The quick buying and selling of real estate is often called “flipping.”
Definition of condo flipping on the Web:
• To buy and sell an condo equity within a short period of time to take profits is called condo flipping.
Some real estate experts have compared the frenzy of condo flipping to the late 1990’s when investors were busy buying and selling dot-com stocks.
Miami has one of the most active markets in the country for flipping, because so many condo units are under construction or in the planning stages.
Flipping real estate contracts can bring quick bucks, but here is the rub: profits are taxed as ordinary income, not as capital gains, if the buyer’s contract is not held for at least one year.
Most developers open resale offices to help buyers sell their units. They sometimes turn a blind eye to owners flipping because they rely on pre construction sales to secure financing. Lenders often require having a certain percentage of units pre-sold before issuing the money needed to build a project.
Some developers are becoming more cautious. To avoid flipping, many force buyers to close on the condo or face penalties.
However, investors and real estate agents have been able to get around many developer roadblocks by purchasing condo units under the names of other family members or friends.
Also, condo flips never appear in the public record because it is done through selling contracts during construction.
Some are speculating that investors who sink all their money into pre construction will be the ones who will lose the most money when the market is flooded with thousands of condo units in the next few years. Many may default on their mortgages or sell for a loss.
Experts are saying that if the market declines, Miami may again be at the center of a condo bust. There are more than 64,000 condo units under construction or in the planning stages, according to the city’s monthly development report. There were 11,000 units under construction, 23,000 approved and 30,000 in the preliminary or application phase.
Fort Lauderdale has 6,000 new condos planned for its downtown and West Palm Beach will add 6,000 new units to their downtown and along the Flagler corridor. Also, apartment buildings being converted to condominiums will add thousands more units to the South Florida condo market.
Questions or concerns regarding condo flipping will be responded to with immediacy.
Gus Moore heads up Miami Beach 411 as site administrator. You can reach him at 1-305-754-2206.