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    Investing Guide

    07/31/2017
    Miami real estate investment guide

     

    Many excited Miami real estate investors think they can get rich by using a bank loan to purchase and upgrade local fixer-uppers. The situation is slightly more complicated than that. Here is a guide for those new to the Miami real estate investing game.

    MIAMI REAL ESTATE INVESTMENT OPPORTUNITIES

    Investment opportunities in Miami real estate may be better than alternatives like the more homogeneous stock market.

    Key Ingredients to Miami Investment Success

    To go from “handyman” to real estate tycoon like Donald Trump whose company owns multiple developments in Miami like Trump Towers Miami, Hollywood Trump Tower, etc. You must understand the market and the four key ingredients to achieving strong real estate gains.

    1.Amateurs wait for a healthy national market. While experienced and astute real estate investors may be able to make some money in a weak national real estate investing environment.

    The odds are against professionals from the beginning. And the odds of success for newer investors in such a market are even worse.

    2.Rising interest rates can throw a lot of cold water on an otherwise hot real estate market because of adjustable rate mortgages. Borrowers will have to pay more to keep it and those who don’t have real estate often can’t afford it. This leads to reduced demand for real estate, and prices fall accordingly. When starting to build your real estate portfolio, the ideal time to buy property is in a declining interest rate environment.

    3.Another desirable trait is a healthy gross domestic product. Since this literally speaks to the overall health of the economic system that supports the real estate market, it’s a given that you should buy when things are strong. In healthy GDP times, such as growth above 3% annually, it is rare to see significant real estate weaknesses. The US has not been in a situation like this for some time. While many people see this as a time when prices are too high, it is a different mindset to have than the usual way of thinking.

    4.Choose a specific location. If you find flat to falling interest rates, decent GDP growth and respectable unemployment rates in the national market, you can start looking for a desirable neighborhood in Miami. Well-publicized data like the Case-Shiller Home Price Index and Bureau of Labor Statistics unemployment rates are excellent indicators of the future health of the top real estate markets. Currently, Miami is seen one of these markets.

    Case Schiller Miami index

    Current Case Schiller Index chart for Miami market.

    Miami Real Estate Investing: A City Of Growth

    If you see the city expanding as Miami currently is with pre-construction properties for sale as they currently are and can tolerate some risk, invest in real estate in the outer perimeter.

    Perhaps a property in Ft. Lauderdale like the Aqualuna on the Isle of Venice is an ideal opportunity to benefit from the rising trend. While Miami condos for sale are still in vogue, it is not long before middle income earners will be priced out of the market.

    If the investment market is weak, layoffs are likely coming. Which could start to suppress real estate values due to marginal labor supply.

    Miami Real Estate Investment: An International Affair

    Because the Miami market is more international than most, it is seen as a safe haven for real estate investment. With the current economic crisis in Venezuela and Argentina, Miami benefits from a growing GDP in the USA. While wealthy investors overseas seek a safe haven for the future, the market continues to deliver returns.

    Opportunities abound for the EB-5 investor visa such as at the Paramount Miami development which offers favorable lending terms to overseas investors who are seeking residency.

    It’s important to keep in mind that real estate investing values can vary widely within a metropolitan area.

    Your most volatile real estate appreciation will happen in the outer ring of cities. Look west or north of Miami because this is the outer cusp of the city.

    That is where future commercial properties like suburban strip malls will be built. As residential real estate development fills in around these future strip malls, property values will likely jump significantly. This is not absolute but relative to average real estate returns. If Miami is a bit rich and you are not focused on the latin community, areas like Sawgrass in Broward are a good area to consider nowadays.

    The opportunity for above-average rates of return seems greater in the real estate realm than the financial instrument realm since because are fewer eyes looking at non-homogeneous units.

    ft lauderdale urban sprawl

    A good alternative play is the urban sprawl perimeter if you believe the area is growing. Or stay away from it if you think it is shrinking. Condos in Miami likely will not suffer from this fate because of the aforementioned influx of investment cash from South and Central America. Downtown areas tend to be safer places to seek yield although barrier to entry is not just cash flow, there is a naturally limited amount of space.

    Finally, it would be remiss to not mention that square foot is directly related to the relative value of a property. Whether you are looking at downtown Miami, Miami Beach, a Miami condo should be considered a store of value in relation to its size. Being expensive is not simply a question of square footage but proximity to the buyers desired location is another essential factory. Some buyers are not looking for condos Miami but actually in the greater downtown area.

    Understanding these key points can help maximize the value of any real estate investing portfolio.