7 Warning Signs for New Ventures in Greater Miami

Investing in the Greater Miami real estate market can be an excellent opportunity for those seeking profitability and portfolio diversification, especially in the context of pre-construction real estate.

However, as with any type of investment, it is important to be aware of warning signs that may indicate risks or problems in the project. Many investors make mistakes by not properly verifying certain aspects, which can lead to large financial losses.

In this article, we will highlight the 7 warning signs that every investor should watch for when considering new ventures in Greater Miami, and how Makan Capital can help ensure that you are making safe and profitable choices.

1. Inexperienced Developers or Without a Proven Background

One of the biggest risks when investing in pre-construction real estate projects is the developer's lack of experience and credibility.

Many projects have sprung up in the Greater Miami region, especially in growth areas, but not all developers have the necessary track record to ensure that the project will be well executed and delivered on time.

How to Identify the Risk:

Research the developer's history: Check that the company has successfully delivered other projects and that it has experience in the local market.
Reputation in the market: Consult feedback from previous investors and see if the developer has positive references in the real estate sector.
Attention: Projects with inexperienced developers may experience significant delays or even fail to execute the project, resulting in losses for investors.

2. Unsecured Construction Financing

When investing in pre-construction real estate projects, it is crucial that the financing of the project is guaranteed. If a project does not have guaranteed funding, this can be a major warning sign that the project may face delays or even be interrupted in the middle of the process.

How to Identify the Risk:

Verify the financial viability of the project, including the guarantee of funds for execution.
Question about financing: The lack of guarantees may be an indication of financial instability, which increases investment risk.
Attention: The absence of financial guarantees may result in unforeseen financial events, compromising the schedule and the execution of the project.

3. Projects Aimed at Short-term Rentals with Promises of Dubious Return

Greater Miami has attracted many investors interested in short-term rental properties, especially due to high demand from tourists and visitors.

However, many projects come up with promises of financial returns with excessive and poorly founded amounts. Projects that claim to generate high income easily and quickly must be analyzed with caution.

How to Identify the Risk:

Research the promised return: Very high returns may be a strategy to attract investors, but with a high risk of not realizing them.
Check the actual demand for short-term rentals at the proposed location.
Attention: Above average return promises may not be realized, especially in saturated markets or in areas with low tourist demand.

4. Leonine Contracts Without Technical Details

Another clear sign of risk is when the purchase and sale contracts are not clear and do not include technical details about the construction, design, or specifications of the property. This may indicate that the project lacks solid planning or is being conducted in an unprofessional manner.

How to Identify the Risk:

Read the contract carefully: Make sure that all technical aspects of the construction are clearly specified, such as materials, finishes, and schedule.
Request a technical detail to know exactly what you are buying and what guarantees exist for the execution of the work.
Attention: Poorly drafted contracts may result in unwanted and unforeseen surprises during construction.

5. Plants that Don't Accurately Represent Final Units

In real estate projects, it is common that the plans presented at the beginning of the project do not accurately represent the distribution of spaces or the final finish of the property. This can cause frustration among investors, especially when expectations do not match the reality of the property delivered.

How to Identify the Risk:

Compare the plans with the developer's previous projects.
Require detailed representations of the project and verify that they are in accordance with the actual construction.
Attention: The lack of clarity in the plans may result in disappointment as to what was promised and what was delivered.

6. Underestimated Condominium and Maintenance Costs

Many investors don't realize the importance of verifying the maintenance costs and condo fees of a new development. These costs can have a major impact on return on investment, especially if they are higher than expected.

How to Identify the Risk:

Check the condominium fee and maintenance cost estimates provided by the developer.
Consider the impact of fixed costs on property profitability, especially if the project is aimed at long-term rental.
Attention: High maintenance costs can significantly reduce the property's net profitability.

7. Requirement for Large Initial Deposits Without Work Execution Guarantees

One of the biggest risks when investing in pre-construction real estate projects is the requirement for large initial deposits without clear guarantees of execution.

Investing in projects where the initial deposit is high and there are no guarantees that the work will be completed on time or as promised may result in large financial losses.

How to Identify the Risk:

Require legal guarantees regarding the execution of the work and the return of the capital invested.
Research the developer's background to ensure they have the experience and financial capacity to complete the project as agreed.
Attention: Initial deposits without clear guarantees can be risky and there is no assurance that the work will be completed or that you will get the promised return.

Investing in new ventures in Greater Miami can be extremely profitable, but it is essential that the investor be aware of the warning signs. The real estate market, especially in the pre-construction sector, presents specific challenges and risks, but with the right guidance, these obstacles can be overcome.

Makan Capital offers solid real estate projects, with exceptional governance and transparency, minimizing risks and providing fast and secure returns to its investors.

By choosing a reliable partner like Makan, you can ensure that your investment is not only safe but also highly profitable.

‍