South Florida Condos - Buying, Holding or Selling?

[Joe Morello]

Hi Everyone,

With the current dynamics in the South Florida real estate market, I'm curious to hear your thoughts and strategies regarding condo investments.

On one hand, we are seeing rising monthly dues, special assessments, and skyrocketing property insurance costs. On the other hand, Florida continues to be a highly desired market for out-of-state and foreign buyers, keeping demand strong.

Given these factors, what are you currently doing with your condo investments in South Florida? Are you:

- Buying: Taking advantage of the demand and potential for long-term appreciation?

- Selling: Cashing in on the high property values and avoiding increasing costs?

- Holding: Waiting to see how the market evolves while managing the higher expenses?

I’d love to hear your perspectives and experiences. How are you navigating these challenges and opportunities?

Looking forward to your insights!

[Ray Hage]

Hi. I don't own any condos but if I did, I would aim to sell ASAP. Prices are going down and insurance/assessments are going up. I am also RE agent and have already advised my clients not to buy any condos unless they are really financially and emotionally ready for the risks involved. 

I agree that FL is a still a hotbed for investment but I am not sure condos specifically are worth the risk. I would advise to aim for SFH and smaller buildings at the time.

[Joe Morello]

Quote from @Ray Hage:

Hi. I don't own any condos but if I did, I would aim to sell ASAP. Prices are going down and insurance/assessments are going up. I am also RE agent and have already advised my clients not to buy any condos unless they are really financially and emotionally ready for the risks involved. 

I agree that FL is a still a hotbed for investment but I am not sure condos specifically are worth the risk. I would advise to aim for SFH and smaller buildings at the time.

I agree! Unless you’re in at a really low basis and/or own free and clear, I would definitely try to sell. And certainly wouldn’t recommend buying. Unless it’s a COA that is 2 stories or less and is very financially healthy. I would also target COA’s with newly replaced roofs, and negotiate to have the seller pay any outstanding special assessments at closing. Townhomes are also a good alternative. Similar low maintenance, they aren't subject to Condo laws, and you could get financing much easier, particularly FHA, unlike condos. 

[Livia Adams]

Quote from @Joe Morello:

Hi Everyone,

With the current dynamics in the South Florida real estate market, I'm curious to hear your thoughts and strategies regarding condo investments.

On one hand, we are seeing rising monthly dues, special assessments, and skyrocketing property insurance costs. On the other hand, Florida continues to be a highly desired market for out-of-state and foreign buyers, keeping demand strong.

Given these factors, what are you currently doing with your condo investments in South Florida? Are you:

- Buying: Taking advantage of the demand and potential for long-term appreciation?

- Selling: Cashing in on the high property values and avoiding increasing costs?

- Holding: Waiting to see how the market evolves while managing the higher expenses?

I’d love to hear your perspectives and experiences. How are you navigating these challenges and opportunities?

Looking forward to your insights!

I would definitely consider selling.

Long-term appreciation in property value can occur for several reasons, but not all of them indicate a real increase in value. Inflation, for instance, can raise property prices, but this doesn't necessarily translate into a real increase in value when adjusted for the cost of living.

Demand can also drive appreciation, but there are factors that could cause demand to decrease. For example, many elderly individuals purchase condos in Florida to retire. These retirees often live on fixed incomes, so rising HOA dues, special assessments, and increasing property insurance costs can be a significant burden. These higher expenses could deter potential buyers, leading to a decrease in demand.

In essence, appreciation is sustainable only if there are strong, underlying reasons for it. Given the current dynamics—rising costs and potential demand constraints—selling now could be a prudent move to capitalize on high property values while avoiding the risk of future depreciation.

[Joe Morello]

Quote from @Livia Adams:

Quote from @Joe Morello:

Hi Everyone,

With the current dynamics in the South Florida real estate market, I'm curious to hear your thoughts and strategies regarding condo investments.

On one hand, we are seeing rising monthly dues, special assessments, and skyrocketing property insurance costs. On the other hand, Florida continues to be a highly desired market for out-of-state and foreign buyers, keeping demand strong.

Given these factors, what are you currently doing with your condo investments in South Florida? Are you:

- Buying: Taking advantage of the demand and potential for long-term appreciation?

- Selling: Cashing in on the high property values and avoiding increasing costs?

- Holding: Waiting to see how the market evolves while managing the higher expenses?

I’d love to hear your perspectives and experiences. How are you navigating these challenges and opportunities?

Looking forward to your insights!

I would definitely consider selling.

Long-term appreciation in property value can occur for several reasons, but not all of them indicate a real increase in value. Inflation, for instance, can raise property prices, but this doesn't necessarily translate into a real increase in value when adjusted for the cost of living.

Demand can also drive appreciation, but there are factors that could cause demand to decrease. For example, many elderly individuals purchase condos in Florida to retire. These retirees often live on fixed incomes, so rising HOA dues, special assessments, and increasing property insurance costs can be a significant burden. These higher expenses could deter potential buyers, leading to a decrease in demand.

In essence, appreciation is sustainable only if there are strong, underlying reasons for it. Given the current dynamics—rising costs and potential demand constraints—selling now could be a prudent move to capitalize on high property values while avoiding the risk of future depreciation.

 Great point Livia! I certainly agree. 

[Francesco Ponticelli]

Hi Joe,

I own condos in Miami and I have clients, each one with different financial situations, owning condos too. I have been investing in Miami Dade County area, so i can't talk for the rest of FL that is a different beast, county by county, so I give you my point of view of Miami.

The key point is which type condo are we talking about: newer >2010 condo, old condos, in key growth areas or not.

Data, as always, speaks: condo sales ares slowing down, overall Miami is close to be a Buyer market overall (it is already a Buyer's market in many zip codes...), while appreciation is on average +5.5YoY. Some areas have higher appreciation, some areas lower. 

Condos are also unique because each condo is different from another, so the strategy is really building by building, and there are buildings which match each of the options you listed above.

June 2024 showed clearly the increase (and rush to sell) of inventory, that for 90% is driven by older buildings (40 years+).  Days on Market is increasing steadily, driven by those older condos. 

Newer ones (2008+) are suffering from seasonality now but will pick it up in Q3-Q4: if you look at historical data, Miami Dade county has always had seasonality low volumes during summer time, due to hurricane season, holidays and less tourists visiting. Those are the ones who most likely will be less hit by Special Assessment and, with the current "fear" in the market, are a good option to buy at a discounted price. Again, being very focused on key buildings close to new constructions being delivered in 2-4 years, in key growth areas, you can get good deals and cash in apprecitation in the mid-long run.

In older buildings, if you are not financially solid, it's recommended to sell before HOA and Special Assessment will put you out of business.

Key drivers of the HOA fee increases have been insurance and special assessments. Newer building has seen huge increases in insurance in the past years because of the collapse of the Champlain Towers and hurricanes, but that is over and there is more competition now in the market: I have already seen the cost of insurance going down -8% in the negotiation for 2025 in one building where I sit in the HOA.

In my condos, I hold: they are pretty new, with healhy equity already, and solid, with no Special Assessment at the horizon. And they are located beside multi-million development which will bring up the value in 4-5 years, if the market remains the same.

I have clients who are selling because they have some equity but are cash flow neutral/negative and fear some assessment. I have sold one in 40 days and others are on the market. 

I have 3 clients willing to buy: they are highly focused on specific buildings (and line) they want, and are watching the market to attack potential distressed owners and grab the best deal.

Hope it gives the perspective, even if it's only focused on Miami, that is one of the hottest market nation-wide and some dynamics that are very local (i.e. latin-american buyers buying cash to take $ out of their country)

[Joe Morello]

Quote from @Francesco Ponticelli:

Hi Joe,

I own condos in Miami and I have clients, each one with different financial situations, owning condos too. I have been investing in Miami Dade County area, so i can't talk for the rest of FL that is a different beast, county by county, so I give you my point of view of Miami.

The key point is which type condo are we talking about: newer >2010 condo, old condos, in key growth areas or not.

Data, as always, speaks: condo sales ares slowing down, overall Miami is close to be a Buyer market overall (it is already a Buyer's market in many zip codes...), while appreciation is on average +5.5YoY. Some areas have higher appreciation, some areas lower. 

Condos are also unique because each condo is different from another, so the strategy is really building by building, and there are buildings which match each of the options you listed above.

June 2024 showed clearly the increase (and rush to sell) of inventory, that for 90% is driven by older buildings (40 years+).  Days on Market is increasing steadily, driven by those older condos. 

Newer ones (2008+) are suffering from seasonality now but will pick it up in Q3-Q4: if you look at historical data, Miami Dade county has always had seasonality low volumes during summer time, due to hurricane season, holidays and less tourists visiting. Those are the ones who most likely will be less hit by Special Assessment and, with the current "fear" in the market, are a good option to buy at a discounted price. Again, being very focused on key buildings close to new constructions being delivered in 2-4 years, in key growth areas, you can get good deals and cash in apprecitation in the mid-long run.

In older buildings, if you are not financially solid, it's recommended to sell before HOA and Special Assessment will put you out of business.

Key drivers of the HOA fee increases have been insurance and special assessments. Newer building has seen huge increases in insurance in the past years because of the collapse of the Champlain Towers and hurricanes, but that is over and there is more competition now in the market: I have already seen the cost of insurance going down -8% in the negotiation for 2025 in one building where I sit in the HOA.

In my condos, I hold: they are pretty new, with healhy equity already, and solid, with no Special Assessment at the horizon. And they are located beside multi-million development which will bring up the value in 4-5 years, if the market remains the same.

I have clients who are selling because they have some equity but are cash flow neutral/negative and fear some assessment. I have sold one in 40 days and others are on the market. 

I have 3 clients willing to buy: they are highly focused on specific buildings (and line) they want, and are watching the market to attack potential distressed owners and grab the best deal.

Hope it gives the perspective, even if it's only focused on Miami, that is one of the hottest market nation-wide and some dynamics that are very local (i.e. latin-american buyers buying cash to take $ out of their country)

Francesco, thanks for the detailed insight! Perfect info for this thread. I am with you on everything you said, however I am curious about what you mentioned you have been seeing with insurance. Although -8% is nothing compared to how much the premiums have been jacked up over the last 4 years, it's certainly something! Who have you seen coming into the market, increasing competition? I have yet to see that myself. 

[Francesco Ponticelli]

Quote from @Joe Morello:

Francesco, thanks for the detailed insight! Perfect info for this thread. I am with you on everything you said, however I am curious about what you mentioned you have been seeing with insurance. Although -8% is nothing compared to how much the premiums have been jacked up over the last 4 years, it's certainly something! Who have you seen coming into the market, increasing competition? I have yet to see that myself. 

Hi Joe! Yes, increasing competition! Frankly, I would have been happy with no increases :D so a -8% was gold! In the last two years we had approx +35% YoY each year. Let's hope it keeps stable/descresing! 

[Robert Ellis]

Quote from @Francesco Ponticelli:

Hi Joe,

I own condos in Miami and I have clients, each one with different financial situations, owning condos too. I have been investing in Miami Dade County area, so i can't talk for the rest of FL that is a different beast, county by county, so I give you my point of view of Miami.

The key point is which type condo are we talking about: newer >2010 condo, old condos, in key growth areas or not.

Data, as always, speaks: condo sales ares slowing down, overall Miami is close to be a Buyer market overall (it is already a Buyer's market in many zip codes...), while appreciation is on average +5.5YoY. Some areas have higher appreciation, some areas lower. 

Condos are also unique because each condo is different from another, so the strategy is really building by building, and there are buildings which match each of the options you listed above.

June 2024 showed clearly the increase (and rush to sell) of inventory, that for 90% is driven by older buildings (40 years+).  Days on Market is increasing steadily, driven by those older condos. 

Newer ones (2008+) are suffering from seasonality now but will pick it up in Q3-Q4: if you look at historical data, Miami Dade county has always had seasonality low volumes during summer time, due to hurricane season, holidays and less tourists visiting. Those are the ones who most likely will be less hit by Special Assessment and, with the current "fear" in the market, are a good option to buy at a discounted price. Again, being very focused on key buildings close to new constructions being delivered in 2-4 years, in key growth areas, you can get good deals and cash in apprecitation in the mid-long run.

In older buildings, if you are not financially solid, it's recommended to sell before HOA and Special Assessment will put you out of business.

Key drivers of the HOA fee increases have been insurance and special assessments. Newer building has seen huge increases in insurance in the past years because of the collapse of the Champlain Towers and hurricanes, but that is over and there is more competition now in the market: I have already seen the cost of insurance going down -8% in the negotiation for 2025 in one building where I sit in the HOA.

In my condos, I hold: they are pretty new, with healhy equity already, and solid, with no Special Assessment at the horizon. And they are located beside multi-million development which will bring up the value in 4-5 years, if the market remains the same.

I have clients who are selling because they have some equity but are cash flow neutral/negative and fear some assessment. I have sold one in 40 days and others are on the market. 

I have 3 clients willing to buy: they are highly focused on specific buildings (and line) they want, and are watching the market to attack potential distressed owners and grab the best deal.

Hope it gives the perspective, even if it's only focused on Miami, that is one of the hottest market nation-wide and some dynamics that are very local (i.e. latin-american buyers buying cash to take $ out of their country)

 I think a lot of this data for miami is wrong. it's not a buyers market or even close to a buyer''s market. 

Literally maybe 3 month old article and really contradicts a lot of what you said:

https://www.benoitproperties.com/news/miami-housing-market-s...

[James McGovern]

I can't think of anything more braindead than purchasing a condo in South Florida right now.

[Francesco Ponticelli]

Quote from @James McGovern:

I can't think of anything more braindead than purchasing a condo in South Florida right now.

 :D depends on the goal, not all investors have the same one!

[Francesco Ponticelli]

Quote from @Robert Ellis:

 I think a lot of this data for miami is wrong. it's not a buyers market or even close to a buyer''s market. 

Literally maybe 3 month old article and really contradicts a lot of what you said:

https://www.benoitproperties.com/news/miami-housing-market-s...

What do you think it's wrong? :D

The article is of Jan 2024, giving a lecture of data of Dec 2023. 

The key drivers are still there (appreciation, hot market, as I mentioned) but you need to look at the real data - that is based on Public Records and Listings / MLSs. 

Official data of June 2024, Miami Dade County overall (Single Family + Condo + Townhouse + Apt) is a Balanced market now. When you look at the verticals, at the overall Miami Dade County:

- Single Family Homes is Seller market

- Condo is already Buyers Market. 

And this is the aggregate. As mentioned, you can slice the data and focus on zip codes, neighborhoods, areas, and get different results. 

Data doesn't lie: articles can point you in a direction or another to focus on the indicators they choose, but you as investor need to analyze the data carefully. 

[James McGovern]

 :D depends on the goal, not all investors have the same one!

How can an investor make money on condos while avoiding future liabilities?

[Francesco Ponticelli]

Quote from @James McGovern:

 :D depends on the goal, not all investors have the same one!

How can an investor make money on condos while avoiding future liabilities?

I agree with you that it's hard to predict future liabilities in condos, but if you choose wisely (solid management, reliable developer, newer construction), you can reduce the risk. 

How to make money? Appreciation and understand when is the moment to sell, cash in the equity, and move to the next project.  

And it's not just condos: you can't avoid future liabilities in any RE investment. You can buy a house and it can get damaged by a hurricane (i.e. Hurricane Irma, to mention the latest with big impact here in SoFL), while a new condo can remain intact. 

I think the answer is very market/condo specific.

[Ray Hage]

Quote from @Francesco Ponticelli:

Quote from @James McGovern:

 :D depends on the goal, not all investors have the same one!

How can an investor make money on condos while avoiding future liabilities?

I agree with you that it's hard to predict future liabilities in condos, but if you choose wisely (solid management, reliable developer, newer construction), you can reduce the risk. 

How to make money? Appreciation and understand when is the moment to sell, cash in the equity, and move to the next project.  

And it's not just condos: you can't avoid future liabilities in any RE investment. You can buy a house and it can get damaged by a hurricane (i.e. Hurricane Irma, to mention the latest with big impact here in SoFL), while a new condo can remain intact. 

I think the answer is very market/condo specific.

I agree there are ways to reduce condo risk but it is dangerous in south FL right now. Frankly, I wouldn't feel comfortable owning a condo long term due to rising HOA costs and major assessments. This can happen even with a newer building