florida condo prices based on applying the "1% Rule" to the Summer Buying Season statistics.
Volume 2024, Issue 45 (Subscribe here)
This week’s Miami Condo Market Intelligence Report™ newsletter examines whether now is the right time to buy a South Florida condo or are today’s investors risking a possible “catching a falling knife” scenario.
After all, South Florida condo sales have slowed dramatically for the last 18 months and asking prices are starting to decrease, especially for older units facing increased costs resulting from Florida legislative changes made in the aftermath of the Surfside condo collapse.
This has some buyers thinking now is the time to start acquiring units.
To answer this question, we ran an analysis based on the “1% Rule” that is commonly used by investors to assess valuations.
As you may know, the “1% Rule” is a simplistic - or “back of the napkin” - approach that calls for the monthly rent of a residential investment property to represent about one percent of the purchase price of a unit.
For example, a $100,000 condo - if you can find one in South Florida - should rent for about $1,000 monthly under the “1% Rule.”
The “1% Rule” can “help an investor gauge the risk and potential gain that might be achieved by investing in a property,” according to Investopedia.
To analyze the condo market in the tricounty South Florida region, we used our recently compiled statistics and published reports for Miami-Dade, Broward and Palm Beach counties that were generated within the last 30 days based on the 2024 Summer Buying Season, which stretched from May through October.
Based on a recent report, South Florida condos traded for an average price of about $521,279 per unit in the 2024 Summer Buying Season.
Under the “1% Rule,” a South Florida condo should generate about $5,213 per month in rent.
In reality, South Florida rental units were leased out at a median price of about $2,300 monthly during the 2024 Summer Buying Season.
This means, condo prices need to go down or rents need to go up to make up for the difference required to comply with the “1% Rule.”
It is not to say that investors cannot buy condos at current pricing but that those investors are probably going to end up subsidizing tenants to live in their units.
The Summer Buying Season is traditionally when visitors and locals, alike, flee South Florida to avoid the humidity, hurricane warnings and limited number of events.
As the busier Winter Buying Season - which extends from November through April - begins to ramp up for the hordes of tourists expected to visit, there are lessons to be learned from the summer condo market trends for buyers, sellers and real estate professionals, alike, in South Florida.
The summer trends are especially important this Winter Buying Season as Florida’s condo market is undergoing dramatic changes as a result of the implementation of new requirements in the aftermath of the Surfside condo collapse.
Beginning in January, condo associations in Florida will be required to start collecting money from unit owners to place into reserve accounts - based on the results of Structural Integrity Reserve Studies (SIRS) conducted by experts - that will be used exclusively to fix, maintain and improve the structural integrity of residential buildings that are at least three-stories tall.
People are dubbing this moment as the 2025 Florida Condo Association Financial Cliff as it is expected to result in significantly higher costs for unit owners. News reports are already chronicling condo owners selling their units at deep discounts ahead of the 2025 deadline.
Buyers - who are seeing condo asking prices fall - are probably thinking this might be the time to make a purchase.
Conversely, sellers are probably worrying that they need to unload now as prices could be lower in the future.
For real estate professionals, they are probably wrestling with whether or not it is worth their time and the marketing expense to accept condo listings that are too richly priced and never going to transact.
This is a push-pull scenario that many are facing in early December now that the U.S. elections are over.
It is a lot of information but we are confident our reports will assist you to better understand current market conditions in South Florida.
It is worth noting that we are sharing a portion of our research for free with subscribers to our newsletter and readers of MiamiCondo.Club.
If you want access to all of our published information and charts, we would encourage you to join the Miami Condo Investing Club™.
The objective of the Club is to create a community that shares realtime, actionable information on the latest real estate trends, opportunities and service providers in South Florida.
The Club is ideally suited for Do-It-Yourself (DIY) condo buyers and real estate professionals, alike, who can rely on our latest statistics, expert opinions and access to consulting services.
Additionally, we encourage you to listen or view our podcast wherever you get podcasts. The podcast is available on Apple, Spotify and/or YouTube.
As a reminder, we are always available for consulting, expert witness work and buyside brokerage services just as we have been since 2006.
If you are seeking information on condo resales in South Florida, please visit CondoVulturesRealty.com or call the office at 305.865.5859.
— Peter Zalewski, Founder of the Miami Condo Investing Club™
Story 1
South Florida Condo Prices Inflated By Nearly 127%
South Florida condo prices in the 2024 Summer Buying Season - that extends from May through October - traded at a rich premium based on the "1% Rule" commonly used by investors.
Story 2
Are Foreign Investors Driving Force Behind South Florida's Condo Market?
In this episode of the Miami Condo Minute™, host Peter Zalewski - founder of the Miami Condo Investing Club™ - provides essential insights into foreign investment in the South Florida condo market.
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Will Crypto Bros Eye South Florida Condos Again As Bitcoin Tops $100,000?
In this episode of the Miami Condo Minute™ micropodcast, host Peter Zalewski - founder of the Miami Condo Investing Club™ - discusses the Crypto Bros influence on the South Florida condo market.
Story 4
Are Art Basel's Disruptions Still Worth It For Miami?
In this episode of the Miami Condo Minute™ micropodcast, host Peter Zalewski - founder of the Miami Condo Investing Club™ - weighs the disruptions versus the benefits of the Art Basel festival that attracts 80,000 attendees to Miami every December for the last two decades.
Story 5
What Went Wrong This Summer With South Florida's Condo Market?
Expert Peter Zalewski of the Miami Condo Market Investing Club™ will host a 75-minute online Monthly Meeting on Wednesday, Dec. 11, 2024, to discuss the dismal South Florida Summer Buying Season.
This information is provided for general informational purposes only, based on research, personal experience and interviews. It should not be considered legal advice, as we are not attorneys. While believed to be accurate and complete, this information is provided "as is" without warranty or guarantee of any kind.
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