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Miami - Rents catching up with mortgage payments. Time to buy?

Rents reaching records heights in Miami: it's time to buy

Wall Street and other major investors are beginning to cash in on their massive investments in Miami - Dade through the increase in prices in the housing rental market.

Renting an apartment in Miami Beach, Brickell, Downtown or Midtown is costing top dollars to those who are looking for one. In some cases, these are same people who lost or gave up their homes during South Florida’s foreclosure crisis.

“If you look at how rents have gone up steadily since 2009, it seems like rents could continue to go up,” says Peter Zalewski, a principal at CraneSpotters.com, a website that tracks South Florida’s condominium and apartment markets.

“Rents are about to reach their maximum price in Miami and the outside areas”, he adds, “and it remains to be seen how much more rates can be stretched”.

Since 2010, rents have increased by 24.3% east of the I-95 and by 17.7% west of it. This means that nowadays, the median rental rate per square foot ranges from $1.74 to $1.33, bringing the final price for a 1,000 square foot around $1,740 - $1,330 per month.

Just as banks and other firms bundled mortgages together and sold them as mortgage-backed securities, the new trend is the purchasing of properties and bundling them into rental-backed securities, says Bruce Jacobs, a Miami foreclosure attorney and host of the popular “Debt Warriors” radio show.

Wall Street and other big investors buying up those rental-backed securities account for a large majority of the all-cash purchases, Mr. Jacobs says.

The problem becomes that the conventional buyers in need of financing, have an harder time getting into a market where cash is king and decide to turn to rentals instead.

However, Mr. Zalewski says some relief appears to be on the way for renters, thanks to the laws of supply and demand.

As more and more units enter the market, prices are bound to hit the brakes - especially thanks to all the new and planned construction in Downtown Miami, Brickell and Edgewater. This situation should bring relief to tenants, starting from those looking to live in the areas West of i95.

In the meantime, Mr. Jacobs says, in addition to the burden of high rents, many tenants can expect less service from their institutional landlords, who might own 100 buildings and can’t or won’t pay attention to each one’s needs.

“What we’re seeing,” he says, “is the largest transfer to real estate from Floridians – taxpayers, homeowners and residents – to Wall Street investment firms and foreign investment firms.”

Add that to the fact that most homeowners who have become renters have downsized their living space. Often, Mr. Jacobs says, the only way families and others can afford to rent a house or apartment is to take in more roommates by renting out a bedroom or two.

 

“They’re not paying as much [in rent] as they once did on their mortgages,” he adds, “but it’s not far from it.”

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