Miami Beach, FL (PRWEB) September 10, 2012
Miami Beach Condo Journal announced their "Real Estate Development Story of the Week" as a new trend called OPM financing may developers to fund new housing projects.
Martha Branningan of StAugustine.com reported that many of the Miami Beach condos under construction right now are being funded using an unusual financing model. Industry professionals call this financing scheme OPM, an acronym for “Other People’s Money.” The model principally involves getting large pre-construction deposits - as much as 80 percent of the full price - from cash buyers, often from abroad. These buyers are usually attracted by condo designs that feature groundbreaking perks like rooftop pools, green energy, and automated parking. The OPM model leaves 70 percent of the condo price available for construction, with 10 percent held in escrow.
Previously, new condos were usually financed with a 20 percent down payment, 10 percent of which went to escrow; most older St Regis condos were built using this method. That leaves 10 percent of the condo price available for construction, with the remaining 80 percent due when the building was finished. OPM financing means that developers have 7 times as much money to build state-of-the-art condos, which could completely revolutionize the Miami housing market. This model isn’t perfect, though; buyers who invest this way are now liable if the project fails. Where banks used to shoulder most of the risk of loss, a buyer funding 80 percent of the project can lose his/her entire investment if a project falls apart, with little hope of recovering it through collections.
This model of financing is new to South Florida, but is very similar to a model that has been used for years in South America. In Miami, OPM financing has exploded in popularity: at least nine new condo projects are already underway that use OPM financing. Buyers from Canada, Latin America and Europe are particularly excited to get involved using this method. Projects in progress include 1100 South Miami Avenue, 30 SE Sixth, and 1300 Brickell Bay Drive.
Condo developers are very enthusiastic about this new trend: David Martin, COO for developer Terra Group, loves the idea that “when [they] start construction, [they] are going to be fully funded.”
The Miami Beach Condo Journal’s Condo Story of the Week: Thanks to a new financing model known as OPM financing, state-of-the-art condos are being built with greater ease all across Miami. The new financing model, which is similar to South American financing schemes, requires a much larger down payment from the buyer to provide developers with greater construction capital. This high-risk, high-reward model has already taken hold in Miami, with at least nine new projects underway.
Miami Beach Condo Journal is an online publication which discusses Florida real estate news.