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Failure to Flip – Pre-construction condos at Icon Bay in Edgewater

There has been much discussion and debate regarding the state of the Downtown Miami condo market over the past few months, with many reporting a slow down or impending crash due to the changes in the global economy and reduction in overseas buyers.

Meanwhile Developers continue to announce new projects, and make huge bets on the ability to sellout high end luxury developments for prices that exceed the current resale market.

In 2015 Related Group in conjunction with renowned architectural firm Arquitectonica completed and commenced closings at Icon bay in Edgewater. Which represented one of the first ultra-luxury buildings to be completed during this cycle. And now 12 months on we can review how this building has performed on the resale market for buyers who purchased pre-construction, and have attempted to flip on the resale market

First, let’s take a quick look at the building, Icon bay is a beautiful 43 story building that has 299 units that range in size from 854 Sq. Ft. through to 2,569 Sq. Ft. All units came with 9 FT ceilings, floor to ceiling hurricane proof glass and direct bay views, private elevator access and top of the line amenities that are now standard in all new luxury developments such as infinity edge pool, SPA, fitness center and more.

Of the 299 Units, 98 (32.8% of the building) are currently listed on the MLS for sale, and since the building was completed, only 9 units have been resold for a combined average of 19.56% over the original asking price.

Icon Bay Flip

A deeper look at the numbers, shows that unit #4104 was flipped for a whopping 48.92% above the original purchase price. The lowest return was unit #3302 which was sold for only 8.72% above the original purchase price. These figures do not include real estate commissions, closing costs and other holding costs associated with the investment. You could say these 9 flippers got lucky when we look at the rest of the active listings in the building.

There are 16 units listed for between -7.39% – 9.98% from the original purchase price, with three units being listed for less than the original purchase price. These 16 units will most likely result in a breakeven/loss for the owners once closing costs and commissions are factored into the deal.

The remaining 83 listings in the building are priced anywhere from 11.44% through to an astounding 90.13% for unit #4302 above the original purchase price.

There has been 86 closed rental transactions in the building at an average of $2.70 per Sq. Ft, so many of the active listings are generating rental income for the owners.

Personally I really like the Building, but when I step back and look at these results I have to come to the conclusion that buyers who purchase in this development with the hopes to flip for a profit have failed. Yes, there was 8 sellers who you may say got lucky, and turned a nice profit. But there are 16 active listings that will either break even or result in a loss for the sellers based on the current list price once closing costs are factored in

What does this say about the pre-construction market? I think it’s too soon to come to a conclusion. However, investors who are hoping to flip new construction for a quick profit may need to reconsider their strategy. With rents continuing to increase for Downtown and Edgewater Condos, buyers should consider holding these condos and renting them for an excellent return

The information used in this article is based on data from the Miami Dade MLS and Miami Dade Property Appraiser.

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