Every condo market is different. Miami, in particular, has been known for over-development spurred by speculative investors. As the market appreciated rapidly, the same buyers kept snapping up more and more speculative units. When prices fell, these investors were left holding the bag.
The Miami market with it’s thousands of unsold units has led to a new investment model: bulk investment. In this model, bulk investors or bulk vulture buyers take the pressure of developers by negotiating to purchase multiple units at deeply discounted prices. Often, these investors or investment partnerships purchase 5 or 10 or more units in a single transaction. They than can rent or hold the units to turn a profit. Often, they purchase the least desirable units (small units on low floors) at rock bottom prices.
The presence of sophisticated bulk investors in the Miami market is a sign of the scale of the condo market problems but also a signal that smart buyers see paths to profitability in the chaos. While we have not heard reports of bulk buyers in Austin, over supply and discounting may lead to increased investor interest in the downtown condo market.
Here is a recent report from the Miami Herald on a typical bulk investment transaction:
Following the bankruptcy this week of Cabi Downtown Developers, the builder of the luxury condominium Everglades on the Bay, a new distress marker was revealed in Miami’s downtown condo market.
In the lowest bulk price paid for condo units in the downtown area since the market crashed last year, Prodigy Capital Investments, a newly created corporation based in Miami, has purchased 10 units in the Brickell on the River South condominium for $156 per square foot, according to new research from Bal Harbor-based Condo Vultures, a real estate consultancy that closely follows the downtown condo market.
Prodigy Capital Investments, which incorporated in July and is headed by Rodrigo Nino, according to state records, paid$1.9 million for the units,which include five one-bedroom apartments and five two-bedroom units for 12,081 square feet of space. . .
“A key reason for the discount realized on the Brickell On The River bulk deal is the location of the units,” Peter Zaleweski, president of Condo Vultures, said in a statement.
The 46-story south tower is located at 41 SE 5 St. in Miami. The prices were lower, Zalweski said, because the units, which are primarily suitable for renters, were located on the lower floors of the building.