Buying a Miami Condo 2017

[Taneisheo Ferguson]

So I was thinking with the luxury condo market slow down and the large inventory we have currently (some condos still under construction, I work on one) there will be deals on older condos next year. Do you think it would be a smart move to buy a condo as a first deal and rent it out (possible AirBNB)? I know i would have to consider taxes and HOA fees, but depending on the market demand which is high enough, it could still cash flow. People made a killing buying condos at a steal the last recession. Also I wonder if it would be possible to refinance that condo in order to purchase another that I could live in. I'm interested in the Brickell and Edgewater/Omni areas.

[Andrew McConnell]

@Taneisheo Ferguson Thought something I worked on with my team at my company might be helpful for you as you go through your process...:

When a couple I know decided they were ready to purchase a second home for vacations, they immediately knew an oceanfront property in Miami was the place for them. It had been a favorite vacation spot for their family for years—they couldn’t justify spending any more money on hotel or Airbnb stays. But they also knew that to afford this second home, they’d need to rent it out when they weren’t using it. But they had questions. Where was the best place to buy? Should they be right on the ocean, or a few blocks in? Where could they get the most for their money?

In Miami, there are thousands of waterfront properties to choose from, but it's important that you carefully evaluate the home and its potential as a vacation rental property. Your Miami vacation rental's location can have a tremendous impact on property value, the cost of ownership and, ultimately, the return on investment (ROI).

When projecting the ROI for a piece of real estate, you'll need to consider:

• The purchase price of the property and monthly mortgage cost.
• The average rental fee for comparable Miami rental properties.
• The number of “rentable” weeks per year.
• The property tax fees and insurance rates.
• The cost to maintain the property.

If you decide to buy a Miami vacation rental, you'll have a major advantage, because South Florida real estate rentals are popular year-round. But your property's location relative to the water can impact other key figures, like the purchase price, average rental fee, property taxes, insurance rates, and maintenance costs. So let's examine how these and other issues will factor into the equation.

What Factors Impact Real Estate Rental Price for Properties Near the Water?

For vacation rentals located near the ocean, there are many factors that will impact the rental fees and thus, the ROI. You'll want to ask a few questions, including:

• Is the home on the water or near the water? Oceanfront homes tend to be the most desirable and valuable as vacation rentals because vacationers want convenience and simplicity (and what's more convenient than stepping out the front door and onto the beach?). Homes that are near the water (but not technically on the water) tend to have a slightly lower property value and lower rental fees.
• Are there ocean views? Water views increase a vacation property's value, desirability, and profit margin (although you can expect higher property taxes too). A home with unobstructed ocean views from every room will have a high ROI, whereas obstructions or view limitations (such as the ocean only being visible from certain rooms) result in a comparatively lower ROI.
• Is there beach access? Properties with private beach access command a higher rental fee, while those with access to a public beach have a slightly lower rental fee. The closer and more convenient the beach, the higher the potential ROI. If you own property with water views but no beach access, consider buying annual passes to a nearby beach so you can provide convenient access to your guests.

What Are the Average Sale and Rental Prices for Miami Coastal Properties?

According to Trulia.com's Miami area real estate heat map, the average sale price can vary by millions depending on precisely where you seek to buy. The table below provides a quick reference for the average sale and rental prices for Miami's coastal areas.

A Look at the Flood Risk and Elevation of a Miami Vacation Rental ROI

A Miami waterfront home's ROI as a rental property is largely impacted by the precise location and elevation. Miami is prone to some serious flooding, especially during hurricanes, which can create a destructive storm surge. This means higher insurance rates. But more concerning is the sea level. The Miami area—especially Miami Beach—is expected to see a fair amount of its land reclaimed by the sea if sea levels rise by the predicted height of two feet by 2060.

Beachfront properties are apt to be at the highest risk—and this includes highrises, since the foundation and ground level would be partially underwater, resulting in structural damage that could render the building unfit for occupation.

Many South Florida properties will also be prone to more frequent flooding in the coming years, resulting in higher insurance and maintenance costs. So if you're investing in real estate, you'll want to be sure to learn more about its elevation and the flood risk. Otherwise, you may find yourself the owner of a vacation home that sees a sharp decrease in value over time.

Always Crunch the Numbers When Choosing a Miami Vacation Rental Property

It's important to crunch the numbers when deciding between two or more rental homes.

The oceanfront home with an unobstructed view and private beach access may not always be the most profitable. This type of real estate also has the highest rates for insurance, maintenance, and property taxes—expenses that can really cut into ROI.

In fact, some of the most profitable Miami vacation rentals are condominiums, especially those in beachfront high-rises. These properties often have lower maintenance costs when compared to a house, even with condo association fees factored into the equation. The insurance rates are often much lower, especially since many condominiums do not require flood insurance. What's more, high-rise units have some of the best unobstructed water views, driving up the overall desirability in a big way.

Finally, remember to calculate your anticipated rental fees based on comparable properties in the same area.