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Buying a second home can be a gruelling, time consuming,
frustrating and expensive affair. Buying a property possibly
thousands of miles away can seem like an insurmountable hurdle
that must be plagued with problems and pitfalls. Yet, as with any
financial investment, proper professional advice and guidance can
alleviate most, if not all the worries, ensuring that the entire
buying experience is a pleasurable one. We believe that buying a
property in
Florida, with our expert guidance, should be considerably simpler
than buying one in most other parts of the globe. And it is our
objective to assist you in reaching your goal with the minimum of
concern, worry, and, of course, expense.
Here we address common questions a new home buyer may have. We
make ourselves available to assist you, should you have any
additional questions.
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 - the E2 or investors visa - the L1.
LOCATION
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.
RENTAL RESTRICTION
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.
DEPOSITS
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..
BANK ACCOUNT
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 Kissimmee
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.
In total,
therefore, a prudent buyer should have cash available over and
above the deposit and furniture monies of around $5,000.
TAXATION
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.
RESALES
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".
SPEC HOMES
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.
FURNITURE PACKS
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. 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.
WE WILL:
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.
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