Investors have been stuffing the piggy banks in South Florida, boosting sales in the region.
South Florida homeowners distressed by the foreclosure-ridden housing market are more often than not renting, rather than buying, their homes. Surprising as it may sound, this scenario has actually helped the resale market. According to a recent Miami Herald article, South Florida is on track to set a new sales record this year. The reason behind this ironic economic market twist – investors.
International investors and stateside locals with the extra cash to spend have been making a pretty penny buying up foreclosed homes and converting them into rental units. The majority of homebuyers today are not first-time owners and growing families, as they traditionally have been, but opportunistic investors.
The current demand flooding the rental market by foreclosed homeowners and by those who can’t or won’t buy in this economy is unprecedented.
“I talk to a couple investors all over South America and they tell me they buy these condos and it takes about a week to rent them,” said Craig Studnicky, principal of Miami real estate firm RelatedISG, in the Herald piece. “Each and every month, the rents are going up.”
There have been over 100,000 South Florida homeowners that have lost their homes due to foreclosures since 2007. Investors gravitating toward the distressed and cheaply traded properties have accounted for about 60 percent of home sales. This year, occupancy rates have risen to over 95 percent and rent prices have risen between 3 and 7 percent, according to research by MPF Research.
RJ de Varona, chief operating officer of The Solution Group, told the Herald, “We bought a two-bedroom in Kendall in May for $50,000. We invested $10,000 in repairs, and then rented the unit for $1,200 a month. We just closed the sale of the unit for $95,000.”
The region’s rental market is likely to increase as so-called “vulture investors” continue to seek profit gains through buying, repairing and renting the distressed properties.
Sales for condos and single-family homes in the Miami-Dade County have risen above the boom era in 2005, reaching an expected 29,000 in 2011. The United States offers greater legal protection for foreign land owners, and owning a home can help facilitate the process of obtaining a visa, which may explain why foreign investors are attracted to the South Florida real estate market.