Homebuyers guide to purchasing a property in Florida

Before you decide to purchase a property in Florida, there are several options you should consider. These are detailed in this document along with some of the facts, which you may find useful in making your decision.

Do you want a holiday rental property or one to just use for yourself and close family and friends?

The benefit of owning a property which you rent out to holidaymakers is that the rentals help with the running costs and mortgage payments. However, if you want to use the property purely for yourself, you need to bear in mind that as a UK citizen, you can only spend up to 6 months a year in the USA.

Visas and Visa Waivers

When you travel to anywhere within the USA, if you complete the green Visa Waiver form on the plane, you will be entitled to stay in the country up to 3 months. To stay longer you must apply in person to the US Embassy in London or Belfast for a 6 month B-2 Visa. If granted the Visa is entered into your passport, and entitles you to spend up to 6 months a year in the USA for the following 10 years. However you should note that:

"A visa is issued by a U.S. Embassy or Consulate. A visa entitles the holder to travel to the United States and apply for admission; it does not guarantee entry. An immigration inspector at the port of entry determines the visa holder's eligibility for admission into the United States"

If you want to live in America permanently, you need to consult an Immigration Lawyer. The usual method of entry is to be sponsored by a Company offering you a position, or to buy a business, which employs at least 2 Americans, although this does not guarantee an E-1/ E-2 Trader/Investor visa. Each case is decided on individual merit.

If immigration is a path you are considereing, we seriousy recommend you seek Legal advice before making any commitment.

Do You Prefer to Purchase a Pure Investment Property?
 

If you would like to take advantage of the currently low property prices in Florida, but do not want to administer the property in terms of the short term holiday rental market, then you may want to consider purchasing a property and renting it out long term on a residential basis.

Many properties are suitable for long term rental depending on your budget. The theme parks in the Orlando area and the amount of staff that are required to operate them and all the associated support services, shops, restuarants etc, provide a constant long term rental market

Tenants normally pay the Utilities, with the Landlord paying the Insurance, Property Tax and any Homeowner Assocating fees. Very often these properties are let unfurnished, as tenants have their own personal effects. Rental rates will vary depending on the size of the property, number of bedrooms, bathrooms etc. Rates can range from $800 a month for a small apartment to $1400 for a 3 bedroom villa or townhouse on a community with lots of facilities

Letting Agents normally take half of the first month's rental and 10% of the monthly rental as a fee.

Property Zoning

Properties are located in what is known as Sub-Divisions. These are zoned for short-term rental or are residential. You cannot purchase a home in a residential area, and then let it out to holidaymakers. If you intend to rent out your property for short periods, it must be located in a Sub-Division, which is zoned for short-term rental.

Some residential developments will allow rental for minimum periods of 1 or 2 months, with a maximum number of rentals allowed in any 12 months. We srongly recommend you determine the restrictions before commiting to purchase a property on a residential zoned area. However,if you are buying the property for your sole use, then a residential development may be more suitable for you.

In and around the Orlando area there are many developments zoned for short-term rental. This is not the case on either the East or West Coast, so pay particular attention to the zoning when you are considering purchasing your property.

Do you want a holiday home on the East or West Coast or one near Orlando and the theme parks?

Florida is about 100 miles wide with Orlando situated roughly in the centre. The East Coast is on the Atlantic Ocean, and the West Coast is on the Gulf of Mexico, where the sea is a little calmer and warmer. Both coasts benefit from fabulous beaches and resorts. Many holidaymakers are taking two centre holidays combining a week on the coast with one or two weeks at the theme parks.

If you are considering spending 6 months a year in Florida, you may want to check out the beauty of the coastal areas

If you are looking primarily for rental income, the year round holiday destination is Orlando. It is here that you will find Walt Disney World, including the Magic Kingdom, Epcot Centre, MGM Studios and Animal Kingdom as well as Disney’s Wide World of Sport. In the near vicinity there is Sea World and Discovery Cove, Universal Studios and Islands of Adventure. Accompanied by fantastic shopping malls and prime retail outlets, not to mention the immense selection of restaurants and fast food outlets, there is something for absolutely everyone.

Would you prefer a single or 2 storey villa, a town house or an apartment?

All detached villas, whether they are single or 2 storey, come with their own private pool. Only those built several years ago or originally residential properties may not have a pool, but one can be installed at a relatively reasonable cost.

Single story villas are usually on a larger lot, to accommodate the square footage. This may increase the initial cost of a new build where the cost of the land is separate to that of the property.

Town Houses and Apartments (called Condos) are usually on a development that has at least one communal pool, a clubhouse and in some cases other recreational facilities. There may be additional costs for these facilities. However this is out weighed by the cost of owning a villa as there are no pool or lawn maintenance charges. On some developments Town House properties do have the option of a private plunge pool.

All properties usually come with a full kitchen and all white goods - appliances including washing machine, tumble dryer, dishwasher, full cooker and microwave - are included in the price.

How many bedrooms and bathrooms do you want?

You need to consider that if you purchase a 3 bedroom, 2 bathroom property, it will be suitable for a single family, whilst a 4 bedroom, 2/3 bathroom property, where maybe 2 of the bathrooms are en-suite are popular with 2 families holidaying together, where both sets of adults have their own private bathroom. You can always rent out a 4 bedroom property to a family requesting 3 bedrooms

You may require personally require a property with 5 or more bedrooms, but consider that it will attract larger families or groups of individuals, who may ‘party’ more than individual or 2 family parties

Do you have any requirements regarding location e.g on a Golf Course; overlooking a conservation area; overlooking a lake?

All properties have rental potential, although much like purchasing a property in this country, a property in a pleasing location will always be more popular and is likely to attract repeat bookings.

Some holidaymakers want to be a close as possible to the attractions while others are happy to travel a little way out. For a short-term rental the property should ideally not be much more than 20 minutes away from Disney.

It is worth considering that renters are become more discerning when requesting accomodation. Many now specifically request that the pool is not overlooked at the rear. Properties on a golf course or lake may also appeal to an alternative holidaymaker, on a golfing or fishing holiday. Also properties on these types of development and a little further away from the theme parks do appeal to ‘Snow Birds’ who travel down from Canada and the northern states to spend some or all of their winter months in a warmer climate.

Whilst 'snow bird' rentals do not attract such a high revenue, it is usually just a couple or small party, there aren’t the frequent cleaning costs and they do occupy your property at a quieter time of year

Would you prefer a new property or a resale?

A new property is built to order, which will take anything between 9 months and 2 years. You will usually pay extra for the lot, depending on the location, which can be anything from $0, if it overlooks other properties, to $50,000 for a lake or prestigious view. You will also need to furnish the property. However, in the current economic climate most Builders do have incentives which range from contributions to Closing Costs, Furniture Packages, Favourable Mortgage Interest Rates or Cashbacks

If you decide to purchase a resale property, it will usually be yours within 2 months, and the cost will include the lot and more often than not, the furniture and all contents required for a rental property. Some resale properties may also have future bookings in place.

Please be aware when considering the purchase of a Bank Owned Property, or a Foreclosure that whilst the price will appear attractive, the property may have been stripped of all furnitre, light fittings and white goods. Also as the utilities will have been disconnected, so the pool will need major attention, along with the lawn and garden

Do you want a mortgage or would this be a cash purchase?

With the current global economic situation, mortgages are becoming more difficult to secure.

The minimum deposit is now 30% and in some cases 50%. There are different types of mortgage much like in the UK, Tracker, Fixed, Variable, Interest Only etc. When you decide on a property you wish to purchase, a meeting with a Mortgage Broker will be arranged to determine the best mortgage type available to you which meets your personal circumstances

Mortgages are set up in the US and can either be with a British company, where you make payments here in the UK in £s, or with an American Lender, where you pay in the US in $s. Mortgage rates vary depending on circumstances, but you must consider that the Federal Rate set by the US Government, is not directly reflected in the Mortgage Rate. Whilst the Federal Rate may be 2% the Mortgage Rate is still around 6%

You should also bear in mind that most US lenders will want to see evidence of at least 6 months advance mortgage payments in a bank account before the final mortgage is granted.

On a very positive note - if you do take out a mortgage against the property you are purchasing, any interest that you pay can be offset against any rental profit you may make for tax purposes. .

What is the cash outlay and timeframe when purchasing a property? If you wish to purchase a new property you usually pay an initial deposit of $5,000. Within 30 days you are contracted with the builder. At that stage the balance up to 10% of the purchase price is due.

If a property price including the plot is $300,000

• the deposit is $30,000
• you have already paid $5000
• you will pay the balance of $25,000

In the majority of cases no further monies are due until the property is built and ready to close. At that stage the remainder of the 30% of the deposit (or the balance if there is no mortgage) is due.

In this example if you are taking a 70% mortgage the balance of 30% is due

• The total deposit is therefore $90,000
• You have already paid $30,000
• So the balance is $60,000

The initial outlay for a resale property is similar to a new build. After the initial deposit of usually $5,000, you will need the balance of 30% within about 6 weeks, which is the time it usually takes to complete.

Closing costs in the case of new and resale properties are approx. 3% of the purchase price, if there is no mortgage and 6% if there is a mortgage. These include all of the legalities regarding the title deeds and the mortgage, house insurance, property taxes, pest control checks etc.

How do you go about furnishing a property?

If you need to buy a furniture package, they are called Turnkey. This is because they contain everything you need to rent out a property, right down to the teaspoons. The starting cost is around $15,000. Once you have closed on the property, the Furniture Company deliver the whole package and put everything in it’s place, make the beds, put cutlery in the drawers, pictures on the walls, in fact everything so you just have to turn the key in the lock.

Resale properties are usually fully furnished and are ready for you to put straight into the rental market.

Who looks after a rental property while you are in the UK?

You appoint a Management Company. They clean your property after guests have been in, and prepare it for new guests. They usually tend the lawns and gardens, and clean the pool. They also arrange initial set up of your utilities and pay your bills monthly. Some Management Companies will also provide bookings for your property.

Below is the average cost of running a 4 bedroom pool home, based on actual figures from our own property in Florida.

Mortgages are available but it is not so easy to obtain mortgage approval as they used to be. You can expect to pay between 5% and 6% interest rate and most lenders will require 30% deposit, however the lower rate lenders require 50% deposit.

Most individualstake out a 30 year mortgage ( there is no age limit in the USA). There are a variety of mortgages available: Fixed, Variable, Repayment or Interest Only. We can put you in touch with a Mortgage Advisor, who will discuss the various options available to you, and most suitable plan for you depending on your personal circumstances

So if you were to buy a property for $250,000:-

• Deposit $75,000. Closing costs approximately $12,500
• Monthly interest payments @6% - $875
• Insurance and Property Tax paid monthly with the mortgage $442
• Monthly Utilities and Management say $900

TOTAL MONTHLY = $2217

If you were to buy a property for $150,000:-

• Deposit $45,000. Closing costs approximately $7,500
• Monthly interest payments @6% = $525
• Insurance and Property Tax (assuming small property) paid monthly with the mortgage $350
• Monthly Utilities say $600

TOTAL MONTHLY = $1475