The difference between home ownership and investment real estate
In case you think that the investment in Miami is starting to ebb, there is an article in today’s Business Monday about Fort Capital Management, a private equity firm, buying up prime South Florida real estate. Their most recent purchase it the Surf Club in Surfside.
Miami-Dade’s strong rebound in the tourism industry is driving up sales of hotels and fueling construction.
I attended a very informative windstorm insurance session at the Miami Realtors Association this afternoon. The presentation by Lee Gorodetsky, The Home Insurance Guru and President of L & S Insurance, was my third insurance update of the year because that is how much of a moving target Florida insurance has become.
So why is property insurance a more important issue than taxes in South Florida? It is not because hurricane Sandy is churning off the coast of our neighbors in the Bahamas. It is because we only have a sales tax and property tax, no state income tax and Citizens, what has been the major insurer in Florida, is so grossly overexposed that it is changing all of the rules to minimize it’s exposure if The Big One hits.
In Miami, property insurance prices for a primary or secondary home range from 1-3% of the replacement cost of the home, calculated by multiplying the living area square footage by $135 for an average standard home. Luxury homes would use a higher dollar amount. The 1% is for homes built after 2006 that receive all of the current wind mitigation credits. Most homes are closer to the 3% range. Property insurance runs at about 2% of the purchase price and as long as you have homestead exemptions, it cannot go up more than 3% or CPI per year, whichever is lower.
The rates on Citizens insurance are expected to increase dramatically next year to raise money to try to close the gap they have between their reserves and their risk exposure. They will also be dropping an estimated 300,000 policies, mostly in south Florida.
There are three amendments relating to property taxes on this November’s ballot and not one amendment addressing insurance.
Related Post: Hurricane Insurance: Will It Be The Next Shoe To Drop In The Recovering Real Estate Market
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Unit 208 is an updated 1 bedroom 1.5 bath that would be great for an investor. Rented until April of 2013.
In most markets in the country, Labor Day is the official end of summer because children are back in school and the weather starts getting cooler. Along with students settling in their seats, the real estate market also starts to slow down since parents try to make their move to align with the start and end of school.
As anyone who lives here will tell you, Miami is not like most cities in the country about anything and real estate is no exception. We actually have two real estate markets, the “traditional” one that is from Spring to Summer and the “snowbird” market that is from Fall to Spring. So basically, year round!
With the huge number of sales we are posting in 2012 and the amount of cash that is still out there, I do not see the market slowing down.
If you are a seller that had been considering selling but were holding back until prices came up, now is a good time to list your home. Inventory is down, demand is up, and prices in many of our neighborhoods have increased. If most sellers wait until the “traditional” listing season, you will have more competition next Spring.
If you are a buyer, know that competition is tight. You are going to need to be prepared if you want your offer to be accepted. If you are not paying cash, be pre-approved for a mortgage. The more money you put down, the stronger your offer will be. Know the market and the listing history of the house you are putting an offer on. If the house is price well based on relevant sales in the neighborhood and the house has not been on the market long, don’t make a lowball offer. It isn’t the buyer’s market it was two years ago.
EWM’s Coral Gables office had another amazing week in sales. Over $23,000,000 in sales and leases this week, the week before schools start. That follows last weeks’ $19,800,000+ in sales and leases. The fact that sales are so high the last two weeks of summer vacation is a sign that the real estate market in Miami-Dade County continues to recover. The number of sales (25) equaled the number of leases this week and were only slightly lower last week (21 sales and 25 leases). This week we had 14 new sales listings. Last week we had 8 new sales listings.
These numbers show that the luxury market is starting to recover, the lower priced inventory has significantly dropped as investors pick up properties, and demand in the middle price range is still strong. If you are in the market to buy or sell, give me a call to discuss prices in your specific area.
Miami is a very international city with lots of foreign investors. If you are buying property here, you need to make sure to ask if the seller is a foreign investor or you could be on the hook for money owed to the IRS.
Under FIRPTA, Foreign Investment in Real Property Tax Act, there is a mandatory 10% withoholding of contract sales price at closing for all foreign sellers of real estate. It is the BUYER’S responsibility to make sure the 10% is withheld EVEN IF THEY ARE WORKING WITH AN ATTORNEY &/OR TITLE COMPANY. The withholdings must be remitted to the IRS within 20 days of sale along with a special tax return.
There are exceptions to the withholding that your Realtor, title company or attorney can walk you through, but you first must ask the question.
At the height of the typical summer selling season, there are only 10 homes, out of 147 currently listed, for less than $500,000 in the Village of Pinecrest. None are foreclosures, two are short sales.
Pinecrest, long coveted by families because of great schools, large lots, and plenty of parks and family activities, has an average list price of over $1.6 million for 2012. The average sales price through May of this year is $882,000.
The house pictured below is listed for $360,000 and is the only one under $500,000 in the Pinecrest Elementary School District.
Miami and Phoenix are seeing a rise in asking prices, based on a Trulia Price Monitor Report. There are still a lot of good buys out there, but many buyers are frustrated when a new property comes on the market and goes under contract almost immediately. Decreasing inventory and aggressive pricing by listing agents, mean you have to act fast if you are serious about making a purchase. If the property is priced right, don’t try to negotiate it down too much, if at all. I listed two properties last week that both had multiple offers within the first two days. The first property had all offers at asking price and we went to a multiple offer situation where we asked for highest and best. Total time on market was 6 days.
The second property had several offers on the second day. One agent had his buyer offer slightly over asking and put down 10% as an initial deposit, upon acceptance. The seller accepted his offer. Two days later, a higher offer came in from a buyer who was desperate because she had just lost out on a short sale and needs to move fast.
If you are a buyer, be ready to put your best offer forward early on. If you are a seller and get multiple offers, don’t second guess your pricing or hold out for something even better. The reality is that you get the most activity on a listing when it first goes on the market. The longer you wait, the less you are likely to get.
I listed a rental in Cutler Bay last week and had over 150 phone calls! I had three offers the first day, even though there wasn’t single picture listed yet, the yard was over grown and the house had not been cleaned out from previous tenant. If you are an investor, buy more properties. The demand for rental housing is huge, which is probably another reason why Warren Buffet said he’d buy a couple hundred thousand single family homes!
Active Rain’s Real Estate Recovery Survey show that agents in the Miami-Ft Lauderdale market believe the real estate market in their areas are improving. What do you think?
Data provided by ActiveRain.com. Join 215,590 Real Estate Agents on the world’s largest Real Estate Social Network.