Why Sell Your Miami Investment Condo When Rents Are So High? Posted on April 19, 2022April 24, 2022 by Sarah Elles Boggs The party is on till the break of dawn for Miami investment condo owners and landlords, leaving tenants terrified. Rental rates have jumped 55% year-over-year according to a report by Realtor.com, and a quick scroll through the Brickell Living Facebook Group is evidence enough that everyone is getting priced out of their rented condos. So, if the rental market is so great for Miami investment condo owners, why should they sell now? We have a few reasons… Interest rates are rising While we are certainly still in a seller’s market, interest rates are climbing and thinning out the pool of potential buyers for properties. Just yesterday, the rates for 30-year mortgages jumped by more than one percentage point to 5.0%. The rate is nearly two percentage points higher than the average rate just one month ago and is the highest in over a decade. Even though these rates are still historically low, the fact that they are rising fast is a sign that you should strike while the iron is hot. Don’t chase the bubble because you never know when the market will change until after it has already begun changing, thus reducing your potential sales income. Rent control Miami has traditionally been an incredibly lax city when it comes to rent control. Landlords get a lot of leeway, but this is tightening up. As many tenants are seeing their rents jump by 55% on average, the government has stepped in. Last month, Commissioner Eileen Higgins introduced an ordinance that would require landlords to give their tenants a 60-day written notice of any rent increase of 5% or more. The ordinance also requires the notice for evictions to be extended from 30 days to 60 days. During COVID, the eviction moratoriums wiped out many smaller landlords, causing them to sell to institutional conglomerates who could handle the lack of income and lack of ability to regain control of their assets. While these changes are not very landlord-friendly, we still have it better than some other cities. Some other cities such as Portland and Oakland have prohibited the use of criminal background checks, limited the use of financial background checks, and limited security deposits. Oof. That’s scary for a landlord to hear! Changes or removal of the 1031 Exchange system Last April, Biden announced his “American Families Plan”, which proposes to change the scope of the popular 1031 Exchange program that allows real estate investors to defer their capital gains tax as long as the transactions adhered to a strict set of guidelines. The changes include limiting the tax deferral to profits that exceed $500,000. This isn’t effective just yet, but if it passes, it will absolutely disincentivize investors to put their money in the real estate market and reduce the pool of potential buyers. Additionally, the $500,000 gains limit ($1 million for married couples) might seem like a decent amount, but many people forget that many 1031 Exchanges take place on commercial properties which bring in far more than that. Speaking of commercial real estate, these properties offer property tax revenues and jobs for the locals. If investors aren’t investing, there are fewer jobs available. Without these jobs, the initial problem of tenants being priced out of the market is compounded. Not to mention that property taxes would have to increase in order to compensate for the lack of taxes that the businesses that occupy the investment properties would typically bring in. If you would like more information on the 1031 Exchange program and how it could help your tax basis for investment real estate (it works on residential real estate as well), don’t hesitate to reach out. This post is not intended to scare investors. The market is still very good and Miami is still very much in demand. But if you are on the fence about whether or not to sell your rental investment, now is an amazing time to do it. Please do not hesitate to contact us if you are interested in buying or selling in Florida. You may reach Broker and Executive Director of Luxury Sales, Michael Light, directly at 786.566.1700 or via email at michael@miamiluxuryhomes.com.