Wealthy Buyers And Investors Propel The Subtle Boom In Vacation Home Properties
There are people who love being able to visit Florida who question the idea of living there. One example would be Faigie Richman, 56, who never found the idea to be worth entertaining despite the fact that she had enjoyed visits that she would make to see her husband’s family in Boca Raton.
Mrs. Richman had felt that the lifestyle did not match hers since she did not play tennis or golf and felt no compulsive need to learn or take part in such sports. Plus she and her husband had a second home of their own in Rhode Island which was loved by their three children.
Given the situation at hand, when she and her husband had acquired two Miami Beach condominium properties this spring, she was just as startled as anyone could be. Their initial plan was to look at condominium properties for their daughter; but instead they had managed to close a deal on one property and do the same on another property in the same building just a few weeks apart.
Mrs. Richman mentioned that spontaneous purchases were not necessarily the sort of thing that she and her husband would enter into. But they felt that it would open the door to a good opportunity.
According to Mrs. Richman, they had only live in the one-bedroom condominium unit for only six weeks — three in the spring after they had made the purchase, and three more upon their arrival in the beginning of October — but doing so has made the couple feel like newlyweds, even more so with the beautiful view of the Biscayne Bay out in the open from their home space. Their apartment built in 1962 does in fact feel new to them.
While the couple has been dealing with the issue of finding potential buyers for their primary residence located in West Hartford, Conn., Mrs. Richman are looking forward to having less stuff around the house and more activity choices to keep herself busy during periods when her husband is traveling.
Such opportunities prove to be the same concept behind the many snowbirds who have come to Florida many years before the couple decided to make their move — being able to indulge in more fun things under the Florida sunshine while being able worry less about other things.
However, the couple claims that the condominium purchases that they made were not out of a luxury plan but more of an attempt to make the most of an opportunity which had become available to them considering that the current market had been a feast of low priced vacation properties as well as the exuberance in the stock and bond markets that have tugged so effectively at people’s desire to own real estate property, especially in terms second homes within premier locations.
Miami which had been iconic of the excess properties from the real estate boom — according to the National Association of Realtors, Miami real estate sales had gone up 34.1 percent in the month of September 2011 compared to September 2010.
It was also noted that Miami real estate sales were looking to reach 29,000 this year which would account for records higher than what was set in 2005. However, property prices are not within the same brackets as those back then as condominium unit prices are still very low despite having gone up 17 percent in September 2011 while single-family homes are at $131,000 which indicates a decline of 6 percent.
Mr. and Mrs. Richman do view the condominium properties as investments which have been paid for in cash — the same method of payment they would have used if they have made investments in a brokerage account instead. Apparently, 63 percent of buyers have also been cash-paying investors.
According to Mrs. Richman, $217,000 was paid for a 10th floor condominium property in foreclosure for their daughter Alanna who is a jewelry designer by profession in both New York and Miami Beach. There were considerations that needed to be made as far as that particular property was concerned since the floors of the unit were black and would definitely cost a substantial amount of money to fix up and refinish.
As far as their own condominium unit on the 12th floor is concerned, the couple had paid $370,000 on the unit, but Mrs. Richman had felt that they had spent $50,000 more than was needed. But since they had wanted a home space that was in a condition that was reading for occupancy, they went for the deal since it had recently undergone renovations and the price was still below what it would cost to rebuild the entire unit.
Essentially, the couple hopes that the value will go up over time and are willing to give it a try for at least twelve months.
Given the current situation, snowbirds and international buyers have become more eager about the allure of Miami Beach. Even their confidence in the Miami Beach real estate market has also grown stronger as they are more inclined to invest their cash in local real estate instead of other investment options that are available to them in their own countries.
The story is somewhat different within Miami proper as a selection of high-rise condominiums located along waterfront locations had failed to achieve the goals that were set out for them, even now that these buildings are finally occupied by renters as opposed to the buyers that they were initially intended to accommodate to.
One notable change in the market lies in the people who are buying as a large majority of today’s buyers happen to be wealthy individuals who merely seek safe investments for their money which will grant them at least 2 to 3 percent returns considering the current situation which will hopefully improve to rates of 8 to 10 percent in the next decade or less.
In the event that these returns become feasible would definitely be a generosity on behalf of the real estate market or a potential bubble. However, buyers are convinced that vacation homes in markets such as the one in Miami are priced low while international investors view these as opportunities to safely invest their money in ventures that can grant them a profit over time, especially when the properties are priced at values which are around the cost of their replacement.
In fact, a majority of today’s international investors are wealthy individuals that hail from Latin America who are purchasing more than 20 real estate properties in vacation destination areas that have had it the worst including Florida and California which generates an exposure increase from 10 to 14 percent up to 15 to 30 percent.
Needless to say, the optimism in looking toward real estate investments is not necessarily universal as people who are looking to purchase second homes need to look upon these properties as consumption good as to mere investments. According to David Rosenberg, chief economist at Gluskin Sheff, the concept of value appreciation was a return to the idea that had numerous Americans in acquisition of homes that they were unable to sustain financially who are looking at selling their properties for less now that the demand has gone up.
As far as the subject of cash payments is concerned, it is not a realistic goal for most individuals on the market as it is a common misconception for people to believe that mortgages cannot be acquired for second homes.
According to Bob Donovan, regional sales executive for the New York-New Jersey area at Bank of American Home Loans, there is financing available for second homes but they are in a full documentation environment which help to avoid situations from going wrong later on in time.
Real estate property buyers should be prepared to place 20 to 30 percent of the property value down and should not expect swift action to take place since there is now a pre-qualification approach in allowing buyers to learn more about what types of financing is available.
Real estate property buyers that have proven to be most successful were ones who managed to provide all income and credit information beforehand with the time allowance which made it possible to ensure that all information was verifiable and complete.
In the case of Mrs. Richman, the luxury of being in her new condominium unit has been a source of satisfaction and contentment. She even has a favorite item in her home space which happens to be a large purple chair which was shipped to Miami Beach from Connecticut. Also, she looks forward to seeing her children and friends when they visit during the winter season.
She knows that their investment is turning out to be positive. As for her daughter who has managed to fix up her home space, she is currently applying for a mortgage in order to pay her parents back and the investment has already gone up by $15,000 since April of 2011 which essentially indicates that the real estate cycle for the market has begun once more.