YOUR FIRST DECISION
Before considering the purchase of a home, one must determine the purpose of the home. Will it be only a holiday home? If so, will one rent out the property when it is not being used by your family, friends or yourself. How important is that rental income?
If you want to live permanently in Florida through retirement or working, are you familiar with the visa requirements? A resident from one of the countries that participate in the "visa waiver" program can normally holiday in Florida for up to 3 months at a time with no visa, or up to 6 months at a time with a B1/B2 visa that many already have been stamped in their passport. If not eligible for that, one can usually obtain it from the American Embassy. In either case you are not permitted to work in Florida. To work in the United States, one must have a green card or sponsorship. One of our expert advisors would be happy to discuss non-immigrant investors visa.
When choosing a primary residence, the logistics of the property location is important in relation to the owner's place of work. However, a holiday home generating income will not need to be close to offices. The whole of Florida provides a wealth of income property locations to the holiday home owner or investor.
When rental income is important however, the correct location of the property is crucial, and rental income will be maximized when the property is located within a 20 minute drive of Disney World. Outside this area, and even marginally outside, rental demand will fall off very quickly and very substantially.
Questions have been raised about rental restrictions imposed within the Disney area. Three counties have different sets of rules. Orange County did, some time ago, bring in regulations forbidding rentals of less than 30 days. This does not mean that a property owner cannot let out his house; only that each letting must be for a minimum of 30 days. However, the number of rental agreements in any year could not be more than 12 at the very best (and probably less unless each rental period follows on immediately from the previous one). Therefore a property in Orange County is not best placed to maximize rental income.
Osceola County now has rental restrictions in place. However, the position is very different from Orange County. Authorities have created exceptions and exclusions so as to protect the large number of investors who have already purchased houses in the county and the large number who continue to do so.
Consequently, and without going too deeply into what are fairly complex provisions, many developments have effectively been excluded from the restrictions rendering them communities from which short-term letting activities can safely be carried out.
Polk County and Lake County are developing relatively fast. Therefore further investment is being encouraged. While rental restrictions could theoretically be imposed in the future, presently it is unlikely. This is due to the many existing owners who would be adversely affected, and would pose sufficient influence to overturn any attempt to introduce restrictions.
It is essential that a prospective buyer obtains independent advice as to the suitability of the property/development they are considering, and for the use to which it is intended to be put. With such advice the "problem" of rental restrictions should be carefully evaluated and understood. We will gladly guide you safely and expertly throughout your selection process.
The amount and required submission of payment of the initial deposit will vary from builder to builder. Most will require a nominal $1,000 at contract stage (up to $5,000). This will enable you to write a contract, thus fixing the price and protecting your chosen "lot", pending your return home to arrange any balance required, payable prior to construction..
A U.S Bank Account is desirable to facilitate the transfer of funds. We will be happy to introduce you to one of the major banks and assist you in opening a suitable account. This need take no longer than an hour and an initial deposit of $100 should be adequate to open the account.
CLOSING AND RENTAL SETTING-UP CHARGES
Many are concerned about hidden extras and have heard stories about buyers being saddled with unexpected charges for closing costs long after it has become too late to withdraw from the purchase.
Closing costs comprise several elements, many of which are stamp duties payable on various documents, but the biggest expense is usually applicable to the mortgage. This alone can amount to 6-7% of the loan amount, and will be clarified further once the most appropriate source of finance has been determined.
The vast majority of builders in Orlando make a substantial contribution to such costs. When a U.S mortgage is not required, then many builders will offer a cash discount, typically 2%. Since the buyer will have to make some contribution to the closing costs; around $1,500 will normally cover these along with charges such as a credit check fee, appraisal charge, etc. Sometimes it is necessary to pre-pay 1-month's mortgage repayment, insurance and property tax, which on a $110,000 purchase with 75% mortgage might require a further $1,500, approximately, along with utility deposit of around $375.
Finally, if the property is being managed and rented out, apart from the $1,000 escrow sum (or float), also required is, a lodging license, fire extinguisher and security bolts, etc. This is necessary at an additional cost of approximately $250 . Inter-linked smoke detectors and battery operated emergency lights are also now required and if not installed by the builder will cost around $475.
See the set up costs table here.
In total, therefore, a prudent buyer should have cash available over and above the deposit and furniture monies of around $5,000.
Property tax generally amounts to approximately 1.5% of the property's value and is payable either annually in advance or, more commonly, monthly along with any mortgage payment. Sales tax is comparable to EU VAT or IVA (United Kingdom) and must be charged on rental income generally at a rate of 12 %. This is in reality the tenant's liability but it is the owner's (or their agent's) obligation to charge it.
Rental income is declared in the U.S for income tax purposes. It may also be declared in the owner's country of residence although many double taxation agreements between the U.S and other countries enable any income tax paid in the U.S to be deductible from any tax liability arising in the country of residence thus avoiding any "double taxation". Actual liabilities will depend upon one's own circumstances and it is recommended that appropriate advice be sought from a suitably experienced accountant. A highly experienced tax accountant is available in our office building and will be happy to file the necessary U.S tax returns for you at a specially negotiated competitive rate.
FORECLOSED AND DISCOUNTED HOMES
The current economic downturn has resulted in a lot of foreclosed homes hitting the resale market. These homes can be cheap but can be complicated to purchase. See our guide to foreclosed homes here.
We have also limited Discounted Homes available from time to time which are cheaper and easier to purchase than foreclosed homes. Availability changes from hour to hour so contact us for latest status.
The availability of second hand properties changes on a daily basis. We will be happy to include a tour of appropriate resale properties within your viewing program should this be of interest to you. Good resale's will not generally be on the market long, and while there is always a possibility that a "bargain" may become available just as you are ready to buy, a true bargain in a prime location can be difficult to find. Hence the importance of ensuring that what you choose to buy is indeed in a "prime" sought after location. This is crucial if the property's resale's value is to be optimized. There could well be a good reason why a particular resale is "cheap".
Most builders will build one or more properties in anticipation of a buyer wishing to buy a house that doesn't need to be built but already exists. While clients will therefore not have the opportunity to choose the specification / color scheme they might favor, some may like the idea of being able to see the finished product before they buy it and, also of being able to complete their purchase just as soon as any finance formalities have been arranged. The inventory obviously varies on a regular basis, but we will be happy to show you the current availability.
While you may like to furnish and equip your home yourself, this can be somewhat time-consuming and most buyers opt for one of our "furniture and house wares" packages. We do not consider it necessary, or indeed advisable, to spend excessive sums on furniture, but equally we believe it could be false economy to buy furniture of inferior quality which may not stand up to the rigors of a rental property. Our own furniture packs will completely furnish and equip your property to an attractive, yet hard-wearing standard. Everything from a color TV, washing machine, fridge, etc., down to lamps, ashtrays and toilet rolls are included. More expensive packs are available and most items can be customized or upgraded to suit your tastes and your pocket. We offer a free interior design service and will be happy to arrange a suitable with our interior designer.
FINANCIAL MORTGAGE INFORMATION
While Florida property purchases can often be financed from one's own home country, perhaps, using a main residence or secondary property as security, U.S mortgages will frequently be more attractive and are readily available subject to status. Advances of 70% of the cost (house, lot and pool) are relatively simple to obtain, 75% are not normally a problem although much detailed financial information will be required, while 80% advances are certainly possible in many cases.
With access to a vast number of different mortgage companies, we will be happy to recommend the most appropriate mortgage source for your circumstances. You can pre-qualify for a mortgage by completing our easy to use online application form. Interest rates can be fixed or variable. Fixed rates are currently around 8.5% (Please ask for the most up-to-date rate) fixed for up to 30 years and generally with no penalty for early redemption, making such a proposition considerably more attractive than financing available from within most other countries. Variable rates start at around 7% per annum.
AFTER SALES SERVICE
Even after a home purchase in Florida, our service does not stop.
1. Continue to be available to you to answer all your questions and queries regarding mortgages, closing dates, rental, etc.
2. Send you photographs on a monthly basis to show you the progress of the construction of your property.
3. Carry out the "walk through" just prior to closing. This avoids the necessity of your returning to Florida to "close" the purchase. We will ensure that the house is completed, the color schemes are as ordered and all extras are installed. Then we will advise you that the closing can take place.
4. Arrange for all services (water, electricity, gas, etc.) to be turned on and for all deposits to be paid on your behalf ( provided that these funds have been established in an account).
5. Co-ordinate the delivery of your furniture package and ensure that all items are in working order and that all packaging is removed from your home.
6. Ensure that your property is ready and is continually ready to receive either your guests or yourselves.