The Ugly Truth of the Miami Pre-Construction Condo Market!

A Must-Read Before Buying A Miami Pre-Construction Condo

Introduction to the Ugly Truth of the Miami Pre-Construction Condo Market!

Whenever a new Miami condo is announced terms such as “LUXURIOUS” or “THE BEST” are often casually thrown around. Buyers are therefore left in a state of uncertainty, wondering what to focus on when everything seems to be described as great. There are some questionable activities happening in the Miami pre-construction condo market. Realtors. who are supposed to have their buyer’s best interest in mind, are often not seeing the red flags. They might ignore them or quite simply lack the experience to even notice them. 

We have been in the real estate business for so long and have sold hundreds of new construction condos in Miami. We openly speak about what we like and what we don’t like. Even in the condos we do like, there are floor pans that work and there are floor plans that don’t work. It is a line-by-line conversation because you buy one specific unit after all. We enjoy full super-broker status with most of the developments. As a result, we get first access to information and inventory on the newest Miami Pre-Construction Condos. We enjoy all the benefits of having this status but by using us you still get independent advice.

There is some ugly truth to the real estate business we want to make you aware of so you know you have someone who warns you and who has your back. Below we go into the more troublesome aspects of the market, which are very rarely talked about.

Construction Loans

Construction loans are a determining factor in whether a project will get off the ground. Some developers do not need financing while others will need 50% sold before they can secure a construction loan.

Having a construction loan is used as a selling point as it means there is money to start constructing Recently one of the developers mentioned they had a construction loan, but what they had was a refinancing of an acquisition loan. Refinancing a building that you already acquired is entirely different than getting a construction loan that you need to break ground. Once a developer has a construction loan you know they will soon be ready to break ground. If they are still working on getting this loan you simply do not know when they will break ground.

Be careful with overly confident or overly leveraged developers. Always look for those who have a proven track record of not just delivering quality but also delivering on time.
Florida is one of the ONLY places where a developer can use clients’ deposits to build. Arbor in the Grove is a prime example of this. The budget was not properly managed and the developer ran out of money. If that developer defaults they take your money with them in a worst-case scenario. Buying in Miami pre-construction condo can make you a lot of money, but you have to get it right

Groundbreaking

Developers always ask for a certain percentage to be paid at contract (10% to 20%) and then the next one at groundbreaking (Another 10% to 20%). What they now often do is announce a groundbreaking so they can ask for funds from the buyers. It can be some guys with a shovel who call the press after which some dirt is moved around. Make sure you know they projects that had an actual groundbreaking and those who just claimed they broke ground.
Because interest rates are so high right now, some developers are waiting to apply for a construction loan. They were hoping rates were coming down. Needless to say, this then delays the groundbreaking and the project’s timelines.

Miami Pre-Construction Condo Market: Rental buildings.

I don’t like short-term leases or buildings that allow for Airbnb. These kinds of condos attract an investment-class buyer. Investors are speculators and when the condo does not perform well or the economy stagnates those are the first ones to sell. A condo that has a lot of units for sale will start devaluating. We have looked at this time and time again and we can tell that these always underperform. The same goes for hotel condos, essentially investing in a hotel room. These seldomly appreciate in value.

Many new construction condos are now coming into the market that allow for short-term leases or AIRBNBs. Most of these are coming to the Downtown/Midtown area. If you are aware of the volatility of these markets and decide to take the risk, you should go for it. If you want to know what does appreciate in value, please check this article or call me directly.

Floor Plans

Floor plans need to be accurate. There is a difference between the architectural floor plans and what the developer is pushing. The developer plans tend to be 10-15% larger than the architectural plans. It is the architectural plans that are recorded with the city. So if you are comparing an existing condo with a pre-construction condo you need to be careful to compare apples to apples. Existing condos use architectural plans while new condos often use the SF of the developer which therefore makes it seem the price per SF is lower.

In addition, you need to understand the floor plans. Floor plans are key. Even in quality condos, they can offer bad floor plans. How will the light come in? Will views remain unobstructed and how is the overall flow? With years of experience in selling luxury condos, I’ve gained insights into what really works and what doesn’t. You see, a floor plan on paper can be vastly different from the experience of walking through the actual unit. It’s astonishing how often I’ve witnessed buyers envisioning a certain layout when making their initial decision, only to realize upon moving in that it doesn’t quite suit their lifestyle.

Developers

Can they Deliver on Time?

If you look at the contract of a pre-construction condo in Miami, it allows for a significant amount of time to pass and could run as much as two years or more. Therefore it is essential to know the developer’s track record. It is not just important to check their quality but also whether they are known to respect timelines. In this cycle, for example, several buildings were supposed to take 3 years and they took 5 or even 6 to finish. The developers were not as experienced. Maybe they had the money but they hadn’t built before. Be really careful with this and ask us about the track record of a developer.

Do they Deliver What They Promised?

Many Miami developers have a pedigree (Eg Ugo Colombo) and they are known for delivering what they promised. Some developers have previously developed poorly and are now in round two. Often with the same promises or mentioning this is an improved project. I have heard the complaints and I have seen the resale prices dive and buyers should be aware of these developers. Please give me a call if you want to learn more.

Value Engineering

New condos are being built during a time with higher construction costs and higher interest rates. What was originally budgeted is no longer valid. These companies see their profits shrink. While many do not jeopardize the quality promised, others will try to save costs and cut on quality. This is called value engineering. When I represent a buyer, I add clauses to the contract that hold the developer accountable for delivering the level of product they said they were going to deliver.

Branded Condos

Brands are a great thing but not all brands have anything to do or add value to a Miami new construction condo. The quality of a car brand does not translate into the quality of a condo. Hospitality brands (Mandarin Oriental, Waldorf, St Regis, Cipriani) however do deliver because they correlate with the condo and have a track record in the industry. You should be careful with brands that do not have a track record with hospitality. It can go well, like is the case with Fendi, but there are several ones that did not perform well at all, sometimes seeing resale values drop by as much as 50%.

Conclusion of Ugly Truth of the Miami Pre-Construction Condo Market!

I have analyzed many new condos and will continue to do so. Some I love and I write about the reasons why I recommend them. Some I simply do not write about because I would not recommend them at all and do not want to be sued either. I’m unfiltered and unapologetic and I don’t say anything positive about a project if I don’t believe in it.

Therefore, if you have a particular condo you want to know more about and I do not have reviewed it, ask me why i have not.  I report on the good, the bad, and the ugly, and I’ll help you make a better decision.

The Miami Condos We Do Recommend

HERE IS A LINK TO OUR TOP 10 NEW CONSTRUCTION CONDOS FOR SALE

Why work with me to buy a Miami pre-construction condo?

As an independent analyst, I have researched, studied, reported, and MOST importantly helped hundreds of buyers purchase new construction and resale condos for over 15 years. I am available to help, partner, and guide you to the best units without bias. I hold ‘super-broker’ status within the real estate community. In addition, I’m one of the few agents to be hired as a consultant on the development and marketing of four luxury projects over the past five years. I understand intimately the process, strategies, and legalities of new construction. Moreover, I have an insider’s understanding of how they work, advertise, market, legally operate, and sell – both the good and bad!

My experience and connections allow me to navigate my way to direct dialogue with the developer on your behalf. Advising, protecting, and executing luxury pre-construction condo deals at the best prices and with the best terms for my clients. My advanced software allows me to provide a clear understanding of new and resale value history to clients. My Top 10 New Construction Condo Rankings enable buyers to see how any new condo stacks up against the competition throughout Miami. Finally, my understanding of project specifics and statistics is unmatched. Want to know more? Call me for an impartial chat at (305) 985-0642 and let me openly and freely share my knowledge with you. You can also email me: David@siddonsgroup.com or register on the Calendly app for a Zoom call.