How much do you think you would pay per month to RENT vs. OWN a 2/2 condo in Miami, FL?
Buy: $3200 per month
Rent: $1600 per month
Read on:
Neo Vertika is a luxury condominium development west of Brickell on the Miami River. It features a state of the art gym, infinity pool, clubhouse with full kitchen, spa, parlor and it is located in the heart of the lively city that is Miami.
Completed in 2006, Neo Vertika is only one of the buildings that has been affected by the adjusting real estate market in South Florida – particularly the speculation in the condo market.
As of today, May 26, 2008, there are 20,580 condos for sale through our local MLS (multiple listing service). This is very good news for people who are on the sidelines waiting to buy at the best possible price, but it is very bad news for those who bought at the top of the market. A typical 2/2 condo in Neo Vertica sold for near $400,000 (some as high as $500,000) and they rarely lasted a month on the market in the peak months. The peak of the “boom” was April of 2005 when our inventory was lowest and sales were at their highest (see graph below). Our market currently has a condo inventory of about 45 months. This means if every condo that is for sale STAYED for sale and condos continued to sell at a rate of about 1000 per month, it would take almost 4 years to sell them all if nothing else came on the market.
If one were to buy a 2/2 luxury condo for about $400,000 right now, putting 20% down (we assume 20% down because lending requirements are very strict at the moment and require higher down payments than single family home financing), the monthly payment of principal and interest would be about $1900 per month plus condominium association fees which can range from $400 per month to over $1000 depending on the building. You would be paying about $2,500 per month to own having put down 20%.
Currently there are 2/2 units available for rent in this building starting at $1600 per month.
With adjustable rates (initially very low and now as high as 9.5%) on 100% financing (in the 80/20 days of the early 2000s), owners could have monthly payments in excess of $4300 a month for these condos.
In this market there is plenty of opportunity to purchase condos at a major discount through foreclosures, auctions, and short sales. This can be a good investment given a good location and solid construction but it can also be a risk.
The rental market in Miami, FL is currently very hot as buyers wait for “the bottom” to buy and sellers place properties on the market for rent “until the market comes back”.
I just found a luxury rental 1/1 bath rental for my clients in “The Opera Tower” on North Biscayne and 19th for $1400 per month. They are leasing this unit for just over half of what they would pay had they bought it.
As a result of this overbuilding, young professionals are living a very luxurious lifestyle that would otherwise be out of reach.
Drive around Miami at night, and a lot of these new buildings will have rows and rows of dark balconies.
It is tempting to live in the lap of luxury for half the price and THAT, I think, is what will keep our market healthy until all the overbuilding is absorbed.