The 2022 Miami Real Estate Forecast | Part 3: Why Miami Real Estate is Becoming such a Solid Investment

Investing in Miami Real Estate | Increasing CAP rates and Asset Appreciation

Part 3 of our 2022 Miami Real Estate Forecast

In part 3 of our report we discuss Miami’s strong rental market, the increase in demand for luxury rentals and we provide some examples of properties that have increased significantly in rent over the last year(s). We also provide a very clear example of a sub-market in Coral Gables, showing its increase in property values and rental rates over the years, again with examples.

An Increasing Demand for Luxury Rentals and Increasing Rental Prices

As the Miami market is growing at an incredible speed, we wanted to include the investor class conversation to our 2022 Miami real estate forecast. Since Miami’s rental market is now also at a level we have never seen before, the market is becoming increasingly desired with investors. When you look at Miami’s typical rental market it was (and is) very much the condo market that is dominated by investors who put their units up for rent.  This market was pre-dominantly built-up with Latin American flight capital. Miami’s urban core for example is mostly owned by Latin American investors who at the time they bought this product were very focused on getting their capital out of their respective countries and to invest in a solid, dollar-based market. In Brickell most condo units were bought by Latin Americans and Sunny Isles was a favorite among Russians and Brazilians. This ‘typical’ rental market is now shifting.

Investing in Miami Real Estate in 2022 | Caps Rates are Increasing and Properties are Appreciating

In a previous article we discussed the Brickell rental market and our concerns about its sustainability.  Rent in Brickell has gone up with 30-50% because of the high demand from relocating tenants. What used to rent for $3/$4K is now renting for $5K or even $6K. Brickell’s median income is $80K per year. With other words, people are renting units and live a lifestyle they cannot afford. A risky situation and one to monitor, although in my interview with Ana in part 1 of this forecast, a more bullish outlook was discussed.

A more positive outlook is based on the fact that there are many new residents moving into Brickell for whom this rental market is still very affordable. The demand for luxury rentals has certainly gone up as wealthy new residents are flocking in. While 2019 saw 80 properties rented for $25K or more per month, this number increased to 153 in 2020 and 262 in 2021. We are now also seeing a higher demand for single-family rentals, as families are moving into Miami looking to be close to Miami’s best schools.

With the high demand for Miami real estate we are now experiencing extremities in the rental market with rental prices going up by 30%. Properties that used to rent for $15,000 per month are now renting for $20,000 per month. Besides this the properties that traded for $2M in 2020 are now trading for $3M. These assets are appreciating in value while at the same time providing you with a great source of income. It is really a win-win situation and now more and more people are looking for an opportunity like this.

1890 S Bayshore Dr in Coconut Grove sold in 2020 for $750,000, it rented for $7,000 per month several months after and in 2021 was put up for rent for $10,000 and received $10,500 per month. That is a 16% yield. There are so many examples like this.

Please see below example or rental appreciation

As you can see from the below examples it is becoming increasingly achievable to rent out luxury or ultra-luxury properties . We are seeing a lot of extreme rental numbers in the housing market. The housing market is generally dominated by people who have a real need to be somewhere, mostly families with children. In this case relocating buyers who have not yet found their dream home while their kids need to start school or families who first want to explore an area before buying.

Investing in Miami Real Estate in 2022 | Discussing Cap Rates and Asset Appreciation in Coral Gables

There are so many sub-markets to discuss in Miami, but we decided to highlight the Coral Gables market of properties valued between $1M and $2M. We have expertise and territory managers in all of Miami’s neighborhoods so whether you are exploring the $1M condo market in Brickell, the $5M market in Pinecrest or the $15M market in Miami Beach we can give you the numbers and assist you in your search. Please contact David Siddons at 305.508.0899

The Coral Gables home market in the $1M-$2M range grew 18% since 2020 and 25% since 2019. We are talking massive appreciations here. When looking at the Gables rental market for properties renting between $5K and $12K we see a 22% increase compared to 2020 and 33% increase compared to 2019.  Please also note that properties used to rent at 95% of their asking price in 2019 and 2020. In 2021 we are paying on average 2% over asking price.

We also looked at individual properties that have been renting in the last few years and checked what they are doing. Rental properties in 2022 received between 22% and 81% (40% on average) more in 2021/2022 than that exact same property did in the years between 2017 and 2020. Properties like 1226 Palermo Ave that rented between 2017 and 2020 for $5,000-$5,500 per month and are now renting for $6,800 per month, 1419 Cadiz Ave that rented for $3,900 in 2020 and for $5,000 in 2021, or 6625 Santona St that rented for $4,500 in 2018/2019 and is renting now for $7,000 per month.

Why Miami Real Estate is Becoming such a Solid Investment
Discussing Cap Rates and Appreciation of Assets in Coral Gables

2508 Anderson Rd in Coral Gables rented in 2019 for $5,600 per month. In July of 2021 it was listed for rent for $7,400 per month and it ended up rented for $10,000 for the year.

1209 Asturia Ave was sold in February of 2020 for $1.8M. The property is now renting for $17,750.00 (as per Dec 2021). That is a 12% yield

1528 Robbia Ave sold for $1,090,000 in January of 2021 and in March of 2021 it rented for $7,000 per month. In august of 2021 it relisted for $9,500 and rented for $10.250 per month. Also a 11% yield.

435 Castania Ave closed for $970,000 in 2018 and has been rented between $3500 and $5500. In 2021  this home resold for $1,250,000.00 and is now rented for $9,000 per month. The yield went up from 6.8% to 8.6%.