Buy Property in Florida

Buying property might be the biggest investment of your life. Choosing the right location is a crucial part of purchasing property. Florida, with its miles of beautiful beaches and thriving urban centers, is a popular location for buying primary, second, or winter homes. Thinking about your motives for buying property in Florida and asking some basic questions before you buy will make the process as easy as it is anywhere else.

Steps

Considering Why You Want to Buy Property in Florida

1. Think about buying Florida property as an investment. The amount you’ll earn on your investment home depends on the local area it is located in; choose wisely before purchasing. Ensure your home works as an investment property and makes financial sense. If you’re paying more in mortgage and taxes than you are earning each month in rent, you should not invest in the property.
   • Investment property should be in a good area to attract reliable renters.
2. Ask yourself if you’re looking for a second home. Buying a second home is a great investment if you have the time and money, but remember, paying property taxes and a mortgage on a second home can be expensive. Consult with a financial planner before deciding to acquire a second home. Also, be realistic about how often you’ll be able to use the home. If you have a hectic work schedule or few days available for vacation, buying a second home might not be a good choice.
   • If you have two homes, you could consider renting either during the period of time you’re not living there in order to earn extra income.
3. Think about investing in a retirement property. If you’re thinking about Florida as a retirement destination, you’ll be among many with a common mind. Retirement communities in Florida are numerous and can be quite affordable, an important quality for a retired person with a fixed income.
   • Consider the quality of community services. Are doctors offices and hospitals in the community or within easily accessible distances? Are there community centers where you can meet and commiserate with other seniors.
4. Consider relocating to Florida. Perhaps you believe you could find work opportunities in Florida that are unavailable in your home state. Florida has a strong economy, with major growth in economic sectors as diverse as tourism, agriculture, global trade, aerospace and aviation, and biological science. Beyond economic reasons, you might make Florida your home because:
   • a warm, sunny climate
   • great cities like Miami and Orlando
   • beachfront property
   • many natural springs
   • attractions like Epcot and Disney World

Researching the Market

1. Find a good realtor. A good realtor is one who listens to you and understands your needs. They will take your criteria and identify properties that match that criteria all over Florida. The property-buying process can be difficult and confusing, but an experienced realtor will walk you through it and explain everything clearly to ensure you end up with a property you’re happy with.
   • Talk with others who recently bought a home through an agent you’re considering.
   • Pick a realtor with credentials. Many real estate agents will obtain CRS (Certified Residential Specialist), ABR (Accredited Buyer’s Representative), or SRES (Seniors Real Estate Specialist) certificates in order to expand their training and abilities. Choose a realtor with some formal training as well as practical experience.
2. Check comparables. Comparables, or “comps,” are similar homes in the same neighborhood or general area. By checking their price, you can get a feel for how much your Florida property should cost. If the asking price is significantly higher than that of surrounding homes, find out why. Homes in close proximity to each other and comparable in size should cost the same, as well.
   • If the property costs less than others, find out why. Something may be wrong with the home. Perhaps it has an unfinished basement or a leaky roof.
3. Find out how long the property has been on the market. If the house has been on the market a long time, it may be that the seller is asking too much for the house. In this case, they may be frustrated that the home hasn’t been sold, and could be open to negotiating a lower price with you. It might also indicate that the home market is weak overall, giving you an advantage in selecting a property you want for the best price.
4. Get to know the community before you buy. Even if you’ve found a perfect house, you might not be in a great community. Select from any of the above locations (or another Florida city that sounds good to you) and spend a weekend (or a week) there to see if it’s a good fit for you and your family. Introduce yourself to potential neighbors by saying “Hello, I am interested in buying a house in the neighborhood. Would you recommend this area as a good place to live?”
   • Ask your potential neighbors about the quality of city services. Does trash get picked up on time? Is the water clean and drinkable? Look for cracked sidewalks and roads with potholes; these are signs of economic downturn and a decline of municipal interest in the neighborhood.
   • Check out central downtown areas and get a feel for the community. Is it a sleepy small town? Or is it a bustling cultural mecca like Miami?
   • Do some shopping. See if the local economy is amenable to your needs and, if you’re considering living there, look for places you could find work in the vicinity.
   • Look for walkability and public transit.
5. Ask about the condition of the home. It is important to know the home’s age and problem areas. These should all be revealed in the seller’s disclosure, the document which outlines known defects which can affect the home’s value. Important issues and questions to think about include:
   • Is lead paint present? This can be dangerous, especially for women and young children.
   • Are the appliances (including washer, dryer, stove, and refrigerator) in good repair?
   • Will the roof need to be replaced? the carpet? the kitchen cabinets?
6. Talk to the homeowners. The homeowners have lots of information that you might not be able to get from your realtor. Ask them how long they lived there and why they are moving out. It may be for a benign reason like they want to live closer to their family, but it may be due to noisy neighbors or a new toxic dump installed nearby.
7. Identify average home prices in your target area. There are a number of ways to discover what average home prices are. You could contact a local realtor and ask him or her to provide a list of average home prices. Alternately, you could use the internet to conduct a search of homes in a given area.
   • The best option is to utilize both the internet and the local knowledge of realtors in the area to gain an idea of what average home prices are, since one source might have different information than the other. Realtor.com provides updated price info on homes in a given area.
8. Investigate the property tax rate on the home you want to buy. Property taxes vary according to the cost, size, and location of your home. Each city and county will have its own taxation rates. Florida is a popular place to live because it has no income tax, but its property taxes are close to the national average, and occasionally just below it.
   • The lowest property taxes in the state can be found in Walton County, where the rate is just 9.75 mills. Monroe, Collier, Bay, Franklin, Okaloosa, Sumter, Santa Rosa, Jackson, and Sarasota Counties all have low (up to 14.5 mills) rates as well.
   • The award for highest property taxes in the state, conversely, go to Alachua County, where residents pay about $23.44 dollars per thousand dollars of their home’s value in property taxes. Similarly high rates (20.11 mills and up) exist in Miami-Dade, Palm Beach, Hillsborough, Hendry, Pinellas, Broward, Dixie, St. Lucie, and Volusia Counties.
9. Think twice before investing in oceanside views. Due to climate change and concomitant rising sea levels, many homeowners are selling their beach homes as the beach erodes. In Florida, the sea level is rising one inch every 11-14 years. Along 328 miles of Florida beaches, extant development (both commercial and residential) is threatened.
   • Ask your realtor about the risk your beachside property is at due to climate change. Talk to an insurance agent about the threat of sea-level rise too, and inquire about expected future insurance rates.
   • You can still have a home on the water without that water being the ocean. Homes located on lakes and rivers will be less expensive in sale price as well as insurance costs, but you’ll still get to go swimming and boating. A house even a quarter mile from the beach could reduce your home’s cost by thousands.
10. Think about the best place for income property. You might want to flip homes (repair and refurbish homes, then sell them at a profit) in Florida. Buying a property and renting it out can also be lucrative. In either case, think about the placement of the home. Whether you’re buying a home for income or as a residence, the property-buyer’s mantra is always going to be “location, location, location.”
    • Whether you’re selling or renting the property you invest in, look at demographic data like population growth and average income over time. If both statistics are going up, you’re looking at a good place to invest. Communities facing a stagnant or declining economy and a population exodus, on the other hand, should be avoided.
    • Before deciding to purchase a rental unit, consider the other costs you might be facing. For instance, you may need to hire a property management team to collect rent and deal with maintenance issues.

Buying Your Property

1. Decide your budget. Do you want a mansion? Or are you comfortable with a humble two-bedroom ranch house? More importantly, can you afford the type of property you want? Deciding what you can realistically afford is an important first step in buying the right property for you.
   • A property should not cost more than two and a half times your total annual salary.
   • If you are in a committed relationship with someone who will be footing at least part of the bill for the property, solicit their opinions on what they think a reasonable property investment is.
2. Get a mortgage. A mortgage is a loan to finance the purchase of your home. Conduct a realistic evaluation of your finances and obtain your personal credit report to determine what kind of home loans you qualify for.
   • Credit reports can be obtained from any of the major three credit agencies, Experian, Equifax, and TransUnion. These describe how eligible you are to receive loans and credit.
   • Typically, lenders do not want you to assume a mortgage in which monthly payments are more than 28% to 44% of your monthly income.
   • Several UK mortgage providers will lend funds of up to 80 per cent of the purchase price for second home purchase over, typically, a 15-year term.
3. Cover your fees. There are a variety of fees associated with buying property. The fees you pay depend on where in Florida you are buying and what realty agency you are buying through. Remember, these can always be negotiated, so if you want to ask the seller to split a certain fee with you, feel free to do so. Typically, you will have to add about two to five percent to the basic purchase price in order to cover the needed fees. Some of the common costs associated with buying property include:
   • recording fees (charged by the government to record change of ownership)
   • legal fees paid to a lawyer who verifies the validity of the contract
   • title insurer and notary fees
   • title insurance premiums
   • transfer taxes
   • realtor’s fee
   • property taxes
   • appraisal fee
   • mortgage fees
4. Get an inspection. A home inspection will give you more information about the condition of the property. A home inspection will protect you and your investment from any unwanted surprised that the home may contain. Typically, a home inspection will be conducted just before you make an offer or within two weeks of closing on the home.
   • Your inspector should be well-qualified. Consult the National Association of Home Inspectors to find a good inspector. Search their database at http://www.nahi.org/home-inspector-search/.
5. Read the contract carefully. Once a price is agreed, the purchaser pays a small goodwill deposit before making a formal offer in the form of a purchase contract. When signed, this contract is binding, though contingency clauses allow either side to withdraw in certain circumstances.
   • 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.
6. Seal the deal. After reading the contract and making a reasonable study of the home and local market conditions, put your John Hancock on it. Get insurance for the house in case of accidents like fire or hurricanes (always a threat along Florida’s many miles of coastline). You will need to pay the various fees and acquire the deed. Transfer the necessary municipal services accounts (trash, water, electric) into your name.

Buying a Florida Property as a Foreigner

1. Consult with a tax specialist in your home country. There are a variety of tax issues which may emerge for you after purchasing a home in Florida. Double taxation, estate/gift taxes, and income tax issues all come into play when purchasing a Florida property.
   • If you hold the home as an individual owner, your heirs will be charged an estate tax.
   • Income tax can be reported at a low rate if you’re renting the property.
   • Double taxation is generally avoidable as a single homeowner. If a separate tax identification number is not created for you in the US, you will probably not have to pay US taxes.
   • Again, all laws and financial regulations differ dependent on the buyer’s country of origin. Most tax treaties, however, conform to the above standards.
2. Get assistance from someone familiar with America. If you speak English proficiently and are familiar with US customs, you’ll have no problem purchasing a home in Florida. However, in 2014 only 37% of foreign buyers reported they had not had any problems due to linguistic or cultural barriers when buying a home in Florida.
   • Your agent should be fluent in English, and you should also get a third party to look over any contracts or English-language buying offers you submit. Your third party reviewer might see issues you or the agent did not. Having them check it will ensure you don’t have problems later.
   • A real estate lawyer is not required by law to execute property sales in the US. However, consulting such an individual can help you avoid pitfalls or potential points of confusion.
3. Be ready to pay with cash. 80% of all foreign buyers in a recent study paid with cash. This is because it is challenging for American creditors to investigate a foreign buyer’s credit rating, leaving them unable to obtain a mortgage. Paying cash means you need to have the entire amount ready to pay at closing. The benefit is that you don’t have to deal with paying off the loan and attendant interest. However, it can be difficult to obtain such a large sum.
   • Financing is occasionally available to foreign buyers. The HSBC (a banking and financial services company in Britain), for instance, now offers 30-year and 15-year fixed rate mortgages to foreign buyers, and can provide up to $3,000,000 in loans. Other banks may have lower loan limits. The HSBC requires a hefty $100,000 on deposit with the bank, though, and require you have 12 months’ reserves (intended to cover your mortgage payment, maintenance, and taxes) in addition to the $100,000 minimum. Finally, you have to pay 30% of your property’s cost up front (40% in Miami).
   • Check local exchange rates before considering what home to buy. Ask a financial expert if there are season fluctuations in the currency exchange rate between your currency and the US dollar which would favorably impact when you purchase your Florida property.
   • Cash transactions over $10,000 must be reported to the federal government.
4. Ask yourself how you intend to use the property. Buyers from abroad usually use the property as either a vacation home or a rental unit. About 4 in 10 foreigners purchasing a Florida home used it as a vacation home. Renting the home out is also a good choice, and depending on the location and rental rates, you may be able to recoup your investment quite quickly.
   • Before deciding to buy a vacation home, however, ask yourself how often you’ll really get to visit. Sometimes the allure of a beautiful Florida home on the ocean can be more than your pocketbook can really afford. Think carefully about your finances and schedule before investing in a Florida vacation home. Furthermore, since it is often difficult to stay in the US for a long period as a foreigner, you could also allow your friends to vacation at the property.
   • Around 23% of foreign buyers used the property as a rental unit. As a rental unit, you could rent either to Americans or your own countrymen. This, however, will require you to locate and hire a reputable property management team to oversee things like maintenance and potential problems with the property.
5. Make a trip to see your property, but don’t return to close. If you have very specific requirements about the house you’re buying, you’ll want to see it before making the decision to purchase. But at the close, when the property actually becomes yours, you can provide a representative to close the sale for you. Many of the documents and contracts which in the past had to be signed in person can now be signed digitally, precluding the need for buyers and sellers to be present at the final hand-off.
   • If you have a trusted agent or family member in the US who knows exactly what you want, you can cede decision-making powers to him or her.

Tips

• 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.

Warnings

• Always seek professional assistance when purchasing any type of property.
• Buying property 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.

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Sources and Citations

See also

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• Determine Land Value
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• Buy Your First Home With Bad Credit
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• Read a Land Survey
• Buy an Apartment Complex
• Get a Quit Claim Deed
• Get Started in Real Estate Investing

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