MIAMI-Bulk buyers bet heavily on distressed condos, spending nearly $2.1 billion on 9.7 million square feet of space in South Florida since July 2008—but the early returns aren’t what many hoped. About half of the more than 70 condo bulk transactions for distressed units across South Florida are being resold to individual buyers at an average rate of $51 per square foot. So says a new report from Condo Vultures.

"Bulk condo buyers are reselling units at an average premium of 24%, which at first glance seems to fall in the range of every investment group's expected return," says Peter Zalewski, a principal with the Bal Harbour, FL-based real estate consultancy Condo Vultures LLC. "The issue is, the $51 per square foot average premium is a gross amount that does not factor in carrying costs, real estate commissions, marketing fees, and any sales incentives. Once these additional costs are factored in, the net profits are likely to erode for inferior properties."

According to recorded deeds in Miami-Dade, Broward and Palm Beach Counties, private equity groups and institutional investors that purchased distressed condos in packages of at least 10 units for an average price of $215 per square foot during the last 30 months are now reselling on a retail basis at an average price of $266 per square foot. To date, bulk buyers have already resold 25% of the nearly 7,900 newly constructed or converted condo units acquired in distressed transactions in the tri-county area since July 2008.