The Weekly Dirt: Is Miami’s condo-hotel boom a bust for buyers in the long run?

Developers have fully embraced short-term rental-friendly condos, thanks to strong demand from buyers. 

The huge pipeline of these projects, most of which are rebranded condo-hotels, should be a concern for prospective buyers — or at least something they consider. Owners of roughly 11,000 units across 36 planned or under construction condo developments from Miami’s Coconut Grove to Hillsboro Beach in Broward County will be able to rent them out on a short-term basis. 

That’s about half of the entire new development condo pipeline. And developers aren’t really slowing down. They continue to launch sales of new towers because buyers are interested. 

When these buildings are completed, the increased supply will likely put pressure on daily rates, hurting investors’ bottom line. Their success will rely on the project’s location, design, price and management.

Brokerage chief Craig Studnicky expects it will become “a bloodbath of competition.” He avoids taking on exclusive sales of short-term rental condo projects. 

Condo-hotel developers oversell the income that their buyers will make off their units, Studnicky and others say. Roman Pedan, CEO of a short-term/hotel operator startup called Kasa, says that is frustrating for buyers after they close. That ultimately affects their resale value. 

Condo-hotels historically don’t hold their value, Studnicky says. Of the condo resales in 2023, only 2 percent were condo-hotel units. 

I spoke with a buyer at Rilea Group’s Rider Residences, a 12-story, 146-unit building set to rise near the planned Brightline station in Wynwood. Buyers will face no rental restrictions and can enter their units into a rental program or manage them themselves.

The buyer, Matthew Birnholz, who owns a finance company called Capital Infusion, is in contract to purchase a one-bedroom condo asking just under $1 million. Birnholz said he came across the project through an ad on Instagram. It appealed to him because he can stay there when he wants and rent it out the rest of the year. 

He found his own comps by checking Airbnb and finding out how much a property manager would cost him. 

In theory, investors who purchase these short-term rental condos will be able to use the income they generate to at least cover maintenance and other expenses. 

Birnholz says he hopes the unit appreciates in value by 35 to 40 percent by the time Rider Residences opens. 

Studnicky said buyers of short-term rental condos have better places to invest their money. 

“You’d be better off buying Amazon or Tesla stock,” he said. 

What we’re thinking about: Mill Creek scaled down plans for the second phase of an apartment project in Aventura, as South Florida experiences record levels of apartment construction. What other signs of cooling in the multifamily market do you see? Send me a note at kk@therealdeal.com. 

CLOSING TIME 

Residential: Helgstrand Dressage sold the remaining 45 acres of its Wellington sales center for $23.6 million, just two years after selling off about half of the original property to the same buyer. Good Friday LLC acquired the facilities at 13625 50th Street South. 

Commercial: Moshe and Yaffa Popack’s YMP Real Estate paid $26 million for two office buildings at 3230 and 3250 West Commercial Boulevard in Oakland Park. Brookwood Financial Partners sold the 183,000-square-foot, 34-year-old complex for $142 a square foot. 

NEW TO THE MARKET 

The waterfront half-acre estate at 230 Harbor Drive in Key Biscayne hit the market for $31.9 million. The three-story home has seven bedrooms, seven and a half bathrooms, an office, chef’s kitchen, a dock and pool. Brigette Nachtigall of Great Properties International is the listing agent. 

A thing we’ve learned 

The number of homeschooled students in Florida grew nearly 70 times faster than public school enrollment in the state between 2017 and 2022, according to the Washington Post. Florida has some of the highest rates of homeschooled students in the U.S.

Elsewhere in Florida 

• Gov. Ron DeSantis said the state will provide Miami-Dade County with $8 million for infrastructure improvements around the planned Miami Freedom Park project, which will be anchored by the stadium for Miami’s Major League Soccer team. 
• Billionaire hedge fund manager Ken Griffin said he pledged $20 million to try to block recreational marijuana from becoming legalized in Florida, including campaign contributions to Florida politicians.
• A South Florida man who admitted to threatening to kill U.S. Rep. Eric Swalwell and his children was sentenced to two years in prison, the Miami Herald reports. Michael Shapiro, 73, placed the calls from his home in Palm Beach County, according to prosecutors. 
• It’s that time of the year again where hunters trek into the Everglades to kill invasive Burmese Pythons. The 10-day Florida Python Challenge started Friday. Thirty thousand dollars in prize money is up for grabs, with $10,000 for the person or team that kills the most pythons and kills the longest python, AP reports.