Gustavo Farfan

Buyers Sue Trump as Miami's Condo Prices Plummet?

The article published in Bloomberg news on October 16. 2009, by John Gittelshon could not be further away from the truth.

Quoting Peter Zalewsky unproductive opinions manipulate the information only to the best of his interest. Zalewsky should not be trusted as an independent, unbiased opinion, what else can you expect from somebody that calls himself a "vulture"?

Media manipulation by presenting partial statistics just confuses consumers with doom and gloom news about the real estate market, with the purpose of making the property prices accessible to their own investors. Fortunately these "formulas" from big funds making offers for 30 cents on a Dollar did not work the way they planned. Their famous call for a real estate "Blood Bath" did not happen according to their predictions. Instead, the market is ripe for individual investors, first and second home buyers that can benefit from the price drop or "market correction" that we are experiencing, if only they could be provided with complete information.

McCabe's opinions are also outrageous, for a real estate consultant it makes me wonder who are his clients....? A few years ago McCabe said to the Miami Herald "I think our population growth is about zero right now" and "Who is going to live in these things?". During the last couple of years, I have read quotes about "Zombies", "At the Current 2007 sale pace it will take 30 years to sell all the apartments" and "there are over 25,000 apartments unoccupied in Miami". When in-fact the apartments where not ready to be occupied yet! I can go all day mentioning these quotes, somebody should make a compilation of them with the original author reference, it would be hilarious! Today, the Brickell and Downtown areas that McCabe was referring to, have experienced an amazing growth in population. The MLS reports over 4,500 closed rentals in the Miami - Brickell area since Jan 2009. According to the US Census, there is an average household size of 2.61 in Miami, which means Miami has had over 11,000 new residents move into the city in the past year! You don't have to be a market analyst to understand that we officially have a new vibrant urban area, with dozens of restaurants, shops offices and an amazing night-life.

It is one thing to misquote predictions about the future market, I have to admit I was in denial about the real estate crisis until I experienced it. But, you can not close your eyes with today's facts. Today, in the above mentioned article McCabe quotes "If you're thinking you can come here and buy and sell condos for a profit in less than five years, you're sadly mistaken," and that "you better wait 10 years, before the property turns into profit or appreciates". These quotes, in my opinion are irresponsible and cannot be further away from the truth. Thousands of new buyers, Realtors and - why not - Small Investors are profiting from this market and they will continue to do so as the real estate infrastructure continues to solidify and populate.

The truth is that nobody is buying at the original pre-construction prices. Although developers had delivered the buildings, as promised, the whole real estate crisis began when people who had placed deposits into new developments did not close, technically bankrupting the developers. However, I do not blame them, I would not have closed at those prices either. Currently, the Miami market place is the best opportunity to make money, I represent clients who are buying property at 50 and 60 percent of the LOAN value.

For years we have been hearing McCabe and Zalewsky misinform the consumers, but it is time that the consumers as a whole start hearing the real "market pulse" of other real estate professionals, that are active in the marketplace and provide unbiased information. That way, rather than a few individuals profiting from this marketplace, we can spread the wealth to all consumers that wanted a city like the one we have right now, and dreamed of accessible and realistic property prices. Whether you are buying a Miami residence to live, rent, or as Vacation buyers, everybody is welcome.

MIAMI IS FOR SALE, ONE BUILDING AT A TIME

By Gustavo Farfan

Artech, a state-of-the-art new development in Aventura whose architecture resembles the shape of a luxury cruise ship, is following the $200 per Square Foot building sell-out trend that started with the Brickell developments such as Brickell on the River, Mynt, 500 Brickell, Ivy,etc. whose prices were also drastically reduced to be sold-out almost overnight.

In today's ever changing Miami marketplace, when the banks take control of the prices of a given development (call it developer short sales) they reduce the prices drastically. When the prices reach around $200 per Square Foot levels, the whole building sells like magic.

The sell-out of these buildings in Miami is so fast, that if you enter a sales center it looks more like a Publix supermarket. The sure sign that the buyers are flocking into their offices is when the sales people no longer answer the phones or do not return messages. Developer sales teams that were starving for three years, are now taking advantage of the opportunity of finally having buyers fight for the chance to buy units at below construction costs and have kept their offices open until close to midnight in many cases.

The next buildings that we think will follow the trend, has to be Infinity at Brickell and Everglades on the Bay. These two brand new developments have already UN-OFFICIALLY reached the "magic number" levels of $200 per Square Foot. Be among the first buyers to benefit from this one-in-a-life time opportunity by calling me to reserve your new apartment in Miami at the lowest price ever!

Gustavo Farfan

HRP Realty Services

786-200-8700

IF YOU LOST MONEY IN THE REAL ESTATE MARKET

Where are really my deposits? How do I get them back?

How to profit from a group purchase approach.

If you made a commitment to purchase a property in pre-construction and you put down a deposit and did not go to the closing, technically you have bankrupted the Developer. The perception is that Developers, have big egos, are greedy and pushy, however there are some Developers that did deliver what they promised they would deliver. The market changed and affected every one of us the same. Most Developers, not only are not making money, they are already bankrupted or in reorganization and they can not reduce the property prices below what they owe to the bank.

Which brings us to our next point "When the Bank loses money you win." The approach to negotiating with the bank has a lot to do with timing. Remember banks are not in the Real Estate business. Banks are in the money business and they do not want to lose more money by holding Real Estate for too long, since they prefer the cash to reinvest it, even if they have to take a big cut or a big loss. However with the same token they are not going to go down without a fight. They will try several approaches to get the most amount of people to purchase at higher prices and as they fail to attract enough buyers to come to close, they will gradually reduce their prices. When this happens, a big opportunity is created and individual buyers that put their deposits into these buildings at pre-construction can not compete with bigger investors that come to buy in bulk the whole property at a fraction of the price. These powerful investors are competing as we speak for a chance to make it big and get the next big deal.

So how can a single buyer win in these scenarios? One solution is to "mix and match" and group people together that share common interests such as type of property, place of residence, rental property vs. primary residence etc. The only problem is that grouping more that two individuals will not work in any given building. The reason is that the Developer is already holding and in most cases has spent your money, so it is better for them to keep four buyer's deposits than to give one apartment away in exchange. However, groups of up to two people have been proven to work in some case-scenarios.

A second option is to acquire negotiation leverage by grouping buyers for individual purchases. This can be very effective. Grouping together Real Estate packages rather than people is the most accepted way in which the bank and the courts will make a quick decision in favor of the purchaser. In this case purchasers will be competing with sophisticated investors for the building. In my opinion, the original purchasers that defaulted and are having problems getting the money back from the Developers, should have the first right of refusal when making an offer in court. This initiative can be organized building by building (at least in the remaining buildings). If you purchased a property at $600-$800 per Sq.Ft. and today you can buy it for $400-$500 per Sq.Ft., you might be able to get away with $200-$300 per Sq.Ft., depending of course on the quality and location of the building. But pay attention this can not be accomplished by individual efforts.

Lets face it, you may not get your deposits back, you may only get a fraction of them or you may get this fraction in a year or two. But if you can acquire a property at half of the price that you originally purchased it for, is it worth more than the deposit that you originally put in place. So what are you going to do? Sit a year or two waiting for that fraction of your deposits and watch your cash depreciate? Or close at the right price and for the next five years sit on a Real Estate investment that will certainly appreciate.

Is the media confusing and misinforming the consumers? By Gustavo Farfan

This article is written as a response to the Miami Herald article by Monica Hatcher, "For Home Buyers, rock bottom prices tough to pinpoint." http://www.miamiherald.com/news/top-stories/story/966229.html

The media manipulates the data to create confusion, rather than explaining the reality of the real estate situation. While they are professionals that understand the market, it may not be in the best of their interest to help a consumer get the best deal in the market, since their professional fees are based on different parameters.

To clarify, there is not only one "rock bottom price" or a date in which the "rock bottom price" is going to be reached, and it doesn't necessarily depend on an area or a building. Just like the market value of any given unit in the marketplace is what an individual buyer is willing to pay for it, the infamous "rock bottom price" is the relationship between the lowest price negotiated for the best price-positioned property model that matches the individual need of a consumer.

Based on the previous analysis we get to the conclusion that there are many "rock bottom prices", even within a single building there will be the "rock bottom price" of the 01, 02, 03, 04, etc. models and additional "rock bottom prices" of high floor units within the same models. There also will be different "rock bottom prices" of furnished and unfurnished units. There cannot be and a cookie-cutter "rock bottom price" approach that is useful for one consumer. The idea of "rock bottom price" is being misinterpreted and branded by the media creating confusion and undecided consumers.

The real "rock bottom price" of an industry or a city cannot be defined with accuracy. The existing analysis only measures information from different sources in large economies of scale. Real estate analysts cannot accurately pinpoint the "rock bottom price" of a single unit in any given property. A more accurate method from a consumer's perspective would be to hire an appraiser to give a consumer a closer idea of the current market value of a property. Real estate analysts rely on different types of considerations for their market analysis. Just like most analysts generally consider a market healthy when there is a housing supply of about six months because it indicates a balance between buyers and sellers. The Realtor association relies on an index, based on the relationship of units for sale and units that change hands in the last 12 months which is roughly 3%. This means it would take three years to work through the supply. What analyst are not taking into consideration is that approximately 70% of the properties listed in the marketplace are overpriced. Those units are owned by misinformed, resilient owners and shouldn't even been considered in the market because of being unmarketable. That leaves approximately 30% of the units of realistic property available in the marketplace. Based on those figures the same Realtor Association index for the same period could be 10%. But what will happen down the line with the rest of overpriced units listed in the MLS? Most of them will eventually catch up with the market and will give way to yet another index figure.

In today's marketplace, consumers buying unique waterfront properties must take advantage of the oversupply of properties available in the Miami Metro area, since it lowers the prices of the unique properties that match their search criteria. Oversupply allows consumers to have the opportunity to acquire unique property at bargain prices like we've never seen before. The real market size for the average consumer of unique waterfront properties is about five or ten best-priced properties located in two or three buildings of their preference. The rest of the property in the marketplace does not apply to their search criteria because of location, style or price. The "rock bottom price" for these consumers is identified when they negotiate the lowest price for the best price-positioned unit type in the building that they wish to buy. Will the market go any lower? Yes and No. The overpriced units will continue to reduce in price until they become marketable by today's standards. But in every building there are units that have reached the "rock bottom price" or are very close to reaching the bottom. The trick is to find an experienced Realtor that knows how to identify the correct opportunities in every building.

For savvy consumers this should not be about indexes of industry averages, look for the unique properties that are priced-to-sell, they exist in every city, in every building and in every model type of property in the marketplace. We all know by now that real estate is a cycle. The consumers that buy early in the cycle, when the supply is strong will always obtain the best equity and future resale value. There are only a handful of unique properties for any particular search criteria that are available at a bargain price and for a limited time. Consumers today have the luxury to choose from a whole selection of properties that can be purchased today at "rock bottom prices" so why wait?

Questions, Comments?

Gustavo Farfan

786.200.8700

Skype: gfarfan1

www.glfproperties.com

www.miamiforeclosuresnow.com

Today's marketplace can be defined as a target rich environment for real estate investors. There are several good opportunities in the South Florida residential market, but which is the best investment? When will the prices hit the bottom? Should I buy now or should I wait?

Those are some of the classic questions that I have heard from clients looking to buy Real Estate. Now, add in to the equation all the foreclosures, short sales, pre-foreclosures, auctions, default properties, etc. and you get the perfect recipe for not making a decision. Too much information can hurt too.

The best time to buy an investment property is when you get in front of a great deal. When that happens, grab it, secure it, lock it and take it out of the market. Don't worry too much, if you don't do it somebody else will. Somebody sharper and perhaps better prepared to identify great opportunities and seize them.

In our last blog, we talked about great deals coming from the "motivated owner" area. The "motivated owner" is our best friend. Sometimes it is best to keep it simple: Here's a text book example buying a second home or an investment home and getting a great deal in today's marketplace.

OWNER FINANCING PENTHOUSE IN SOUTH FLORIDA

ONLY $147,000 DOWN PAYMENT MOVES YOU IN

PAY NO MORTGAGE for two years! NO qualification, NO closing cost from mortgage. Best deal ever in this Buyer's market!!!

Enjoy Amazing views from the two large roof top terraces

Approximate Monthly Expenses

Taxes                     $485 (2007)

Maintenance           $401 (2008)

***OWNER FINANCING*** $886 per month expenses.

Description:

2 bedroom / 2 bathroom 1,417 S. F. Living area. Upgraded PH W/ Marble Floors, Granite Counter-Tops In The Kitchen, Hurricane Impact Sliding Glass Doors And Floor-To-Ceiling Windows. California Closets, Lg Private Storage, 2 Covered Parking Spaces, Gated Community, Key-Access Elevator. Ref # M1202555

Property Address: 2350 NE 135^th Street PH-W

North Miami, FL33181.  

OK, now that we have this information, here's what I would do:

1. I would buy this property, It's owner financing, so that comes without the hassle of having to deal with a financial institution and all their new limitations due to the sub-prime financing.

2. Since the "motivated owner" is giving me an additional buyer's incentive of two year paid mortgage. I would turn around and rent the penthouse, and It will rent fast for 2,000 per month. That'll give me $24,000 per year income. Deduct agent commissions and expenses and you'll get roughly $11,000 per year. That's a $22,000 cushion.

3. I would rent it for one more year; my expenses will increase to approximately $35,000 because I would have a mortgage payment but I would still have my $24,000 rent income plus my $22,000 cushion equals $46,000. So, I would end up with a positive cash flow of $11,000.

4. In year four, my expenses are going to be $35,000 again and my income from the rent is $24,000 plus my positive cash flow balance of $11,000 totaling $35,000. Break even.

5. Now I am ready to sell this property and get an interesting return. If the property goes up only 30% in those four years I'll be doubling my initial cash investment of $147,000.

But who wants to sell it, it's a great property. Maybe you should just retire and use it as a second home with a dock space for the winter time!

Questions, comments?

Gustavo Farfan is a luxury waterfront Real Estate specialist in Miami, with over 25 years of Real Estate experience.

Currently, with Marka-Tech Associates. He can be reached at 786-200-8700 or gfarfan1@aol.com 

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