Should I Rent or Sell my Brickell Condo in 2018?
I want to move to my next property! Should I sell my Brickell condo or rent it out?
I very often go to listing presentations during which the owners tell me they are undecided yet between renting or selling their property. They are unsure of the market and unsure about where they get the best value. This big decision can be made easier by answering a few questions.
When to Rent or Sell a Property?
- Is the market going up or going down?
- In an upward market it is better to rent the unit until the market is about to reach its peak. This provides you with a nice asset appreciation, which adds to your cap return. One big question that owners have is ‘If I wait can I sell the home for more later on?” With this in mind we often ask questions to ourselves like: “What could hurt the market?”: Certainly raised interest rates, reduced benefits for homestead exemption or “What helps the market”? Such as tax incentives for high tax states like NYC, and California.
- In a correcting market, depending on how heavy the correction is, one should decide between holding on to the unit a bit longer or selling it right away before the market shifts from “Oversupply” to “Recession”
- What is the condition of my home?
- If your property is really nicely done, the premium you get when selling can disappear if tenants don’t like looking after it, and it devalues the product.
- Is it the ideal ‘rental property’?
- Some homes lend themselves to great returns while others are limited. Tenants don’t value property in the same way that end-users do. For example, end-users will value condo elevations, finishes, views, HOA fees and financial stability of a condo much more than renters do.
- Are there better properties to buy to get the same return or better, and put more money in your pocket?
- If your focus is just income, have you considered selling this property and buying into a more bullish market with better rental returns?
- How do you feel about being a landlord?
- How do you feel about a late night call “The air-co is broken” or “The washing machine is leaking”. Condos are easier to maintain than homes, but not everyone is cut out to be a landlord!
To rent or to sell my Brickell Condo?
The 2018 Brickell condo market is seeing a very high number of months of inventory. It is important however to divide the market into two. We have the “older, oceanfront condos” and the brand new wave of condos that were constructed between 2012 and 2016. Many of these brand new Brickell condos are very basic units sold as luxury products against inflated prices. Owners of these units, suffer the most. The market has reached its point of “Oversupply” and many investors are now looking to sell as they expected to flip the unit once they would be released. The truth is that demand has slowed down considerably and sellers are finding it hard to offload their units. With a massive oversupply and inflated prices, the market is unlikely to see a fast recovery (not within 2 years) and prices will need to adjust by 15%-20% or even more in order to stabilize the market. For this very reason it is better to sell now. Waiting a few more years will not provide you with much higher prices as we foresee considerable corrections. Unfortunately, many sellers will need to adjust their prices by at least 15%, even taking a loss. Renting in this market is also increasingly hard with 1000+ units being released as rentals units, offering very competitive prices.
Owners of waterfacing units in the older, established buildings (Brickell Key condos, Santa Maria, Bristol, Jade etc) find it easier to rent or sell their units. They did not buy for inflated prices and there is more demand for the established luxury products with waterviews.
As a general rule we would recommend to sell your Brickell condo unless you can rent it very well. A rule of thumb is to get $600 income on every $100,000 spent on your condo. So a $500K condo should provide you with $3K of rental income. That means that if your $1M condo only brings you $4,000 or $5,000 on the rental market, you will be better off selling. This of course also depends on your mortgage costs or your HOA fees. You could also sell in Brickell and buy into a market that is moving up which will also get you a higher rental rate.