By Paul Anthony McRae - Real Estate Expert
It doesn’t matter what country you come from, most international buyers prefer purchasing new construction condominiums over pre-owned ones.
Today, sophisticated buyers relish the concept of owning contemporary apartments adorned with floor-to-ceiling walls of glass, trendy new designer kitchens and rich, opulent bathrooms – all surrounded by a myriad of spectacular amenities. And it’s no surprise that sellers of yesterday’s traditionally styled buildings are now finding it much more difficult to compete for today’s affluent international buyer.
So, if you’re thinking about buying a luxurious new condominium here in Miami, there are many things to consider before signing on the dotted line. But most importantly, you’ll need to first define who you are, and what the primary purpose of your investment is. Are you an investor – or a real end user – just looking to enjoy future memorable moments in Miami with family and friends?
Alright then, let’s get started;
An INVESTOR is an individual who enters the pre-construction marketplace not intending to reside in the apartment, but with the sole intention of making as good a return as possible on his capital investment. Often, the most savvy pre-construction investors will hold their units long after closing, through long-term leasing to qualified tenants. This additional time often increases the investor’s holding power needed to maximize potential profits – by giving the new building quality time to become fully seasoned as well as more time to eliminate competition from other resale units.
An END USER is one who makes his initial pre-construction purchase with the primary intent of designing, finishing, furnishing and living in the residence for personal pleasure and enjoyment. In many cases, these apartments are purchased as vacation homes by international buyers, seeking to capitalize on Miami’s new global reputation as one of the top places to live – anywhere in the world.
Although end users are primarily concerned about personal enjoyment and lifestyle, they should constantly be aware that they are still making a considerable investment in real estate and should always look at any pre-construction purchase as a major investment for the future.
So whether you’re an investor or an end user, you should definitely consider these important suggestions:
1.) Do your research before you buy!
With many opportunities for pre-construction projects in today’s market place, it’s important to visit many different ones so you can make knowledgeable comparisons as to which one offers the best price and value for your investment. Learn who the developers and their architects are, and take time to find out as much as you possibly can about their experience, success, and above all, their reputations.
2.) All locations are not created equal!
Select the project with the best location that will ultimately bring you the best return when it comes time to re-sell. It’s very important for you to find out what the distances are to the beaches, shopping, restaurants, performance and sporting venues – as well as the Miami International Airport.
And equally important is the location of your new apartment and where it’s situated in the new building. Often the lowest prices are for apartments that face west or to the north – and developers consistently put the highest premiums on apartments that face south or to the east. The best advice is to always go for the best location – at the lowest available price.
3.) Invest early!
The most important rule of pre-construction investing is to buy during the opening pricing levels and take advantage of the best selection of available inventory. Developers often raise prices quickly, once certain percentages of sales have been reached in different lines in their inventory, so take the time to ask the developer’s on-site sales professional to inform you of how many price increases have already gone into effect since the opening of sales. If you feel you’re a little late in the process, then wait and take time to check out some other pre-construction opportunities. Avoid buying close to the end of a developer’s marketing campaign because you will most likely be paying a highly inflated price for the unit. In addition, you will probably have to compete with many other investors in the building, who were fortunate enough to buy earlier, at much lower prices.
4.) Compare the quality of luxury finishes – before you buy!
It’s very important to compare what each developer offers, especially when it comes to kitchen cabinetry, appliance brands, and bathroom materials and fixtures. In addition, each new project features different amenities, so make sure you invest in a building that is equal or better than the competition – as this could become a big determining factor when you go to resell your unit.
5.) Does the contract contain pre-closing resale restrictions?
Ask the developer’s sales associate if there is a clause in the Purchase Contract that restricts you from advertizing your unit for sale, listing it with a broker, or putting it on the Multiple Listing Service (MLS) – prior to closing. If so, try to negotiate in the Contract that marketing your unit may be permitted as soon as the developer reaches 90% of pre-sales in the building. If approved, this will give you some beneficial marketing time to try to line up a possible buyer – prior to closing.
Also, determine if the developer has plans to sanction a re-sale program for those investors wanting to sell their units before closing. Sometimes, a developer might permit a pre-closing resale, by your pre-paying him an assignment fee for the privilege. If the answer is no, you must be prepared to close and offer the unit for resale or for lease, after closing.
6.) Decorator or Designer ready?
The vast majority of pre-construction apartments are delivered in what is known as Decorator or Designer ready. This means that the apartment will be delivered to you at closing with a complete kitchen and kitchen flooring only, finished bathrooms and bathroom flooring only, and a primer coat of paint, throughout the apartment. The floors inside the unit and on the terraces are delivered in their original concrete condition and it is the sole responsibility and expense of the buyer to complete the apartment, after closing.
Rarely do pre-construction apartments come with finished floors, painted interior walls, and custom fitted window treatments, but when they do – it is the exception to the rule. And a good one at that!
7.) Developer Fee at closing.
It is a standard practise for developers to charge buyers a Developer Fee at closing. Typically, this fee averages about 1.75% of the actual purchase price and it pays for the buyer’s Title Insurance, Florida documentary deed stamp taxes, and the developer’s attorneys fees for handling the entire closing process. This fee is non negotiable, but it’s important to calculate it into your expense column – before making your final decision to invest.
8.) Know what’s in the condominium documents!
The Florida Condominium Act was passed into law as a series of the most stringent consumer protection laws in the United States. Designed to protect all buyers of Florida properties, the condominium documents clearly identify the complete intentions of the developer, as well as outline all the monthly association fees and rules and regulations that will govern many important issues for the owners.
What about rental policies? Pet restrictions? Material changes by the developer?
Make sure that you take time to review these documents and don’t hesitate to ask questions if there are issues you don’t clearly understand. The State of Florida provides every buyer with a statutory 15 day review period, before the Purchase Contract becomes non cancellable.
9.) Contact a pre-construction specialist – before you buy!
The absolute best thing a foreign buyer can do before investing in a pre-construction project would be to consult with a seasoned, experienced pre-construction sales professional, who knows all the “tricks of the trade” about investing in new developments in Miami. This specialist can represent you by looking out for your best personal interests during the selection and negotiating process with the developer.
The best news is that this service is absolutely free to you…with no obligation whatsoever.
Paul Anthony McRae is Real Estate Expert.