Condos in Miami and Las Vegas are often larger, shinier, and more elaborate than those in New York. And developers in those sunnier lands are more inclined to help buyers flip their newly bought apartments. Loosely coined the Miami Model, the process involves bringing investors in at a very early stage.
Developers sell pre-constructed units to investors and then work with them to market and resell the same units via an in-house sales team. As a result of the flipping, units are built, bought and sold at a much quicker rate. The developers keep a percentage of the investors’ transaction fees (usually between 0.25 to 10 percent); the investors make a quick buck and the end buyer is satisfied with his or her state-of-the-art condominium.
New York developers, who have traditionally shied away from flip closings, are beginning to see advantages to this approach, and the sales model is being touted by some brokers.
“It’s more of an intelligent model,” said Eddie Shapiro, CEO of Nest Seekers, a brokerage in New York with an office in Miami, “where the developers are more of an investor’s friend. Instead of fighting investors and saying, ‘You’re making money while I don’t,’ they’re saying, ‘Fine, you want to make money on this thing, let’s share the profits, let’s share the risk.'”
So it’s likely that by the time a building has been fully constructed, a unit in it may have been sold multiple times, at appreciating values, though none of its owners have lived in it or even seen it. Some industry experts are dubious about whether the method would work in New York’s expensive real estate market, though Shapiro remains confident.
“You’re selling investors a commodity that they’re buying as an investment,” Shapiro said. “They’re not buying it to live in it, they’re buying it to make money on it.”
JC DeNiro & Associates, another brokerage with offices in New York and Florida, plans to market projects in Manhattan based on this model, managing partner Christopher Mathieson recently told the New York Times. Mathieson’s plans include one project Uptown and two Downtown, though he declined to provide specifics.
Andrew Heiberger, founder of developer Buttonwood Real Estate and former CEO of brokerage Citi Habitats, is toying with a slightly different angle.
“Most condos,” Heiberger said, “don’t want investors, as they end up leaving the buildings potentially unstable for occupancy.”
His main concern is whether to allow unit owners to resell units, once all the condos have been sold out. This approach, he said, will reverse the no-flip New York policy and will make it more amenable to users. Heiberger is gearing up for the start of sales at Sundari Lofts & Tower, on Madison Avenue and 32nd Street, expected to hit the market at the beginning of November.
Working as a broker, Heiberger said one of his clients bought a unit in Miami’s opulent 10 Museum Park for $815,000. He flipped the sale for $1,300,000 and walked away with a total profit of $394,000, after paying a developers/marketing fee of $91,000.
“Most commonly,” Heiberger said, “when people flip their units, they’re looking to make a profit, but what if somebody has a life-changing circumstance they lose a job, lose security, and basically need to get out of a contract?”
Nonetheless, Mathieson sees the model coming to the Big Apple.
“It’s going to be done more and more in New York,” he said. “The condo craze is 13 to 14 years old in Miami. In New York, it’s just a few years old.”
Kevin Small, director at marketing firm Alpha Vision, agreed. That firm is involved in marketing projects in Miami and New York.
“I’m optimistic about the growth for the investment model in New York,” he said. “There’s a generation of big-time investors who will be eager to capitalize on it. After all, New York is New York.”