On today's post, we are revisiting Starlofts on the Bay #1701, a studio that we sold in November of 2022 in Edgewater. The sale, initially expected to be a straightforward transaction, turned out to be one of my most challenging operations of 2022. Because of the unexpected difficulties of the deal, I was already sure at the time of the sale that it would serve as a case study for the future Now that a few months have passed, writing this post is now an opportunity to revisit this transaction with a fresh perspective. I hope you enjoy this retrospective into our past work. As always, please don't hesitate to reach out to us for more details regarding Downtown Miami real estate.
Before discussing the sale, we must first revisit the property and the building in order to better understand.
700 NE 25th St #1701, Miami FL 33137
Built in 2007 and designed by tenured Miami based architect Bernard Zyscovich, Starlofts on the Bay is a twenty four story condo with forty seven residences in total. Its units are loft style, open floor plans that feature concrete floors and high ceilings that succeed in emphasizing the building's tropical backdrop. Despite the fact that this story highlights a studio in line 01, which are west facing units, the most sought after floor plans in the building, without a doubt, are the tower's bay facing residences (lines 02, 03, and 04).
Due to the boutique nature of the building, it's not surprising to know that Starlofts isn't a highly discussed or well known building in Downtown Miami. Despite all of its positives, it isn't a development that is often in the spotlight. Some Downtown Miami locals, including some living only a few minutes away, aren't even aware of its existence. Nevertheless, I believe this is how the building is able to provide an oasis of exclusivity to its residents.
The amenities are strikingly beautiful. It features a brand new lobby, a state of the art fitness center, and a bayside infinity pool with brand new cabanas. It also features brand new elevators, coworking space, and covered parking. Everything that could be expected in other upscale offerings in the area but in a scale reflective on the number of units.
#1701, located on the 17th floor of Starlofts, is one of only three 01 units in the entire building (Yes, three are only three such units in the entire building) The other two studios are the units directly above the subject listing, units #1801 and #1901. It features 556 SF, concrete floors, floor to ceiling windows, and an L shaped layout with a galley kitchen. Although the square footage, on paper, will be an issue to some buyers reading this post, it is important to note that the higher than average ceilings made the unit feel much larger in person. The ceilings were never measured at the time but I estimate them to be somewhere between 10 and 11 feet.
Last but not least, and the unit's main attraction is its oversized balcony with west facing views that are a dream come true for sunset lovers. To this day, this is the largest balcony I have ever seen for a unit of its size. I may not miss the headaches that were involved in the sale of this listing, but I for sure still miss those views.
Now that we're up to speed, let's start breaking down some of the challenges behind the sale.
Our first obstacle, which came before selling the actual unit, was determining a price. Due to the uniqueness of the unit, finding comparable sales and proving them to be comparable enough was our first challenge. Since the building's completion, only one of the three studios in the building had been a resale. That listing, unit #1801, sold for $175,000 in November of 2020 and had been listed 1,537 days (an unbelievable number but that's what it says on the MLS). I am still unsure to this day as to why this listing took so long to sell but its sale price was indicative of a market that was no longer the same. We needed newer, more recent comparable sales.
The owner, who has been a frequent customer of ours for many years, anticipated this issue prior to listing the property with us and had hired an appraiser first. That initial appraisal, in my opinion, was too conservative when it came to factoring some of the unit's unique features. I don't remember the exact number but it was somewhere in the mid $200,000 range. With that said, the actual report gave us a blueprint we could follow when it used comparable sales from other buildings to get an idea on price. This method gave me the ok to use this approach on my own analysis but opt for a more nuanced approach towards the manual adjustments I used for my report.
The final outcome was listing the unit for $295,000, a significantly higher than the appraiser's opinion. Despite the increase, at that price, the listing at the time was still one of only a handful of units available in all of Downtown Miami for under $300,000.
Fast forward to Summer of 2023, it is worth noting that this price segment in the same area is starting to no longer exist.
Improvements, in the case of real estate, come at a cost. In the case of Starlofts, renovating the building came at the cost of a special assessment on all units. The monthly expenses of #1701, at $557/month, were already at slightly over $1/FT. With the additional special assessment of $124/month on this unit, which I remember had a balance of several years left, I knew that we would need to have room to negotiate on the price to either:
- Discuss a lump sum payment at closing so the buyer doesn't have to deal with extra charges
- Provide a better price for the buyer in order to have him/her assume the assessment charges after closing.
Not doing so, as I have seen in other buildings dealing with similar situations, meant sticker shocking potential buyers.
Rising Interest Rates
Unlike the trends we saw during the early part of 2022 and prior years, we were already starting to see rising interest rates by the later part of 2022. At the time in which the listing was active, rates on a 30-year mortgage were already anywhere between 6-7.5%, almost double compared to what was observed during the same time one year prior. We tried our best to counter this obstacle by highlight the scarcity of inventory in this price point. Rates remain one of the few variables in a transactions that are out of our control.
Other Random Issues
We had other issues that are worth noting for the sake of being thorough:
- One of the reasons behind the special assessment, aside from improving the amenities, was to mitigate alleged building defects that the building had. These alleged defects prompted a lawsuit that effectively makes financing an issue as seen in other buildings with the same problem. The lawsuit was between the building and the developer of the building. We resolved this issue once we confirmed in writing through the management company that the litigation had been settled.
- The building's reserves, at the time, did not seem to be allocated at 10% of the building's annual budget and would likely be an issue for any buyer financing with less than 25% down.
- The building was still under renovations related to the special assessment. Not everyone is ok with buying a property while dealing with construction noise.
Despite all of the obstacles, we still sold the unit for $280,000, to a buyer that assumed the special assessment after closing. Prior to closing:
- The deal fell through twice with the first buyer that was interested. At first, we believed the deal did not go through due to a mistake made by the lender regarding the lawsuit that was already settled. We discovered the second time it fell through that it was related to the buyer's own finances.
- The deal fell through a third time with another buyer. This particular buyer walked away from the deal due to general concerns she had related to the real estate market and the U.S economy. That buyer walked away just a few days prior to closing and lost the deposit in escrow as a result of defaulting on the contract.
By the time the second buyer walked away, both the Seller and I were exhausted but we also noticed that the market was starting to heat up again and took another swing at it. On the final swing, we received multiple offers on the listing and we opted to move forward with a buyer that already owned other units at Starlofts on the Bay. It was a smooth closing that took less than two weeks to complete.
Thank you for reading our latest post on Miami Real Estate! For more information regarding Starlofts on the Bay or Downtown Miami condos for sale, please reach out to us today at 305-674-4127 or write to us at [email protected].