|
Guide to buying a property in Florida
01/06/2008
Florida is one of the most popular locations for overseas property buyers to invest in. Boasting all year round sunny weather and fantastic tourist attractions more people visit the state of Florida than the whole of France yearly.
The property market remains buoyant in all areas of the state. The more expensive properties can be found nearer the major tourist attractions such as Disneyworld near Orlando. The rental market for such properties is booming and this attracts many property buyers from all over the world. Many buyers have used the Florida market as an investment opportunity and rent out their properties for all or part of the year.
The weak U.S Dollar has made property investment in Florida even more attractive. People have found that they get more value for their Pound Sterling and can afford better accommodation
Popular Property Purchase locations
The most popular regions for British property buyers are – the central region around Orlando, the east (Atlantic) coast and the resorts on the southwest (Gulf) coast.
Although there are no formal restrictions on Britons buying a property in the US, there are limits to how long they can spend in the United States each year. Many areas of Florida also impose restrictions on the number of days per year that homeowners are allowed to let out their property. Some ban letting altogether, so if you are counting on your property in Florida to pay for itself through rentals in any way, it is vital that you know what the letting situation is as early as possible.
Central Florida
The central part of the Florida, particularly around Tampa and Orlando, has long been a favourite with British holidaymakers; especially families, as it is there that most of the big attractions are located, including Disney World, Universal Studios, Busch Gardens and Sea World. Unlike some other parts of Florida, it is warm all year round, and there is less rainfall than in other areas of the state
Central Florida’s popularity, and the resulting healthy rental market offers property owners the best returns in Florida making the area a magnet for both second home purchasers and buy-to-let investors. Prices reflect this, but generally still represent good value as the volume of new construction helps keep them competitive. Most purchasers here are looking for detached villas with pools.
The Gulf Coast
Unlike the inland areas around Orlando, the Gulf Coast tends to be wet, particularly in July and August, so the potential for letting properties, certainly to families, is not as good. However, it makes up for these disadvantages with magnificent white beaches, azure seas, plentiful moorings and fine restaurants – attributes that have made it popular with the super-rich. A high percentage of the US’s wealthiest citizens winter at Naples, an exclusive resort on the Gulf Coast, or at Palm Beach, on the Atlantic Coast.
Consequently, the Gulf Coast is a hugely expensive area. Houses on the waterfront, in particular, command prices easily in excess of twice those of similar-sized ones in the Orlando area. Properties further inland or up the coast are slightly less expensive.
The Atlantic Coast
Florida’s Atlantic Coast stretches from St Augustine through Daytona Beach, Fort Lauderdale and Miami, right down through the Florida Keys to Key West. It includes some of North America’s most desirable (and most expensive) locations, such as Palm Beach, where property prices routinely run to millions of dollars.
However, not everywhere on the Atlantic Coast is this expensive, if you choose your location carefully, you can find a three-bedroom house with a pool for around $250,000 (approximately £125,000).
An decent apartment in a good area of Miami will start from around $300,000 (about £150,000) – pretty good considering how much the city offers: beautiful beaches, blue seas, non-stop nightlife, a varied art and culture scene, fascinating Art Deco architecture and a consistently warm climate. Many smart buyers are taking full advantage of the stressful situation developers are involved in with Miami condo projects to get some of the best discounts available in international real estate.
Buying a property
The Floridian system of property purchase is very different from the UK’s and has several pitfalls for those unfamiliar with it, so appropriate professional guidance is essential.
One thing to remember is that the property in Florida is cheaper than the UK market generally. So many Brits look at pricing from a British perspective and believe they are buying a bargain, as prices are often a lot lower than comparable British prices. Unfortunately no one points out the differences to them. Research your market carefully before committing to buy!
In Florida, nearly every property for sale is listed on a central database available to all estate agents (known as realtors in the US), so there is no need to visit every single individual estate agent' office. Agents tend to work as seller’s agents or buyer’s agents. It is always wise to consult a buyer’s agent experienced in working with British property purchasers.
Your costs
To cover legal, title insurer and notary fees, title insurance premiums, transfer taxes, property taxes and mortgage fees (if applicable), you should allow around five per cent of the purchase price.
The purchase process
Once a price is agreed, the purchaser pays a small goodwill deposit before making a formal offer in the form of a purchase contract. WOnce signed, this is binding, though contingency clauses allow either side to withdraw in defined circumstances.
Costs
You will need to build into your budget at least 10% of the purchase price to cover professional fees. A further 10% is needed for property VAT, plus 5% to cover utility connection fees.
A 10% deposit is then paid into an escrow account. A title insurance company scrutinises the public records and insures the property against any third party claims. Completion, including the transfer of the balance of the purchase price into the escrow account, can then take place.
Time is a crucial element of the US home-buying system. If you fail to observe dates stipulated in the contract, you risk losing your deposit. Be careful to understand timings and dates.
Mortgages
When working out how to finance your purchase, consider all the options. Paying cash, if you can afford to, is often recommended, but you may not want to tie up a relatively large sum in this way. If this is an option for you, be sure to consult Interchangefx first as you can get far better exchange rates and potentially save thousands of Pounds in the process.
The other options are re-mortgaging your UK home or arranging a mortgage on your Florida property through a UK or US lender. Re-mortgaging offers the easiest solution. Releasing equity in a UK home means that the second home can be purchased for cash, without the need for another mortgage. However, this may only be feasible for those who own their first home outright.
Several UK mortgage providers will lend funds of up to 80 per cent of the purchase price for second home purchases over, typically, a 15-year term.
Getting a mortgage in Florida
If you decide to obtain finance in the US, bear in mind that most mortgages available to foreign nationals require a minimum 20 per cent down payment. Some even stipulate 30 or 35 per cent.
At the beginning of the process, make sure you obtain what is known as a Good Faith Estimate. This is a standard document used to detail all the costs of obtaining your mortgage, including both monthly and one-off payments.
If possible, try to secure a self-certified mortgage. Unlike in the UK, this kind of mortgage does not necessarily carry a higher interest rate than a fully documented mortgage, and it could save you a lot of time and trouble spent assembling documents.
Taxation Libilties
The US taxation system is a complex one, and may involve payments to at least four different levels of government: local, regional, state and federal. A Double Taxation Treaty between the US and the UK exists to prevent double payment of taxes.
Income tax, a progressive tax ranging from zero to 35 per cent of taxable income, forms the bulk of taxes collected by the US government.
Florida ranks lower than many other US states in terms of the tax burden it imposes. It is one of only nine states that do not levy a personal income tax. More than half of its non-federal revenue is collected at local level, mostly through property taxes, which, for homeowners, amount to approximately 1.5 per cent of their property’s value per annum.
All rental income in Florida is subject to tax, which is charged on a sliding scale (currently 15 to 34 per cent), depending on the amount. ‘Intangible personal property’ (that is, stocks, bonds, mutual funds and so on) is also taxed.
Florida’s sales and use taxes provide over half of state revenue. Sales tax applies to most retail items (excluding groceries, medicines and certain other items), as well as to car and hotel room rentals and theatre tickets. The rate is currently 6 per cent. Local governments may levy an additional local sales tax of up to 1.5 per cent.
Passports, visas and residency
British citizens may visit the United States for business or pleasure without a visa for up to 90 days per year. A UK passport is required.
Those wishing to stay between 90 days and six months must hold a B2 visa. To be successful, applicants must prove they have sufficient funds to support themselves during their stay.
Florida’s immigration laws are very strict. People seeking a Florida Green Card, which entitles them to live and work in the state, face close scrutiny by the Immigration and Naturalization Service, particularly if they wish to start a business.
Those not planning to work, including retirees, must be able to demonstrate substantial means. This can sometimes be an obstacle to many people’s dream of retiring to Florida.
Healthcare
Hospitals in the US provide some of the best advanced healthcare in the world. Most are private.
The US spends around 13 per cent of its gross domestic product on healthcare, much of it through insurance schemes provided by employers and the two federal schemes, Medicare and Medicaid. There is no national health service as such. Approximately 14 per cent of the population are estimated to be without any form of health insurance.
For visitors, private medical insurance or travel insurance is essential. If you are seriously injured, the emergency services will treat you and charge you later. If the injury is not serious and you need to consult a doctor, a basic consultation will cost approximately $100 (around £50). There are a variety of policies available for overseas travelers and those intending to live overseas, and they do not have to cost huge sums.
Investment potential
The recent economic slowdown in America has caused many potential property buyers to be nervous about investing in property in America. For long-term investors there are still great opportunities to be found. Many developers are having trouble selling projects right across the country, so they are keen to offer deals on projects that are nearing completion so that they can release more funds and begin to move on to new project.
In some cases there have been stories of developers offering discounts of up to 40 per cent on their list prices so there are plenty of bargains to had, if you do your homework.
The recent slowdown in the US housing market has made it very hard for buyers to get finance in the US as lenders are nervous about granting approvals, so cash buyers or those with finance already arranged are being welcomed with open arms.
Should you prefer to try to raise finance locally in the US, there is the added advantage of the current low interest rates that the US Federal Reserve has introduced to stimulate the markets. Research is key here.
Summery
The reasons for buying in the Sunshine State remain the same; for the weather, the theme parks or the rental potential. The US economy is having a tough time, but this will not stop people going there for holidays – in fact, the favourable exchange rates on the US Dollar at the moment are encouraging more visitors to the region.
Buying a home abroad is a major decision and one that should not be taken lightly. It is vital to ensure you have researched all aspects thoroughly and are in possession of all the relevant facts.
Individual circumstances will vary widely, so it is essential to obtain professional advice and guidance tailored to your particular situation, especially in areas such as property purchase, potential rental returns, taxation and mortgages.
| 
FOREIGN CURRENCY EXCHANGE SERVICES
