Comfortable condo for an LGBT buyer in Fort Lauderdale, Wilton Manors or perhaps Miami?

A new client of mine wrote in today to ask…

“I’m looking  to consult with a local agent in fort Lauderdale area for a potential investment property or vacation home.  For us the most important search criteria is location.  I know years ago, Wilton Manors was a good area to invest and live in for the LGBT community, is this still the case?  Are there any other neighborhoods that we should be considering?

We are debating between investing in Miami or Fort Lauderdale.  What are your thoughts pros and cons for each market if you are familiar with both?

Here is our search criteria

  • 1-2 bedroom(s) condo
  • At least 1.5 bath
  • HOA fees less than $400/monthly depending on amenities could pay more
  • LGBT neighborhood preferred or central location in metro FLL or close to beach
  • Must include Parking and pool
  • Max price -$300k
So here’s the deal in South Florida.  This is going to hold especially true for southern Broward County and into Miami-Dade.

A tale of Two Markets

The single family home market is healthy and vibrant.   In fact, it’s overheated.   Prices are increasing.   Demand is strong.   Broward is an economic engine – not just a vacation destination – and demand for family homes in good school districts is strong.
The condo market is the opposite.  Several agents mentioned Dave Gervase.  Dave lives in Hollywood and serves greater Broward, but he is willing to work further south than I do.   From Hollywood, down into Hallandale, Sunny Isles and Miami, the condo market is struggling.   New development is over-built.  Developers are scrambling to convert properties already out-of-the-ground into apartments.   Seriously scary shit.
Me and the husband (Condo Guru Steve West) settled in Oakland Park (which may as well be Fort Lauderdale) on the north east side.  We are 8 minutes to Wilton Manors, too.   So I am biased.   I’ll push you towards Fort Lauderdale (including Wilton Manors and Oakland Park) because I think it’s the most gay-friendly, relaxed, amazing place to live.
However Fort Lauderdale is a “Tween.”    What I mean is that the only reason it exists is because it was a whistle stop on the way south to Miami from the Treasure Coast.   So your North Easterners with money will choose West Palm Beach and the Treasure Coast.
Folks who want an international destination with the feel of a big city will choose Miami.
The rest of us think that Fort Lauderdale is “Just Right.”    It’s a bit more quiet.   It’s not as homogeneous as West Palm Beach.    And after the heyday of Spring Break (which BTW is still going strong) gays and lesbians moved in and fixed the place up.
As far as what you can get?    I had a fellow agent from Michigan purchase a condo in Pompano Beach for under $100,000.   Pompano Beach is farther from Wilton Manors, of course.  But Michael and Karl got a 2 bedroom, 2 bath, only a mile to the beach off Atlantic Boulevard, in a community with a pool, near restaurants and bars.  The condo itself was gorgeous.   The community was on the more basic end of the scale.  They won’t lose money, however.  Ever.
NOTE:   You can NOT Air BNB in most condos.  You probably can use your condo as an annual rental.    Read this:https://sunshineguru.com/2017/05/18/can-i-use-my-condo-in-south-florida-as-a-short-term-rental-or-vacation-rental-by-owner/
$300,000 will almost get you a whole house.   Clients Ed and Jeff close on a house in Oakland Park next week for $330,000.   It’s a 2 bed, 2 bath, full 2 car garage, and a pool overlooking a canal.    $300,000 will comfortably get you a townhome, almost new townhome in Pompano.   A 1970’s or 1980’s townhome in Wilton Manors.   Easily a condo.   And if you’re near the gayborhood, you’re less susceptible to the vagaries of the market that are plaguing the beachfront in Miami-Dade.
NOTE:   You can easily use a townhome or a house as an Air BNB.   Heck, I have a pocket listing duplex that would allow you to keep one, and AIR BnB the other.   The various villages have inspection and registration requirements.   For example, a vacation rental needs a $500 inspection and registration in Fort Lauderdale.  On the other hand, Oakland Park is a free-for-all.   Similar for Wilton Manors.
Last but not least:   You should feel comfortable anyplace in Broward.  Just a matter of style of community depending on where you are.   You don’t have to be right inside Wilton Manors.   I have uber-business lesbians out in Coral Springs because that’s where the good schools are located.  There’s a young vibrant gay community in Boca Raton because of several universities.   Oakland Park seems to be “Where The Bears Are.”

Is the Multi-Family Market Heading Towards a Bubble?

When it comes to the hottest type of real estate multifamily investment, investors started to question Weston Condoif we are in the bubble.

It is not possible to predict the future with 100% certainty, but the facts support the statement that the multifamily segment of real estate market is outperforming all other types of investments.

We’ve got more than enough demand. Between the Millenniums and the Baby Boomers there is definite increased interest in renting apartments.

Have we thought that too many apartments are being built in Broward County? Since 2006 we did not see any new multifamily construction, therefore the answer to such a question is a strong resounding NO.

We’ve got a long way to catch up with the market demand.

Many of my investors are expressing concern related to a valuation of this type of asset defined by a CAP Rate. In actuality CAP Rate will continue to go down in the coming years. There are multiple reasons for this prediction which we will not be touching on in this publication due to the complexity of the issues.

There is no shortage of interest and/or capital available for this sector of real estate.

The main challenge is to find the willing Sellers in South Florida. It is becoming harder and harder to come by multifamily deals.

What are the main driving factors for such a condition?

1. Foreign investors are looking to bring a capital into the most economically stable country in the world. They can afford to pay a price that would yield an extremely low return because they get the benefit of currency appreciation. 3% CAP Rate for them is not actually a 3% return.

2. Florida is the State with no Income Taxes.

3. South Florida has shortage of land available for development which increases the value of existing properties.

4. And one more Very Important Factor, we have wonderful weather most of the year.

The challenge is to find Sellers that would sell multifamily property at the market value. When someone considers selling, he or she is asking what to do with the money and where it can be reinvested.  This information is not to discourage anyone from looking for reasonable (hopefully) Sellers, but provide a brief overview of the particular sector of the market.

As a buyer in South Florida, it is probably a good idea to invest even if the initial return seems too low. Almost all lenders love the product and provide financing with a low interest rate. If buyers exercise their leverage they should be focusing on the Internal Rate of Return versus CAP Rate. Multifamily is considered to be an exceptional investment in today’s market.

I am always available to answer your questions.

Top Ten Tips for 1031 Exchanges

The 1031 Exchange is slowly making its way into daily conversation by Realtors, title companies, and investors.  Please keep in mind that Section 1031 isn’t restricted to Real Estate but this is where most of the discussion takes place.

Although most sales are taxable as sales, if you use 1031, you’ll either have no tax or limited tax due at the time of the exchange.

In effect, you can change the form of your investment without cashing out or recognizing a capital gain.   There’s no limit on how many times or how frequently you can do a 1031 exchange.  Although you may have a profit on each swap, you can avoid tax until you actually sell for cash many years later.

In general, if you swap one building for another building, you can avoid depreciation recapture.  But if you exchange improved land with a building for unimproved land without a building, the depreciation you’ve previously claimed on the building will be recaptured as ordinary income.

Such complications are why you need professional help when you’re doing a 1031 exchange.  If you’re considering a 1031 exchange, or just curious, here are 10 things you should know.

1.  A 1031 isn’t for personal use.

The provision is only for investment and business property, so you can’t swap your primary residence for another home.   There are ways you can use a 1031 for swapping vacation homes.

2.   Some personal property qualifies.

Most 1031 exchanges are of real estate.  However some exchanges of personal property (say – a valuable painting) can qualify.

3.   “Like-kind” is broad.

Most exchanges must merely be of “like-kind.”  You can exchange an apartment building for raw land, or a ranch for a strip mall.  The rules are surprisingly liberal.  You can even exchange one business for another.

4.   You can do a “delayed” exchange.

An exchange involves a simple swap of one property for another between two people;e.  But the odds of finding someone with the exact property you want who wants the exact property you have are slim.  For that reason the vast majority of exchanges are delayed.  in a delayed exchange, you need a middleman who holds the cash after you “sell” your property and uses it to “buy” the replacement property for you.  That middleman is called the “intermediary.”

5.   You must designate replacement property.

Once the sale of property occurs, the intermediary will receive the cash.  You can’t receive the cash or it will spoil the 1031 treatment.  Also, within 45 days of the sale of your property you must designate the replacement property in writing to the intermediary, specifying the property you want to acquire.

 6.   You can designate multiple replacement properties.

The IRS says you can designate three properties as the designated replacement property so long as you eventually close on one of them.

7.   You must close within 6 months.

You must close on the property within 180 days of the sale of the old property.  YOu start counting when the sale of your property closes.   If you designate a replacement property 45 days later, you’ll have 135 days left to close on the replacement property.

8.   If you receive cash, it’s taxed.

You may have cash left over the intermediary acquires the replacement property.  If so, the intermediary will pay it to you at the end of hte 180 days.  That cash – known as “boot” – will be taxed as partial sales proceeds from the sale of your property, generally as capital gain.

9.   You must consider mortgages and other debt.

One of the main ways people get into trouble with these transactions is failing to consider loans.  Suppose you had a mortgage of $1-million on the old property, but your mortgage on the new property you receive in exchange is only $900,000.   You have $100,000 of gain that is also classified as “boot,” and it will be taxed.

10.   Using a 1031 for a vacation house requires caution.

You can sell your primary residence and, combined with your spouse, shield $500,000 in capital gain, so long as you’ve lived in your home for two years out of the past five.  But this break isn’t available for your second or vacation home.  Yes, taxpayers can still turn vacation homes into rental properties and do 1031 exchanges.  Example:  You stop using the beach house, rent it out for six months or a year and then exchange it for other real estate.  If you actually get a tenant you’ve probably converted the house investment property, which should make the 1031 exchange OK.

In 2008 the IRS set forth a safe harbor rule.

To meet safe harbor, in each of the two 12 month periods immediately after the exchange: (1) you must rent the dwelling unit to another person for a fair rental rate for 14 days or more; and (2) your own personal use of the dwelling unit cannot exceed the greater of 14 days or 10% of the number of days during the 12-month period.

Glossary:

Relinquished property:  The original property being sold by the taxpayer when making an exchange.

Replacement property:  The new property being acquired by the taxpayer when making an exchange.

Qualified intermediary:  Accommodator, facilitator, qualified escrow holder.  A third party that helps to facilitate the exchange.