Miami Now Has The Hottest Rental Market In The United States Posted on July 12, 2023 by Sarah Elles Boggs The Summer of 2023 is hot in Miami, and in more ways than just the weather! Starting off 2023, RentCafe ran a study of the top rental markets among major cities across the United States. At the time, only New Jersey slightly inched past Miami in terms of competitiveness for rental properties in the first quarter. Fast forward to today, and the tides have turned. Miami’s historically low vacancy has caused a decrease in the supply of available properties, paired with ever-increasing demand, pushing us into the #1 slot as the Most Competitive Rental Market. Let’s break down how we got here, and how to succeed in this environment if you need to move… The Rush of Demand His critics can say what they wish about Mayor Suarez, but nobody can take away the fact that he is a champion for business in Miami. He has created a business-friendly atmosphere that has caused a mass migration from cities including both New York and Chicago. The movement of these companies has expanded our job market beyond the historically-common tourism and real estate sectors. We are now a burgeoning tech hub and even considered an emerging global city in a new book that was recently published. This swarm of new professionals arriving to the city is joining the swarm of migrants from that arrived in Miami during COVID, seeking a more laid-back lifestyle and remote working environment. The current statistics show that for each available rental option, there are 24 prospective tenants. This figure is nearly double the demand of North Jersey, the second most in-demand market in the country. Developers are working as quickly as possible to bring new apartment and condo options to the marketplace, but these new buildings are not constructed overnight. A new high rise takes at least 24-months to construct, considering one floor per week is added to vertical construction. Developers were not yet caught up with the COVID-era demand when the new professionals began to arrive. These are excellent problems to have, we are of the mindset that growth is good, but it comes with growing pains and this surge of demand is showing no signs of letting up anytime soon. As long as crime and taxes increase up north, those who are able will migrate to the south and Miami is mighty attractive. Aerial View of Ritz-Carlton Residences Coconut Grove The Supply Crunch We touched on this a bit above, but the short supply issue we are faced with is more than just the fact that developers cannot finish new towers quickly enough. We are also faced with historically low vacancy because people in Miami are just not moving the way they used to. According to the RentCafe.com survey, almost 72% of renters renewed their most recent leases, a figure that typically rests slightly lower than 60%. The market has changed so quickly that those who are situated in the most desirable neighborhoods are no longer willing to run the risk of losing their spot in the skyline in search of a spot in the latest building to open. Prices have skyrocketed and the newer towers that are opening are astronomically-priced compared to what residents are accustomed to paying. Rather than risking having to move to an emerging neighborhood, more people are staying put. Another issue we are faced with is that buyers of available condos and homes have increasingly been end-users of the spaces, rather than rental investors. In the past, investors from foreign countries have taken advantage of Miami’s steady demand and availability of purchase opportunities to invest in spaces that are used as rental units. There was a time not so long ago that entire condo towers were almost completely sold out to rental investors. It was a win-win for everyone involved as the neighborhoods were flush with available options for tenants, whether long-term or just until they found a more permanent place to hang their hat. For the investors, their assets remained safe from political fears, or other issues in the investors’ homeland. Changes in government policies on both sides of the border have slowed this pace, although not brought it to a grinding halt. Aerial View of Brickell City Centre The fact that 2023’s Miami condo buyers are increasingly end-users also displaces tenants who have been in their rental condos for years, which leads us back to the demand issue and another tenant jockeying for rental units that just aren’t there. It’s an ongoing cycle that compounds itself, showing no signs of letting up until these new towers start to be delivered to the marketplace. How To Survive And Thrive In This New Rental Market For starters, it goes without saying that you need proper representation. Gone are the days where you can peruse the national listing aggregates (Realtor.com and Zillow), calling the number listed on a pretty listing and deciding the following week to move in within the next month. Today’s market requires tenant representation. You need someone whose sole job is to know what is currently available, what is possibly coming available soon, and knows how to sell you as a tenant to the landlord who has an opening coming up. It takes someone organized, knowledgable, professional and dedicated. Know your budget boundaries and have a clear list of things you need from a rental home followed by a list of things you would like to have. Your Realtor will need to know their boundaries when they go out to do your bidding for you, else you could go out of budget quickly or wind up with a home that does not fit what you need. You will also need to be realistic with the cost of a rental property that embodies all of your “must haves” list. These tips are not meant to stress you in any way. Any of the agents in The Light Group at Douglas Elliman are knowledgable and can seamlessly guide you into what you need based upon the guidelines we are given by you. Being candid with your agent and realistic with yourself is the best way for a stress and drama-free moving experience. When working with an agent, also know that every real estate agent you encounter is working with the same inventory of possible options. Working with several agents will only stress you out more. Furthermore, agents are naturally more dedicated to their loyal clients. If you want an agent’s undivided attention and full-service for your home search, it’s a good idea to find someone you trust and work with that person. If this is your first trip into the Miami property market, you can also prepare yourself for the fact that tenants do not pay their agents. Our service is free to you, the landlords take care of us. We realize that in some other markets, agents are compensated differently, but in Miami real estate representation is free for tenants. We at The Light Group would be honored to help you to bypass the stress and competition that this market brings and get you set up peacefully and seamlessly. If you need/wish to move and are looking for a Miami rental property, or would like to talk about rental investment opportunities, please contact Michael Light, Broker and Executive Director of Luxury Sales at Douglas Elliman. You may reach Michael directly at (786) 566-1700 or via email at michael@miamiluxuryhomes.com. We would be honored to assist you.
Miami’s Rental Market Ranked Second Most Competitive In The United States Posted on March 25, 2023March 26, 2023 by Sarah Elles Boggs As we round out the first quarter of 2023, we can see our predictions of the 2023 Miami rental market coming to fruition. That’s right, Miami’s rental market is incredibly competitive. The only market even slightly more competitive is North Jersey. This is all laid out in a new study undertaken by RentCafe.com. The study measures occupancy/vacancy rates, the number of days rental units stay on the market, how many tenants opt to renew their leases and the number of new apartments that are delivered to the marketplace. Miami landlords are enjoying vacancy rates of less than 3% and over 70% of existing tenants are opting to renew their rental contracts. The Landlords The low vacancy rate and high rate of tenant renewal is a huge draw for landlords, as apartment turnovers are not inexpensive. You have to take into account the physical turnover, moving the previous tenant out, arranging for the security deposit reimbursement, repair of any damage or wear and tear, marketing costs of seeking a new tenant and the time and energy it takes to qualify the new tenant/arrange their move-in. It isn’t the end of the world, but it is not free and cuts into the return on investment of the property. In Miami today, rental apartments tend to stay vacant for an average of 33 days while this turnover is undertaken. This is far lower than it has been in previous years, even in seemingly strong markets, but is still a month of your investment not earning a return and instead incurring costs. Our current market is prime for welcoming new landlords. Inventory is tight, but not as dramatic as it was in the post-COVID market. New buildings are coming to market frequently and despite most of the US real estate markets teetering on recession, the demand remains strong in Miami. Jobs are still plentiful, the tax climate is more favorable than other markets, financing is possible and why wouldn’t people want to live in Miami? If you have considered a safer place to invest your savings over the more volatile crypto market or stocks, Miami is the market to bet on. The Tenants If you are a tenant in the Miami market, we are sorry to say that you have your work cut out for you. The RentCafe.com report shows that for each available rental unit, there are 20 prospective tenants jockeying for the keys. This does take into consideration the wealth of new rental buildings delivered to our marketplace as well as units that are overpriced. Even with those less-than-desirable options, there are more tenants in line here than anywhere else in the United States by a good stretch. The second closest market was San Diego, with 13 hopeful renters per available dwelling. In order to experience success in a market like this, it is imperative to have all of your ducks in a row. Having a good credit rating and no criminal background is an obvious piece of advice, but you also should come equipped with letters of recommendation, documented income and have strong representation. Utilize the skills of a real estate agent who is proficient in the marketplace and can guide you to the front of the line where possible, but who will also level with you on routes that are not the easiest. How To Get Help The Light Group is well-equipped to assist both prospective tenants and new landlords. We were recently honored as one of the top teams at Douglas Elliman for securing rental units for our clients throughout all markets that Elliman is present in. We pride ourselves on efficiency and ease of service, almost like a concierge approach to finding a new place to live. We understand that moving is stressful, even more so in an uber-competitive environment and we strive to make it as seamless as possible for our clients. If you are looking to invest funds into the rental market, we will be able to guide you to the areas and buildings that will offer an abundance of high quality tenants and lower fees. This would include more reasonable HOA’s, high quality builds that require less upkeep and tenants who do not move around as frequently. We love to see our investors make the most of their dollars that are at play in Miami. To speak more specifically about an investment or if you need/wish to move, please contact Michael Light, Broker and Executive Director of Luxury Sales at Douglas Elliman. You may reach Michael directly at (786) 566-1700 or via email at michael@miamiluxuryhomes.com. We would be honored to assist you.
Miami’s Rental Market Is The Most Competitive And Least Affordable In The United States Posted on January 6, 2023January 9, 2023 by Sarah Elles Boggs Another day, another list with Miami in the #1 spot. Actually, there are two lists that we have to discuss today. This will come as a welcome announcement to landlords throughout the Miami area. Tenants, eh, not so much. It’s hard out there for a tenant in the 305 right now. Miami-Dade has been named the #1 Most Competitive Rental Market in the United States by RentCafe, who surveys the rental markets across the US each year. To add insult to injury, we have also topped the list of the most rent-burdened markets in the country, with tenants paying 60% of their income to their landlord each month. The traditional amount to budget is 30%, so we are seeing a marked difference between what is suggested by banks/governmental bodies and what is actually true on the street. We’re also dealing with the fact that 75% of tenants are renewing their leases even though lease prices have skyrocketed over the last 2 years, now being 58% higher than they were when the pandemic began… and there are no signs of a slowdown. In 2022, there were on average 32 renters competing for each available unit in Miami. The national average was 14 renters per available unit. RentCafe also showed that vacant rental units took an average of 25 days to be leased, which sounds like a long time but is not. Those 25 days start accruing on the end date of the previous lease, meaning that the time required for making the apartment ready to be shown to prospective new tenants, time to negotiate and sign the new lease, do the application process for the landlord and the management office (typically done separately in condo rentals, not concurrently), and get an elevator date are all lumped into this 25 day time frame. In addition, most buildings do not work on any paperwork or apartment turnover work on the weekends, but the time frame of availability index does continue on weekends and holidays. Considering this, 25 days is a flash in the pan. It used to be that we would be able to show a vacant apartment to a prospective tenant. The tenant could see a list of apartments in one day or even over multiple days, then sleep on it and we would still have ample time to do all of the paperwork and scheduling without any care in the world regarding competition and time frames. This is not the case any longer. These days we are having to advise landlord clients to start showing the rental before the previous tenant leaves, and it typically rents before the end of the old lease. You have to be very agile and quick in order to score the perfect spot, and even still it is unlikely that you’ll find a PERFECT spot. More likely, it will be a nice apartment that has most of what you requested and the fact that you beat out the competition will make it a perfect apartment. How to increase your chances of finding a place: Be Organized: Have all of your verifications ready to go. You will need a proof of income, proof of residency, proof of credit and your deposit funds ready to go. The proof of income can come in the form of an employment letter from your HR department, or if you are self-employed you can use bank statements or tax returns to get your foot in the door. These items should be scanned and saved for easy access on the day you go to view options. If you were previously a renter, a landlord recommendation letter is also a great idea. Be Loyal: Hire ONE Realtor to represent you. Many tenants feel like dealing directly with the landlord or having many agents shopping for you is the best bet, but that is a misconception. A landlord is going to represent him/herself and look at the bottom line. Wouldn’t you? If you hire several Realtors to shop for you, none are going to give you their full attention. Realtors only get paid when the contract is executed, so first priority goes to those tenants who are most likely to transact. You need to have one person to express your wants/needs/situation/timelines and act in your best interest. Doesn’t that sound better than having to organize ten different people, all showing you the same inventory? That’s right. We’re all working with the same availability, so it’s much more efficient to hire one person and trust them to do their job. It is also important to note that the landlord pays the Realtor commission in Florida, so having the professional representation costs you nothing. Broker fees are also not customary when rental shopping, so there’s a bit of bright news when comparing the process to the process in New York. Be Agile: In Florida verbal commitments do not hold any value. When you find “The One”, you need to be able to get the contract executed ASAP. In order to make a binding deal, all parties need to have signed the “Contract to Lease” and have your deposit in escrow. In a rental-only building, they sometimes have their own paperwork, so it may just be the lease and deposit to hold the apartment, but watch your P’s and Q’s with this part and act quickly in order to make sure you don’t have to start over. This is the reason you want to have your entire application kit saved somewhere handy, so you can include it with the Contract To Lease and escrow letter immediately. If the landlord has a few identical offers to consider, they will choose the one that has the organized application over the one that is crumpled and missing pages. Don’t Play Games: Landlords don’t like games and we don’t either. They always make additional drama in the process and open an opportunity for a less dramatic tenant to swoop in and take the apartment you were jockeying for to begin with. Shoot everyone straight from the outset. If you have a pet, don’t get fake service pet papers in order to circumvent building rules. Many buildings verify this nowadays anyway. Don’t mark up the lease with terms you invented between the Contract to Lease and the actual Lease. As Realtors, we cannot change those contracts anyway. You have to find an attorney to do that. The same goes for the building application packet. You cannot cross off rules that you don’t like and have no intention of abiding by. You have to fill out the packet in its entirety or someone else is moving in, and that’s just the end of it. We are not giving you this advice in order to scare you off. It is our goal to make your move as smooth and stress-free as possible. Setting the expectations now will help you to not have a panic midway through the process when you see how things are turning out, inventory continues to dwindle and you fear being homeless. You’re in good hands even if we do have to go through these pointers on the first day. While inventory is uncomfortably short at the moment, we do expect some relief in the coming years. Next week we will speak about some of the new rental inventory that is being delivered to the marketplace, opening back up the opportunities for those in the mid-range price points. If you are interested in speaking more specifically about a neighborhood, project or listing, please contact Michael Light, Broker and Executive Director of Luxury Sales at Douglas Elliman. You may reach Michael directly at (786) 566-1700 or via email at michael@miamiluxuryhomes.com.
What To Expect From The Miami Rental Market In 2023 Posted on December 16, 2022December 16, 2022 by Sarah Elles Boggs There has been much talk about Miami’s sizzling real estate market over recent months, even more so than normal. Ever since the summer, when rates rose for the first time and many predicted that Miami would soon be faced with an affordability crisis, tongues have been wagging about how long the epic post-COVID market would last in Miami. It turns out that a rate hike wasn’t the only dilemma that awaited the Magic City. Crypto was increasing in volatility, leaving ‘Crypto Bros’ in their Downtown Miami and Brickell high rises questioning their investments and (*gasp*) having to live on a budget. Just as FTX went from hero to zero overnight, people really started to worry about the stability of the real estate market in Miami. Was our growth sustainable? What gives? The short answer is yes. The market has changed and yes, the growth is sustainable. Here’s why. Inventory Remains Low The influx of domestic buyers we have experienced over the last few years has locked down much of the available inventory despite the fact that new buildings are going up all around. This trend is expected to continue for the rental market as well over the next few years. Domestic buyers tend to purchase condos more for personal use than rental investments, so that has removed a healthy chunk of units that would otherwise be available for renters. It is also a very common strategy for new residents to lease for a year or so in order to determine whether or not they love the Miami lifestyle before committing to a larger transaction. This also allows new residents to get to know the area and buildings to better figure out where their home is. The result of this dynamic is that inventory remains low, both in the sales and the rental markets. Rates Are Up While the rise in rates can be overcome with creative deal structuring, the fact of the matter is that the increase in cost of money borrowed will knock some buyers out of the running. Not all sellers are able or willing to buy down the rate for a potential buyer, even if it means a sale with a higher sticker price. Unfortunately not all sellers understand how to use this strategy in order to widen the buyer pool, and not all real estate agents think to suggest it. When this happens en masse, many buyers turn into tenants. This is particularly true for those who are relocating to Miami due to job changes or other relocation due to necessity rather than the fact that the new residents simply want to live in Miami. Latin American Buyers Are Back Historically, Miami has been a hotbed of investment from foreign nationals from around the world. Convenient direct flights between Miami and 181 destinations in 63 countries is a big contributing factor in Miami’s attractiveness to expats, as is the vibrant lifestyle, agreeable weather conditions and mixed cultural representation throughout the area. Everyone loves Miami. While some expats do immigrate to Miami and make it a home, many also invest heavily in rental units. This allows buyers to have a tangible investment that can hold their funds safe from the threat of socialist regimes, dictatorships, meddling cartels and other financial threats in their home countries. Over the previous two years, this segment of buyers has quieted down, likely due to COVID travel restrictions but are beginning to become more active in recent months. For those foreign nationals who do plan to reside full time in the 305, many settle down in the same fashion as domestic buyers. They rent for a year or so to start, only narrowing the market down to a new permanent home once they have identified an area, neighborhood or building that suits their lifestyle. The foreign nationals who protect their nest eggs via rental investments, they are typically unconcerned by rising interest rates. Some of these buyers prefer to keep their properties unleveraged, and some simply are not familiar with the prospect of investment property mortgages. These cash buyers have a tendency to take deals from buyers looking for a primary residence using a mortgage, as the purchase transaction is so much easier without the involvement of mortgage lenders. This winds up creating more tenants as well as more inventory, so is a wash as long as things stay balanced. We have seen a recent uptick in buyers from Colombia, Venezuela, Mexico, Argentina and especially Brazil. After their recent election, we expect to see further investment from Brazilians as the left-leaning Luiz Inácio Lula da Silva taking the win. Historically, whenever a liberal candidate wins a major Latin American election, we see a marked uptick in currency leaving that country, usually winding up in Miami or New York. With Florida’s superior tax climate, Miami is the better choice for investment. The Job Market It wasn’t so long ago that one of Miami’s biggest problem was the wage gap and availability of professional jobs that would allow residents to be able to afford the swaths of open luxury rental units that existed throughout the city. People who were actually working in Miami were not able to afford the lifestyle, leaving the living to wealthy out-of-towners and the workers to commuting. Brickell has long been the international banking capital of the United States and Wall Street of the South, with over 50 banks represented in the 1-mile radius, but Starwood Capital’s move of its headquarters to the Magic City just before COVID was a turning point for professional-level employers setting up shop locally. Their leap of faith to the sunny side of the street solidified them as a trendsetting company, with many others following suit through the COVID years and all the way to today. At present, we have Starwood Capital, PriceWaterhouse, Ken Griffin’s Citadel, Blockchain.com, Ichan Enterprises, Windstar Cruises, as well as other major finance, tech, hospitality and investment companies plus their subsidiaries all taking out substantial office leases and bringing in executives, sales staff, and other high-paying professional jobs to the Miami area. In addition to the initial leases of these employees and the purchases that they will make, they also create the need for additional corporate housing for short to mid term contract workers and consultants, and of course, office space. With the addition of these companies and professional positions, the Miami real estate atmosphere is more balanced, helping to create our own little micro-economy that is pretty self reliant. The Overall Rental Market While we tend to concentrate on areas that are agglomerated (self-sufficient live/work/play neighborhoods), Miami is home to a host of different communities and price points. Looking into the macro-statistics of Miami-Dade County rentals, we can find that the median rental rate for one-bedroom units is $2,373. Two-bedrooms go for the median rate of $2,962/months and three-bedrooms are listing for around $3,700/months according to an update of the data report from the Miami Association of Realtors. Looking back on November, there were nearly 40,000 active rental listings in Miami with the median prices being $2,100 for a one-bedroom, $2,600 for a two-bedroom and $3,200 for three-bedroom yearly rentals. This does show a bit of negotiation room in the deal-making process, but with a very low 3%-6% vacancy rate, the market is very healthy. We anticipate that the Miami rental market will remain hot through this market shift. If you are interested in speaking more specifically about a neighborhood, project or listing, please contact Michael Light, Broker and Executive Director of Luxury Sales at Douglas Elliman. You may reach Michael directly at (786) 566-1700 or via email at michael@miamiluxuryhomes.com.