If you are a Miami real estate tycoon, the whole idea of renting can seem a little ridiculous at first blush. Renting is not for the high-end luxury buyer. Or is it? Playing the luxury real estate market in Miami is no different than playing the stock market in New York. Prices ebb and flow. If you can sense that there is going to be a short-term dip in the market, why not sell, and then rent as a temporary stop-gap before buying back into the market for profit?
The rental market in Miami is decreasing as property values skyrocket. It is getting more expensive to rent as fewer and fewer spaces become available. Rentals were down 3 percent in the third quarter, with a 10 percent increase in the median lease rate. There were only 625 total properties leased in the third quarter, compared to 645 in 2011 Q3.
This is a growing concern for a large section of the Miami population, but not for the multi-millionaire making a brief pause to wait out a temporary boom until prices stabilize. For the affluent renter, the few thousand extra spent on six months of rent is a drop in the bucket compared to a swing of even 10% on their Miami luxury homes. Waiting for the right moment to strike can save a smart investor millions. It is not unheard of to sell and then re-buy a piece of luxury real estate in the same building at a lower price after a dip in the market, pocketing a few million when prices re-stabilize: Just for spending a couple months in someone else’s pool.
When rents climb at the same rate as property values, it is a sign of a healthy market. When there is too great a discrepancy between a mortgage value and the monthly rent, such as in California in 2007, analysts take that as a warning of a potential crash. Miami luxury homes are currently going through a swift recovery, and prices have seen double-digit growth in the last few months. If you are the careful type, waiting for the tide to crest in a nearby luxury suite could be a good way to assess the neighborhood before committing.
Even students are getting in on the action. Wealthy university students are now renting high-end temporary accommodations, eschewing dorm life and cafeteria food for gourmet chefs and poolside studying. These new units are known as “cottage communities” and there are 35 currently in place across the United States, with nearly 19,000 beds. Amenities include yoga studios, tanning beds, stainless steel appliances, nine-foot ceilings, and no neighbors above. There are 18 more slated for construction in the coming year, with roughly 12,000 more beds.
As renting becomes a reality for even the affluent, it opens up doors for luxury homeowners, especially those with multiple dwellings, to create added capital by renting to their multi-millionaire cohorts.
For further reading: