What’s an Airbnb worth? Suit seeks nearly $3M price drop for Miami Beach building without short-term rental permit
Buyer says he was duped that property has a permit allowing Airbnb and VRBO rentals
A real estate investor wants the price of a Miami Beach apartment building cut drastically, claiming he signed an inflated purchase contract after he was duped that the building can be rented out on Airbnb and VRBO.
Raz Ofer, through an affiliate, sued sellers Alfredo and Regina Arias, alleging that they knowingly misrepresented that their building at 1533 Drexel Avenue has a short-term rental license.
Ofer said he wants the price dropped to roughly $500,000 from the $3.3 million they had agreed to under a 2019 contract for the two-story building. Ofer, who put a $50,000 deposit into escrow, filed a lis pendens on the property, which could tie the Ariases’ hands from selling it to someone else.
The suit, filed in Miami-Dade Circuit Court on Wednesday, sheds light on the value of short-term rental licenses on multifamily real estate, and how local governments’ crackdowns on Airbnbs and VRBOs are impacting the market and deals.
“A building with a hotel license is worth two and a half times as much as a similar building without the license,” Ofer said, adding that this is because the rental income is higher. “I have an apartment building with a hotel license on Pennsylvania Avenue and today I am getting $700 a night per apartment.”
The price reduction he is seeking is equal to how much it would cost Ofer to get a license, he said.
Whether or not he can get the permit is up for dispute.
In an effort to clamp down on short-term rentals in residential South Beach, the city has banned them in certain areas. The 18-unit Drexel property is in a section where these rentals are outright banned and no waivers are allowed, according to Yisel Morales, an assistant at the Miami Beach Planning Department.
Ofer’s attorney, David Winker, countered that the ban is not set in stone and could be lifted through a citywide referendum. Ultimately, the Ariases were hoping to sell this property to an “unsuspecting buyer,” under the pretense that it has the permit, Winker said.
Michelle Marie Urbistondo, an attorney for the Ariases, said the couple did not intentionally misrepresent that the building had the license and it is outside their control whether it ultimately gets a permit.
Ofer’s “goal is to get this property for pennies on the dollar and to strong-arm my client to sell it to them for less than the agreed upon price,” Urbistondo said.
The Ariases, an elderly couple, found out about the missing license about a day after signing the contract and immediately inquired to the city about it, she said. Still, it is Ofer’s responsibility, too, to check whether the property had a permit, Urbistondo said.
The Ariases have owned the property that sits on 0.2 acres for 30 years, after buying it for $350,000 in 1991, property records show.
It is one of the many low-rise apartment buildings in South Beach that for years have been a top choice among those seeking to enjoy the beach lifestyle, yet stay a few blocks west of the iconic, loud tourist streets Ocean Drive and Collins Avenue.
Ofer first sued the Ariases in April over the same issue, but that suit was tied up in technical issues. A judge at a Wednesday hearing — held before the new suit was filed — agreed with Urbistondo that the April complaint was improperly served on the Ariases, although an official order to that effect has not been entered.
Winker, who represents Ofer in the new suit and was not involved in the April case, lists breach of contract, specific performance and fraud in the inducement counts.
This is not the first time Ofer has sued over a South Beach property he had put under contract. In 2016, an Ofer affiliate sued the owners of the building at 702 13th Street, alleging financial record discrepancies that the sellers did not clear up.That case was settled in June 2016.