I met a real estate developer in Sarasota who said that his specialty of buying “Class B-/C+” apartment buildings on behalf of investors and lightly fixing them up no longer made sense. “A year ago, I was paying $60,000 to $70,000 per door and now it is $130,000 or more,” he said. “I can build something new for about the same price.” (These are buildings with at least 40 units.)
Why didn’t he buy the fanciest buildings? “You don’t want to buy in the ghetto, but these buildings are like a Toyota Camry,” he responded. “Even if the economy turns down, there will always be a market for a Camry.”
If used apartment buildings are about the same cost as building new, doesn’t that suggest that the real estate market is near a peak? I say “Yes” because (a) new is better, and (b) there is still a lot of land in the U.S. The developer, who surely knows more than I do, says “No.” He expects 3-5 more years of 20 percent annual inflation in SW Florida until prices reach parity with California. “People are moving here every day from California and also from Miami,” he said. “They want to get away from taxes in California and from the crazy congestion in Miami.”
Readers: Is there anything special that happens to the real estate market when used buildings being to cost as much or more than new buildings? Am I right in thinking that the curve will flatten? (after only the first 2 years of 14 days!)
The Mote Marine Laboratory & Aquarium reminded us that invasives will displace a native population.