It is already international news that Miami-Dade County & Broward are the first two counties of Florida that has recuperated from the economic real estate crisis. Miami-Dade County is now experiencing incredible new real estate development in every price range in the market. New construction projects, commonly referred to as "Pre-Construction Condos" are rising in every community from Aventura & Sunny Isle, to South Beach, Brickell, Downtown-Miami to Doral. There are many different types of buildings; ranging from two story lofts to 70 story waterfront high-rises...ocean front luxury condo-hotels to affordable suburban mid-rise projects in Doral. Whether you want an affordable studio apartment in the Miami Arts District or a penthouse mansion in the sky in Bal Harbour or Brickell...no matter what price range, level of amenities and services, or location you desires...it can be found in Miami.
What benefits does the buyer have to buy pre-construction? The primary benefit of investing in preconstruction condo projects is that the buyer is able to get a brand new condominium property at some time in the future based on today's prices. The purchaser has the ability to leverage a large asset with a relatively small amount of money at front (typically 30 to 50%) and enjoy the real estate appreciation of the property over time without the carrying costs of interest, maintenance fees and taxes. You can buy a condo now to live in later or hold it for appreciation, and/or rent it to the increasing demand from local residents that cannot afford to buy now. The average return on buying and renting can be between 4% to 6%.
At Best International Realty we would like the opportunity to be your Realtor and assist you to sort through the hundreds of potential Miami preconstruction real estate opportunities to find just the right situation to fit your goals. With that in mind, we try to answer the Frequently Asked Questions below, as well as, describe the process & development phases that each preconstruction project goes through and the different ways to take advantage of the appreciating Miami real estate market.
Each preconstruction condo project goes through four different phases:
Phase 1: Reservation
In this phase, the developer is offering the units at the lowest price of all future stages. These prices are typically below the market price and give the developer the chance to test the real demand for the project, helping the financing process that they face with their current lenders. The buyer will find the great chance to "reserve" the chosen unit with a deposit of 15% or 20% of the unit value, with a "reservation agreement". This money is fully refundable .
Phase 2: Contract
Once the developer reaches the point of the required number of reservation agreements, they create the "hard-contracts" with the "condominium-documents" specifying in detail all the legal and technical specifications of the development. This stage is usually reached between 1 and 3 months after the "reservation agreement". If the buyer wishes to go ahead, the deposit given to the developer is now non-returnable.
Phase 3: Construction
When the construction of the project begins or the construction "breaks ground"; a second 15 to 20% is required to complete the initial deposit. The construction may take between 6 months to 2 years. Once the developer finishes the buyers floor an additional 20 % will be required and also, when the building is "topped-off" or the top floor is completed.
Phase 4: Closing
Once the development interiors are completed (six months or two years later), you will complete the transaction by "closing" the unit. At this point, the remaining money to complete the purchase will be required, and the mortgage or the cash payoff will have to be available, along with the closing costs and all the typical expenses related to a Florida real estate transaction.
For more information on upcoming pre-construction projects and how to buy them, please contact us.
Preconstruction Condos – FAQ (Frequent Asked Questions)
How does Florida law protect the purchaser of a preconstruction condo?
In Florida, purchasers have a fifteen (15) day rescission period starting with their receipt of the Public Offering Statement, which includes the condominium documents, association by-laws, preconstruction purchase contract and escrow agreement; to review and complete or rescind any condominium purchase and escrow agreement and receive a full refund of their deposit if they rescind.
The most important protection under Florida law is that your deposit is held in an escrow account. These funds will be not released until the closing of your unit unless the developer designates a portion of the deposits may be used for construction in the contract.
Why are preconstruction sales necessary?
Most developers are required by their lenders to pre-sell a certain percentage of their projects before the bank or lender will lend them the funds for construction. This is the risk (and the opportunity) when buying a preconstruction condo unit. If for some reason the developer decides not to build the project then your deposit money has not been appreciating. Preselling condos has become a standard practice. Once the required presale percentages have been reached and construction has begun, your risk is greatly reduced.
Why buy a preconstruction unit when I can buy one that is available now?
By purchasing at pre-sale you are able to leverage your down payment and control 100% of an appreciating asset with an initial (20% to 50%) investment. Many people have purchased preconstruction condos and have sold their units for a profit even before the building is completed.
On what floor and what size unit should I buy?
If you are expecting to close and live in the residence then you should select the view and floor height that will appreciate most over time as well as one that you will enjoy living in. The higher floor with unobstructed views are the best.
If, however, you plan to lease the condo to a tenant, you will want one that appeals to the greatest number of potential tenants. This can also depend on the area your purchase is located. If you are in an urban environment, a one bedroom for single tenants may be best; in a resort area, a condo-hotel unit with a management program may work for you. In a suburban neighborhood, two bedrooms are often better because they attract couples without children, single parents with a child or singles with a roommate.
If you plan to sell your condo purchase for a profit as quickly as possible then the least expensive unit on the lowest floor (typically studios and one bedrooms) have shown the highest percentage of return based on previous condominium resales.
What are the required deposits for preconstruction condos?
With most preconstruction condos you will be required to deposit twenty (20) percent by the time the developer "breaks ground". Typically, there is an initial reservation fee, then the remainder of the first ten(10)percent at the time of contract. The final ten (10) percent is required when the developer breaks ground.
Can I sell my preconstruction purchase before it's completed?
You must have written permission from the developer.
• You may sell your right to the condominium unit by transferring or assigning the contract to a subsequent purchaser.
• You may sell your unit under a real estate contract upon completion of the condominium. Two real estate closings will occur simultaneously, your purchase, and the sale to your buyer.
Who may resell my condo?
You have two options in most cases:
• The developer may resell the unit for you.
• Your REALTOR® may find a buyer for you.
In either case there will be a real estate commission but this choice is solely up to you.
What are the advantages of having a relationship with a REALTOR® when purchasing preconstruction condos?
A professional REALTOR® will:
• Alert you about new preconstruction projects before they are made public
• Help you compare the pricing in similar buildings in the neighborhood
• Inform you about community infrastructure developments such as service retail and civic investment that may effect the future
value of your property
• Help you negotiate the terms of the contract and advise you on alternative choices that may meet your needs
• Share information regarding the relative financial strength and track record of a developer with you
Finally, since all realty fees are paid by the developer, you are getting the services of the REALTOR® for free!
For more information Contact us today or call: 305-490-5640