Perspective: Investments in Miami and the Market Situation Today
From Juan Mezzini, Real Estate Broker and MRG Founder
We are experiencing a very active start to the year in Miami in several aspects. This prompts me to write this insight, primarily focused on the topic of interest to us: investment properties. I believe this summary will help understand, from my personal point of view, what is happening and is important to know for those investing in properties in Miami and Broward.
In this regard, I have received calls from some of you expressing concern over the sharp rise in condo fees in some buildings during January of this year, as well as the increase in Property Tax paid in November and December 2023.
The reason behind this situation
As a general comment, in Miami, not only have these aspects been affected, but everything has seen an increase: groceries, entertainment, restaurants, clothing, etc. Miami has grown and is now dubbed the "Mini-New York," with all the positives and challenges that this entails.
Let's delve into a bit of history. Following the pandemic, property prices soared disproportionately in 2021 and 2022. From 2022 through mid-2023, rental rates followed suit, much to the delight of those enjoying excellent profitability.
Additionally, condo fees and Property Taxes are typically voted on once a year, which explains adjustments seen only in 2024, with potential further adjustments expected for 2025.
The brunt of these increases has been felt most by condos built before 2000, exacerbated by the Surfside building collapse. After years of low fees and basic maintenance, inspections and massive repairs are now anticipated, along with fines, liens on condos, etc.
The Surfside tragedy prompted Florida state to enforce minimum reserve maintenance for condos at their actual value. Furthermore, the insurance crisis in Florida in 2023 left us with few options, reduced coverage, and an almost monopolistic environment with unrestricted price increases for owners and condos.
All of this falls on condo associations, leading them to raise ordinary expenses and/or impose extraordinary expenses.
How does this affect us, or rather, what is advisable to do during this general market readjustment period?
We can observe an increase in property inventory, but not necessarily a significant drop in prices or an impending crisis, rather a general economic realignment affecting properties in Miami.
I also perceive a demographic shift in Miami, where lower-income individuals are moving to other cities in Florida, balanced by continuous arrivals of immigrants from various countries with higher purchasing power: Eastern Europe, Canada, plus internal migration from expensive cities and states like New York, California, and others, seeking lower tax burdens.
On the positive side...
Miami is now solidifying its status as the capital of glamour: with luxury buildings already constructed and many more in the pipeline, increasing job opportunities, world-class restaurants, and ongoing events. It remains the financial hub for Latin America and strategically, the primary port for exports to Central and South America.
Fortune 500 companies are choosing Miami for their offices, and it continues to attract high-net-worth tourists for luxury shopping, the climate, and the beaches.
From my perspective, people come to Miami to live, experience its vibrancy, and leverage its dynamism for business across all sectors. Personally, I am optimistic that after the presidential elections in November, a change in government could lift the country out of its current sluggishness.
To the point then: What can we do with our investments at this time?
From my perspective, I offer two perspectives depending on the type of investor and their personal goals.
1) For those seeking a passive, long-term investment, with the premise of "leaving it for my children":
In this case, envision a positive outlook in a few years, with modernized condos, ample reserves, and thereby strong appreciation of properties in Miami. Real estate investment always yields returns; it's a matter of time and is incomparable to short-term fixed deposits.
2) For those seeking an active or proactive investment approach:
Consider selling your property now to realize gains and explore new investment opportunities aligned with the aforementioned situation, expected to generate good returns.
Today, we have access to mechanisms like the 1031 exchange, which allows deferring capital gains taxes by reinvesting proceeds from property sales into another property.
The best buy today
In this investment shift, the best advice is to consider purchasing townhouses or single-family homes without associations that can be renovated and rented or sold.
In our office, we also offer other project types such as:
• Construction of housing complexes on the west coast of Florida
• Property tokenization, allowing purchase of shares in property ownership and exploitation
• Acquisition of multifamily units, joining an investor group. These are small buildings with 4, 6, and 8 units managed by the same buyer.
Beyond these reasons
Let's not lose hope with high-rise condos. There are always well-managed buildings that have maintained and enhanced their properties with genuine funds, reasonable expenses, and reserves in their financial statements.
Continuously finding these will remain an excellent investment.
For investors willing to take more risks, there are distressed condo units available at very low prices. These condos are making agreements with the city, forgiving fines, securing new affordable insurance, etc., with the expectation that their value will rise again soon.
This is the excitement of the real estate market.
I hope this information serves you well in evaluating your investments. Naturally, what has been explained here deserves further development and opportunity analysis, which we can discuss privately at your convenience.
Wishing you all the best for a great week ahead!
Warm regards,
Juan Mezzini
