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The Return Of The Condo Convertors To Miami
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Condominium converters have been absent from Miami since the last luxury real estate bust. They are beginning to return with the hopes of profiting from the residential luxury real estate market recovery.
Between 2003 and 2006, condo conversions were as popular as luxury condo project launch parties and the construction cranes. Condo conversions are the process of turning existing apartment complexes owned by a single corporate entity into a community association made up of multiple individual unit owners.
During the collapse in 2007, many condo converters had to unload remaining units at greatly discounted prices far below the levels originally thought. when the downturn worsened in 2008, several condo converters were forced to return the units to their lenders before leaving town or getting out of the business.
While building a luxury condo real estate project from the ground up can be a long, expensive and tricky process. Buying an existing luxury rental real estate project and selling the units to individual owners, in many cases current residents, is a much faster way to recoup investment and earn a profit. After the initial purchase, the owner only needs to file paperwork and pay a fee to the Florida Division Of Condominiums, Timeshares, and Mobile Homes. Approval is generally a straightforward process.
It should be no surprise that five years after disappearing from Miami, condo converters are once again resurfacing in the region.
The return of the condo conversion comes at a time when inventory is low and prices are on the rise. As of Sept. 16, less than 19,400 units were on the resale market in Miami, way down from 2008, when more than 60,000 South Florida units were available for resale.
At the current resale transaction rate of 4,500 units per month, Miami has about four months of luxury condo inventory left.
A healthy residential luxury real estate market has about six months of resale inventory. Inventory levels that are less than 6 months are designated as a seller’s market, while levels that are greater are designated as a buyer’s market.
The strengthening Miami luxury condo market is driven in large part by foreign investors with strong currencies who are interested in high rental rates being paid by tenants. Their interest has developers poised to propose 161 condo towers with more than 21,800 units in Miami.
There are currently only a handful of condo conversions are underway in Miami, but a growing number of applications are in the in line.
During the last South Florida real estate boom, condo converters converted 94 real estate projects in 2003, 178 projects in 2004, 370 projects in 2005, and 327 projects in 2006.
In August, the owner of the 163-unit rental tower known as Midblock in the Midtown Miami mixed-use complex in the Biscayne Boulevard Corridor started sales of individual condos in an attempt to capitalize on the popularity of the surrounding area.
A few days later, the out-of-town real estate developer of a proposed 34-story rental tower that is currently under construction and will sit above a Publix in the Brickell Avenue area changed direction and announced its own plans to turn the 390-unit apartment project into a condominium that is to be known as the Nine At Mary Brickell Village.
Andres Leiser is a local contributor for Constec Realty's Miami luxury real estate website. Andres Leiser has been involved in Miami real estate for over a decade. For more information please visit www.constecrealty.com
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