The following email from a reader gave me the idea for this new post :
"I love reading your site, thanks. I was wondering if you had a message board that I could discuss specific buildings I'm looking at with other local market observers? I searched the site but can't seem to find anything. If there is no board, would you have any insight into the newly constructed Duo building in Hallandale? I've been watching it for a few months and am seeing the prices steadily decline, but am not sure at what point 915 square feet of new construction is a good price. The cheapest is $232,000 right now. I'm also concerned about what happens in the event that this building has like 20 people living in it if everyone else were flippers or people who are now going into foreclosure. How does the maintenance of the building get paid by such a few number of owners?"
"Thanks for any insight."
For some background, here’s some websites that show the property. The first one shows the overall condo and the second one shows most of the listings both for sale and for lease:
Weichert Realty
Condocompany.com
Keep in mind that according to the listing agents, the monthly HOA on these condos are around $400, $500, and $650 for the 1, 2, and 3 bedroom units respectfully.
What do you think this property is worth? What will be a good price point for the 1, 2, or 3 bedrooms?
Stumble It!
20 comments:
I wonder if actions like this will halt the downward pressure on prices? I wonder what the discount was or why MS would do this?
http://www.reuters.com/article/ousiv/idUSWEN276020071201
I lived in that area for 37 years and have been watching the prices of condos there and at the 3801, 3901, 3001, 3000 and 4001 buildings very closely. The prices for all of the units in that area are in a free fall. DUO doesn't even have enough activity to chart. Those buildings won't fill for years. The shopping center it's attached to has the same demographic target and look at the trouble they're having keeping upscale tenants.
They were depending on wealthy Venezuelans and New Yorkers to fill them up and it's not happening. Gulfstream has been a flop and the Seminoles are about to kill it. Those were the draw for the speculators and they are finished.
You are better off looking at one of the older established buildings on the beach such as the Parker Dorado or Parker Towers. Their reserves are good, turnover is low and the values should hold a little better.
I would definitely wait until prices stop falling. Theyre not going to go up in prices any time soon so wait.
I would consider buying when prices have stopped going down for at least 6-12 months AND you can rent out the property without having to pay anything out of your pocket. Historicaly property values have followed the rent to property value ratio, meaning that values will come down to what the price of rent is.
Ex: Sales Price=$200,000
10% monthly expenses=$2,000
if you cannot rent it for $2,000 or more then forget about it!
Very good point Peter,
I would not be in a hurry to rush into new construction because no one is thinking about the amount of investors who will stop paying their condo fees and cost of attorney fees related to collections which will not be paid by owners or lenders- no equity (will fall to special assessments about 3000.00 per foreclosure)
William C
Broker
Something to think about in new construction condos.
The rent to carrying costs method that Ricky was alluding to is a great method to determine value.
Traditionally, monthly carrying costs of a 100% financed unit should be less than 110% of rent.
Therefore, if a unit is renting for $1450, then the monthly carrying cost of purchasing that unit with 100% should be less than $1,595 a month. Since the HOA is $400/month (I assume that includes insurance) and the taxes are around $350 a month (conservative), you’ll have only $845 per month to cover the financing. If you can get a 6.5% 30-year fixed loan, $845 a month will get pay a loan of $133,688.
Thus, I wouldn’t start looking at the 1-bedroom units until they drop below $135,000.
If the price is anything above that, you’re better off renting.
I think it's pretty difficult right now to figure out the ultimate fair-market value of any property in South Florida. As long as inventories are through the roof and sales are rare, we can't tell where the bottom will hit.
Once inventories get down below 18 months, then I am going to start looking for bargain or I may try a lowball offer here and there.
However, as long as inventories are well over 3 years, I'm staying away and I will not guess on the ultimate bottom.
so your'e saying something less than $150 a sq/ft is a rational business assessment for this area but it may go lower patience pays
The unit I looked at was listed at 1,000 square feet, which would make it less than $135 per square foot.
However, my entire analysis was based on the unit that was offered as a lease at $1450 per month. Is that rent reasonable? Can the landlord actually get $1450 a month or is it just another "wishing price" list many of the home listings we see.
I think to do this type of analysis, you actually need to find out what people who are renting are actually willing and able to pay.
I live in inland PBC and have no idea what waterfront Hallandale properties rent for. Can a landlord really get $1450 per month for a 1000 square foot, one-bedroom property like this in Hallandale?
Maybe others know.
Or you could pay $256 a square foot for this place.
http://fortlauderdale.craigslist.org/rfs/494456218.html
Like a previous poster said - work the numbers backwards from the rent to figure out how much you should pay for it.
If the mortgage interest, lost interest on any cash you put down on the property (you could put that in at least a CD if you were renting), property taxes, HOA fees, and insurance add up to more than renting the unit, then don't buy it.
I think Gator Ted got it right: around $130k or so. And even then, prices could still go down (with the huge oversupply we have in this market).
I don't see any advantage to buying anytime soon.
I think you should buy:-)
Who knows...mabye you will become one of Florida's "Today's F@cked Buyer" in about 10 months.
Here's another overpriced REO.
Dry lot in LHP.
Buyer paid $566 in 2005
Sold in 1990 & 1993 for $182k
On mls for $415 Price reduce 3 times since Sept.
IMHO needs to come down into the LOW $200k's
4460 NE 27TH TE
MLS #F863569
I wasn't in the market to purchase real estate in the late 90s and early 2000s before prices exploded, so I really have no frame of reference for what a reasonable price for a condo is. I'm so used to seeing $300,000 and up for a newly constructed one-bedroom apartment that I'm having trouble believing it could be had for $150,000.
Does anyone really think that prices for a nice new place (i.e. marble, granite, stainless steel appliances) could fall that low? I would imagine it cost the developer more than that just to build it.
Stan,
I definitely think they will fall that low. They were that cheap back in the late 1990s.
Keep in mind that building costs are completely irrelevant to the ultimate resale costs. It doesn't matter if it cost the builders $400 per square foot to build if there is not market watsoever for these condos.
The only think that matters is how much consumers are willing to pay for the unit. Since there seem to be plenty of them to rent at $1450 per month, why would any rational person pay more than 110% of $1450 per month to buy one?
Here's the thing...
People were willing to be irrational in the old days of easy credit. Since they didn't have to invest any of their own money and they didn't need to have verifiable income, people wihout the means took massive risks.
Those days are gone. Now you need at least 5% down (probably more) and verifiable income. This means that only rational folks will be buying these places.
Rational folks will do the math on these places and quickly figure out that renting is a far better prospect. Therefore they will not buy and the price will continue to drop.
Historically this is how it always worked. There has been one brief little hickup between 2001 and 2005 and we're not coming back to a rational market.
Stan,
What gator says is right on, except he forgot one point.
When people were getting cheap easy 100% financing, prices were jumping exponentially due to the wild speculation fever. So people didn't care HOW much it cost since they knew (thought) they could sell next year for $50-100k MORE.
In a word....
Those days are LONG GONE.
We are going back to the old days, and there is an unbelievable glut of housing (supply) out there.
As long as it's way cheaper to rent, don't buy, it will come down further.
I am pretty convinced that prices in Miami-Dade are ready for a cliff. Where I live in Doral, there are houses listed for 700k+ that you can rent for between 2200-2500 per month. There is no way the economics of that make sense unless prices crater.
Every once in a while, I run houses through this model...
NY Times Mortgage Calculator
...to see if they make financial sense. They never do.
I don't envision buying until 2009 at the earliest. Much to the wife's chagrin.
I have always said, buy now, if you are interested. What are things going to matter in ten years. You may lose a very little, but in the end will gain more. I understand FL has been hit hard with this, but on the opposite side of the coast, in Marin, I am seeing prices go up.
"I have always said, buy now, if you are interested. What are things going to matter in ten years. You may lose a very little, but in the end will gain more. I understand FL has been hit hard with this, but on the opposite side of the coast, in Marin, I am seeing prices go up."
Oh please! Marin County is getting absolutely crushed right now, very similar to our local market.
Just like in our local market, buying now in Marin couldn't be more foolish.
Just in case anyone is interested in the Marin market, there's an good blog, similar to mine, that follows their market. Although he doesn't post daily, it worth a read:
Marin Real Estate Bubble
Re: "Therefore, if a unit is renting for $1450, then the monthly carrying cost of purchasing that unit with 100% should be less than $1,595 a month. Since the HOA is $400/month (I assume that includes insurance) and the taxes are around $350 a month (conservative), you’ll have only $845 per month to cover the financing. If you can get a 6.5% 30-year fixed loan, $845 a month will get pay a loan of $133,688."
Did this generalization hold true for mid and high end condos before the real estate boom? It just seems hard to believe that a unit in the Duo (granite, stainless steel, nice building) could be had for a price below $150,000 to make the carrying costs slightly higher than could be rented for. I can see how low end units could be cash-flow positive investments (i.e. slumlords), but for high end units as well?
Anyone know if this is historically accurate?
Stan I agree with you, this rental calculations will work only in a market where you don't have foreigners coming in, baby boomers retiring, etc. Here in South Florida it is quite different since we have a lot of buyers not living here.
For me this model works where you have a place where only workers live. But we are in a transient place so the desirability of the place do have an impact.
Than about the monthly maintenance fees, these are the problem for me. A building with empty units facing many defaults and foreclosures will have a lot of problems regarding the association. When they tell you $600 monthly maintenance fees, please budget $900 because this is what you will have to pay eventually.
But for the smart person it is a good time to buy. So many opportunities. But you do have to be smart.
Best regards.
FD @ Condo Hotel South Beach - Condo Hotel Miami Beach - Condo Hotel Fort Lauderdale
Post a Comment