Miami Beach Pre-Construction Condo Investment

Frequently Asked Questions

Please keep in mind that the answers to these questions about Miami Beach pre-construction condos can vary by project and developer. Again, that's why it's really important that you read and understand every nuance of your developer agreement.

  1. What are the risks of investing in a Miami Beach pre-construction condo?
  2. What protection do I have if a developer doesn't complete a project?
  3. Why are pre-construction condos priced lower than finished units?
  4. Why would a developer hold back inventory during pre-construction?
  5. Can I resell my Miami Beach pre-construction condo before closing?
  6. What if I want to sell my pre-sale condo after closing?
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1. What are the risks of investing in a Miami Beach pre-construction condo?

As with any investment capable of delivering potential appreciation, there are risks associated with purchasing a Miami Beach pre-construction condo.

A. You could buy the wrong unit in the wrong building. This is possible if you receive unqualified advice from your Realtor or the Miami Beach condo developer.

B. You could buy in to a Miami Beach condo project that the developer doesn't finish and lose your second deposit. If the developer becomes undercapitalized due to lack of sales, inaccurate budgeting or rising material costs, he can cancel your Reservation Agreement. In this case, your initial deposit, usually 10 percent, is fully refundable. If, however, the developer ceases construction after your Reservation has moved to Contract, at which time a second deposit of usually 10 percent is due, and, by Contract, he uses this deposit for construction, these funds may be at risk of not being returned to you.

C. You could buy in to a project that the developer underprices. This might cause your Contract to be returned, which means if you still have interest in this particular Miami Beach condo, you may have to begin the buying process from scratch and most likely at a higher sales price.

The best way to mitigate these potential risks, as remote as some may be, is to work with an authority on Miami Beach real estate like me. One of my specialties is pre-construction investing. I can help you carefully measure the risk-reward ratio so you optimize your ownership.

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2. What protection do I have if a developer doesn't complete a project?

Again, if the Miami Beach condo developer becomes undercapitalized due to lack of sales, inaccurate budgeting or rising material costs, he can cancel your Reservation Agreement. In this case, your initial deposit, usually 10 percent, is fully refundable. If, however, the developer ceases construction after your Reservation has moved to Contract, at which time a second deposit of usually 10 percent is due, and, by Contract, he uses this deposit for construction, these funds will be forfeited. In other words, your second deposit is always subject to the risk, however small, of loss.

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3. Why are pre-construction condos priced lower than finished units?

Developers are willing to sell at lower prices to buyers who can envision the success of a project before its completion. In many cases, developers need the pre-sale capital to complete funding for their entire Miami Beach condo project. Developers are often required to have a certain percentage of their project pre-sold before they can get their construction loan approved. Once the project is underway, the supply of available units decreases, thus driving up demand and price.

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4. Why would a developer hold back inventory during pre-construction?

It is common for developers to hold back inventory during the pre-construction phase to ensure a healthy supply and demand of units, and to provide a variety of inventory at all points of their Miami Beach pre-construction condo sales process. Developers do not like to flood the market with their inventory all at once. So that sales appear stronger, the more desirable lines in the project are offered at a slower pace, and as the project progresses, the best units are sold at higher prices.

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5. Can I resell my Miami Beach pre-construction condo before closing?

The practice of flipping or reselling your Miami Beach pre-construction condo before the building is complete is being discouraged increasingly. Developers are more wary of buyers whose potential resales can undercut the current value of their units and create competition within their buildings. To control inventory, some developer Contracts have a clause stating that buyers who market their units prior to taking title will be in breach of their agreement and at risk of forfeiting all their deposits.

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6. What if I want to sell my pre-sale condo after closing?

You can enlist a Miami Beach pre-construction real estate sales consultant like me. Read more about my seller services here.

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Tell Kevin More About Your Pre-Construction Buying Objectives

Some Miami Beach pre-construction condos sell out in a matter of days or a few weeks! Tell Kevin more about your buying objectives, and sign up for condo announcements now.

Kevin Tomlinson is an independent Realtor associated with Calibre International Realty. Kevin recommends that buyers, sellers, investors and renters of/in real estate consult legal, financial and investment professionals for specialized advice.

Learn How to Avoid Paying Too Much In Miami Beach's Competitive Real Estate Market
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Kevin Tomlinson
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F: 305.675.8570
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