Foreigners Fuel Florida Real Estate Sales

Forbes magazine recently examined the growing interest by foreigners in Florida real estate investment. Foreign buyers are snapping up properties in South Florida, with many buying in cash. Unlike American buyers who see advantages in making property purchases using borrowed money, foreign buyers who use cash enjoy bigger savings up front and more flexibility in what properties to buy. Americans, on the other hand, see buying property with cash the exchange of one asset for another with no savings acquired through tax incentives like interest deductions. For more on this continue reading the following article from JDSupra.

Forbes Magazine published an article on Valentine's Day entitled "For Miami Real Estate, Better To Be A Foreigner," which explores the huge amount of foreign investor interest in Miami real estate development. It's not a discussion of whether or not international investors are investigating Miami and South Florida real estate: that's a given.

What Forbes' article focuses upon is the fact that one of the key advantages is the Latin American financial model for buying real estate with cash on the table, no long-term financing strategies like America is used to doing.

We've posted about buyers like those arriving in Florida from Brazil being ready to buy condos and other real estate in Miami and elsewhere with cash assets, not borrowed money. Forbes isn't the first national publication to take notice of Florida real estate's growing love affair with foreign investors; however, this article does explain the great advantage of the cash purchasing model.

For new properties, this means significant savings.

Many foreign buyers, particularly those from Brazil and elsewhere in Latin America, pay cash for their Miami real estate - such as an exclusive, ocean front Miami condo. In the "pay as you build" model that is growing in popularity here in South Florida, the foreign investor buys the real estate in a series of cash payments that cover the time span of initial agreement to buy through the construction phase to completion and the exchange of keys.

By doing so, the buyer saves a significant percentage on the price of the purchase when compared to the traditional financing model that U.S. real estate uses. And the seller gets cash on the barrel head.

The "pay as you build" model of real estate investment

Here in the United States, buying real estate with cash sounds strange. After all, there are all those tax incentives (interest deductions, capital gains considerations, etc.) to consider when you've got financing for your real estate purchase. Buy a condo with cash, you're just turning one asset into another form or asset: no big tax breaks there.

Add to that the fact that the banking industry is hurting in Florida and elsewhere, and loans for real estate purchases aren't what they used to be a few years back, and it's obvious that Miami and South Florida would have a very bleak outlook these days without the foreign investment interest.

After all, RealtyTrac has just reported that Florida default notices on home loans increased 36% comparing this year to last year. Florida banking has been damaged by the housing crisis to an unprecedented extent.

Miami has always been known as a global city, a welcoming metropolis to foreign visitors - especially those with Latin American ties. As the Forbes article points out, savvy real estate developers in the Miami area are marketing globally to bring in more and more of those foreign investors.

Not only is this a good thing for Miami and South Florida, it may be an economic lifesaver in today's economy.

Source: http://www.nuwireinvestor.com/articles/foreigners-fuel-florida-real-estate-sales-58764.aspx

For Miami Real Estate, Better To Be A Foreigner

It’s not that Miami isn’t welcoming to Americans, or that developers prefer Brazilians. They don’t. But in this global city today, the big real estate buyers are all from abroad. And one of the reasons, especially when it comes to new developments, is the sales model.

“Latin Americans and Europeans are used to paying in cash for real estate. American’s are not. What we’re doing with our Brickell House property in Miami is telling people that they can pay us quarterly while the project is being built so that by the time it is done in two years, you have paid for almost 70% of your home,” says Harvey Hernandez, chairman of the Newgard Development Group, a luxury property developer in Miami.

“This is the best way to buy it. Or you can wait for the project to be complete, like Americans do, and pay about 40% more,” he says.

They pay-as-they-build sales model is popular in Latin America. It’s not unusual to see new residential high rises going up in São Paulo with floors being sold before the roof of the building is even in place. For Brazilians, in particular, Miami is their second or third home. Real estate prices in upscale beachfront property in Rio de Janeiro, for example, is more expensive than it is in Miami, a city in a developed country with all the bells and whistles.

Hernandez says that within just 90 days of trying to sell Brickell House’s 374 units, 190 of them have already gone, 90% of them to Brazilians, Venezuelans, Mexicans, Russians, Chinese and Europeans. One bedroom units cost around $300,000, chump change in Europe thanks to a favorable exchange rate.

The sales success at Brickell House is the result of the world’s rekindled love affair for South Beach and new, ultra-mod American luxury in a glam global city. South Florida is in the early stages of a new development wave to cater to the foreigners, with 22 newly-announced projects accounting for more than 4,000 units in a section of the city that’s basically sold out.

“The fact that Brickell House has reached the fifty percent sales mark in just four months is further proof that Miami’s condo market is back,” says Alicia Cervera Lamadrid, Managing Director of Cervera Real Estate.

Today, fewer than 1,500 condos in the Brickell Financial District are on the market, according to a June 2011 market study by the Miami Downtown Development Authority. With the continuation of this sales velocity, the remaining unsold inventory could be sold-out in the next year leaving an inventory gap in Miami.

“Miami’s existing condo inventory has been absorbed at a faster rate than anyone could have predicted,” says Hernandez. “We are still seeing strong interest from international buyers who appreciate Miami’s status as a global business and entertainment hub and see value in the city’s Brickell Financial District. We see our sales momentum continuing through our groundbreaking this summer and we expect to be sold out by the end of 2012.”

(Can a poor reporter get a copy of one of those properties? I’ll take a two bedroom without a view.)

Source: http://www.forbes.com/sites/kenrapoza/2012/02/14/for-miami-real-estate-better-to-be-a-foreigner/