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Why is this
guide so important to you?
The purpose of this
guide is to give you the facts on the subject of property
ownership in Florida. You deserve to be supplied with enough
accurate information to assist you in formulating your own opinion
based on the facts and not impulsive desire. This guide is not
meant to discourage you from your dream of owning property in
Florida. We believe that the information enclosed will enhance
your knowledge and enlighten your awareness of the process
involved in purchasing a vacation home.
Should home
ownership be something you’d like to pursue, we’d be happy to
assist you in locating your dream home. However, after reading
this guide, you may decide that home ownership is not for you
after all and that’s fine too. You’re certainly welcome to
book your accommodation through TTV.com when you
visit Florida. Either way, feel free to pass this information on to
someone who would like to buy property there and prefers to deal
with a straight talking company.
Before you buy a
Florida Vacation Home…
Examine you
intentions. Many people like the idea of owning a home within
close proximity to the area’s attractions. Some people go there
year after year before they think about a purchase. Others see
Florida for the first time and fall in love with the way of life
there. This causes some to hastily spend their nest
egg on owning a piece of that dream, before realizing the full
implication of ownership and management of a rental home. Although
you may own your primary residence, most people have never owned a
rental home before and ownership brings people into a new
territory which TTV.com would like to familiarize
you with.
Something
Special for You!
TTV.com offers something special for you. A complimentary
consultation with our Florida associates to see if owning an
investment property will be right for you and has the potential to
enhance your portfolio.
How is it that we
can help? You may choose to have our associate company manage
your property after you purchase a home. They have been
managing some of the finest homes in the area since
1994. With a current inventory of over 120 private homes and
condos currently under management, they offer vast experience
regarding rental properties. Earning rental income to assist in
defraying the mortgage payments may be very appealing to you. You
will be able to have peace of mind knowing that our association
with you can continue after your purchase for many years if you
choose.
Therefore it is
imperative that this consultation provides you with the education
you will need to make an informed decision. You will then be in a
better position to decide whether or not it is in your best
interest to proceed with the process of purchasing an investment
property in the world’s most popular resort destination.
Why do you want
to buy a home there?
It is important to
give this question a great deal of thought. Contrary to what you
may have heard, customarily there have been no fast gains in
property values. The Central Florida area has so much land
available for development it could be many years before house
prices go up significantly. Before purchasing, take this fact into
consideration.
Your potential
purchase should be viewed as a long term investment. Should you
desire to sell your new home within the first three years of
purchase it is probable that you will not recoup your total
investment at that time. Market trends indicate that a minimum of
five years should be considered in order to break even and that
marker is still not a guarantee. The funds you use as a down
payment should be considered as "disposable income" that
you don’t need for any other purpose in the near future. The
investment takes time to blossom and mature, therefore patience
has its virtues.
For example: a 3
bedroom home with private pool that was sold by the broker in 1991 for $118,000 is now
worth $148,000 in value. That is a 25% appreciation over 9 year’s
time. While this is for example purposes only and we really cannot
predict the future, here is our suggestion to you: Plan to be
involved with this property for the long haul to maximize your
earning potential. The value of real estate fluctuates both up and
down. It is our opinion that owning property in the #1 resort area
in the world will be very lucrative in the long term. However, no
one, including us, can make any guarantees to you.
Foreign
Nationals Desiring Permanent Relocation to Florida
Many people want to
live in Florida full time. The truth is, it can be very difficult to
obtain a visa to live in the United States. TTV.com recommends speaking to an immigration
consultant before you buy a
home that you intend to live in full time. Our experience has been
that if you are in the medical profession, a computer expert, or
any top class professional in your field, you may be able to find
a company that is willing to go through the months of paperwork
required to employ you. Another option would be to purchase a
business that would qualify you for an E2 visa. The requirements
change from time to time regarding what types of businesses will
qualify.
Retirement: Yes, it
is true that you can spend up to 6 months of the year living in
Florida at this point in time with a visa from the US Embassy.
Retirement visas are not presently available.
Family Vacations:
This is a good reason to buy if you think Florida is a place you’ll
love to come back to again and again. Bear in mind though, that in
order to obtain the most leverage from your rental income
potential you will need to consider coming in the slower seasons.
School holidays are very popular for visitors from all over the
world. If you must visit during these periods your rental income
potential will be reduced.
The Straight
Talk About Owning A Home
Due to the vast
experience that our Florida associates have in managing and renting
out properties for homeowners, they have special knowledge about
the short term rental business there.
Law Pertaining
to Vacation Rentals
Although the
property you are considering is "residential" in nature
there are strict laws that apply when the occupants are going to
be short term tenants. It must be established by the local county
whether or not the house can be used for short term rental
purposes. You have our assurance that any property TTV.com shows you does meet the requirements within the local
government’s guidelines for short term rental usage if that is
your intention.
There are occasions
when the right to rent as "short term" ceases when the
property changes hands. This rule can apply to most resales of any
kind. So, it is important before you make an offer to buy any
property, that it be checked with the relevant officials that the
property can be used for short term rental purposes. TTV.com will have already done this research for you and will
be in a position to advise you.
Price Ranges
There are quite a
few differences between the type of homes and the expected rental
returns. The following are examples of what to expect.
Townhouses or
Condominiums
Prices start from
around $70,000. There are usually communal facilities such as a swimming
pool, tennis courts, volleyball courts, barbecue area, children’s
play area and a clubhouse. The main drawback to this type of
property is that the value often goes down before leveling off.
Should you wish to buy this type of home then we suggest you
purchase a resale since the original owners will already have
taken some of the losses.
A Condo Owners’
Association may be a disadvantage for you if you live overseas. A
management company will run the communal facilities together with
advising the association’s officers who are also home owners.
Many different owners bring many different opinions as to what
needs to be painted, replaced, repaired etc. If you decide to buy
this kind of property, you have to stay in touch and get involved
with the decision making process.
Single Family
Homes As Resales
3 Bed/2 Bath Homes
with pools start from around $120,000
4 Bed/2 Bath Homes
with pools start from around $140,000
We suggest you
purchase a home that is less than 3 years old, unless we get you a
great deal, as it could be false economy. The old adage is true
that "they don’t make things like they used to". In
properties more than 3 years old, there will be repairs and
replacements needed within a short period of time. For example,
the carpeting will probably need renewing when the home is
approximately five years old, decorating needs to be "touched
up", like painting, renewing blinds and paddle fans, the washer
and dryer. The air conditioning units usually last about 10 years
unless they have been poorly maintained in the past.
TTV.com recommends that you hire a Licensed Home Inspector. The
kind of report produced will give you insight into current or
potential problems regarding the structure of the home e.g. the
roof, walls, plumbing, electrical, air conditioning etc. The
report will cost you approx. $250. The report may also be used as
a negotiating tool to drive the price down for you or to ensure
that the existing owner of the home pays for the repairs prior to
your purchase. In addition, TTV.com's associates
offer a complimentary rental inspection which will evaluate
potential returns. There is usually a Home Owners Association
which maintains common areas of the neighborhood which requires
payment of set fees.
New Single
Family Homes
3 Bed/2 Bath Homes
with pools start from around $130,000
4 Bed/2 Bath Homes
with pools start from around $145,000
The newest
subdivisions are located only 10 minutes from the Disney area. Due
to the ideal location, in approximately 5 years time your house
would have more potential value than resales in other areas. This
is by far the most popular choice because often you can get a
better deal on a new home than on a resale. When a product is new
and actually costs less than a used one, it makes great financial
sense NOT to buy the resale. The lifespan of your major
appliances, carpeting, air conditioning, etc will be longer, thus
reducing your out of pocket expenses initially. This is a paradox that exists within our market from time to time. When you
are serious about buying, we will evaluate and analize the market
at that particular time to ensure we are offering you a wide
selection of homes that affords you the best value for your
dollar. Remember if you employ us as your Buyers Broker we work
exclusively for you ensuring that you get the best deals
available and what’s more this is done at no cost to you. The
seller has the privilege of paying for you to have an expert in
your corner. Isn’t that great!
About Location
Location, location,
location. The closer your property is to the area attractions and
amenities such as shopping and restaurants, the faster it will
rent. The very first question that is asked by a potential guest
who wants to spend their vacation in Florida is:
"How close is
your home to Disney attractions and theme parks?" TTV.com recommends many of the subdivisions that are located on
or near State Road 192, and Highways 27 and 54. These main roadways give you
access to the connecting highways that lead to all of the
attractions within minutes.
Running Costs
Your rental home is
a business. As such there will be monthly out of pocket expenses
to consider to
operate your property in addition to the mortgage payments. There
are sales and resort
tax payments due on every rental which will run between 9% - 12%
depending on the location. Taxes have to be paid in Florida,
regardless of what state or country the rental money was
collected. It is the sole responsibility of the home owner to
ensure that taxes are up to date. Other monthly expenses include
utilities, pool maintenance, lawn service and pest control,
management, cleaning fees, Homeowners Associations Dues, insurance
and property taxes.
Return on your
investment
Income on rentals
fluctuates depending on whether they are considered "high
season" which means school vacation times; or "low
season" which covers the rest of the year. There are also
times when we will get enquiries for "snowbird rentals"
which will include a booking for a month to several months at a
time during the winter. That circumstance would enable you to
negotiate a better rate to block the space for the tenants. Other
factors that may affect the income would be airline strikes,
natural disasters, global economic factors that affect the
exchange rates both positive and negative, exciting special
events, international sporting games, special promotions offered
by the Theme Parks.
Rental Income
With any business that
is purchased anywhere, the margin of safety is normally 50% down
payment before any profit can be realized or hoped for. A 50% down
payment usually ensures that you can afford repairs and
replacements, mortgage payments and don’t forget your own family
holiday. The following is an example of what you may expect for
rental income that you would be able to apply to the mortgage
payments, based on existing homeowners’ returns from rentals.
- 4 Bedroom
Executive Homes
- Average monthly
income …$2000 (after taxes & commissions)
- Minus Average
Expenses …$850
- Total left for
Mortgage …$1150
Funds Required
for Closing Costs
The minimum down
payment is usually 20% on an investment property. Let’s take a
look at your estimated costs to complete a purchase of a single
family pool home priced at $126,900 in a great location. The
following is only an example of estimated costs.
- Down payment of
20% … $25,380
- Furniture …
$10,000
- Closing costs
… $4,000
- Total funds to
close … $39,380
Sometimes families
or business partners pool their resources to purchase one or more
properties which will be held jointly. This will distribute the
weight of the up front and on going costs as well as allow all to
share the benefits of ownership.
Closing costs are
approximately 7% of the mortgage amount. Some builders/sellers
will pay towards the closing costs to assist you in closing which
will keep your costs down. For purchases that require no mortgage
closing costs can be considerably reduced.
Furniture and
Extras
Whether the home is
new or used the choice of furniture is a major consideration. If
you furnish your home like a budget hotel then it will be
reflected in your rental income. TTV.com recommends
sturdy furnishings with a designer flair. The payments for
furniture cannot be included in the mortgage.
The home may
already be furnished if it is an established short term rental as
a resale. Take this into account when making an offer. The life
span of rental furniture is short, for example, a bed will last
approximately 5 years, so will a sofa etc. Ensure that you
thoroughly look at the furniture, housewares and appliances in
great detail. Some items may need to be replaced before you can
rent it out.
A 3 bedroom condo
furniture package may cost from $8,000 to $12,000.
A detached villa
package may cost from $12,000 to $25,000. These ranges depend on
the size of the home, style and quality of the furniture and most
importantly your personal taste.
It is important
that your home looks well furnished and we strive for them to look
like new at all times. Your tenants will treat your home with more
respect if they find it immaculate to begin with. We can supply
you with a list of items needed or provide you with a written
quote for a complete designer package
to furnish your home.
Who’s Who
These terms can be
confusing if you haven’t heard them before. Here is a brief list
of "who’s who" and what they do in Real Estate.
Single Agent for
Buyer or Seller
A licensee who is
engaged by and acts as the agent of the Principal (the buyer or
seller) only is known as a single agent. A single agent has the
following duties and obligations:
To the employer
(the buyer or seller)
- The fiduciary
duties of loyalty, confidentiality, obedience, full
disclosure, accounting and the duty to use skill, care and
diligence
- Presenting all
offers and counter offers in a timely manner, unless a party
has instructed otherwise in writing.
To the other party
in transaction
- A duty of
honesty and fair dealing.
- Disclosing all
known facts that materially affect the value of residential
property which are not readily observable.
The sales agents in
the builder’s office or the Realtor who has the home listed are
usually single agents acting on behalf of their employer. It is
their job to get the price, terms and conditions that their
"employer", the builder or seller, has asked for.
It is illegal for
them to tell you the lowest price that the seller is willing to
accept when they are employed by the seller/builder. Therefore we
strongly encourage you to enter into an agreement with TTV.com's associates to act as a single agent working exclusively in your
best interest.
A Transactional
Broker
A transactional
broker offers limited representation, which means that a buyer or
seller is not responsible for the acts of the licensee.
Additionally, parties are giving up their rights to the undivided
loyalty of the licensee. This aspect of limited representation
allows a licensee to facilitate a real estate transaction by
assisting both the buyer and the seller, but a licensee will not
work to represent one party to the detriment of the other party
when acting as a transaction broker to both parties. There is
still a duty of honesty and fair dealings to both parties.
Why have a Buyer’s
Broker? (Single Agent Working for YOU!)
If you were buying
an expensive car, like a Porsche, wouldn’t you want the help
from a Porsche professional who has the experience knowing the
models and market prices of the Porsche you are interested
in? This is an expensive investment. What if you overlooked a
minor detail and ended up paying thousands of dollars over the
worth of the car?
We understand that
you live in a house yourself and you are happy with the choice
that you made but in Florida houses are built differently than
many other places. Building codes and standards change not only
from county to county but from city to city.
Having a local
Buyer’s Broker working for you will help you see what may be
right or wrong with the house of your choice, making sure that the
house is constructed soundly and to code. Also, as your broker, we
will guide you through the process of obtaining a good mortgage
and actually buying the house ensuring that the terms and
conditions of the sale are good and in your favour.
In plain English:
Why make an investment as large as a house, in an area that you
are vaguely familiar with, without having someone skilled and
qualified to assist you in the negotiation? Especially when it
doesn’t cost you a penny! We at TTV.com have the
experience and the knowledge to provide this Buyer’s Broker
service for you through our associate offices in Florida.
Mortgages
You are welcome to
secure financing on you own, or, if you would like, we would be
happy to advise you regarding companies that are experienced in
investment mortgages. In many cases, when you are purchasing a
brand new home, the owner/developer also has made arrangements for
financing if you would like to utilize their services. We
recommend that you first consult a professional broker or mortgage
banker before making a decision that can affect you financially.
There are two
main types of loan
- Fixed interest
rate. The lender can not change the interest rate up or down
for the term of the loan (up to 30 years).
- Adjustable
interest rates. The interest rate can vary every few months or
years depending on the terms set by the lender.
A fixed rate
mortgage may be your best choice, providing it is set at an
advantageous rate and you intend on owning the home for a considerable time
period. The advantage of a fixed rate is that even though other
costs may rise, your mortgage payment always stays the same and
provides some stabilization of your cost base.
An adjustable rate
mortgage may work out cheaper for the first few years; however, if
interest rates rise quickly and unexpectedly, you may be at a
disadvantage. Alternatively there have been times when the
interest rates have actually gone down for a time period, much to
the delight of the borrower!
Independent
business owners will need to provide documentation to the lender
as verification of your income. You will be asked to provide three
years worth of audited accounts. If you are employed they will
want to verify that your employment is stable. The mortgage
company will also need to see 3 months bank statements, pay slips,
savings accounts, credit card statements and details of any other
mortgage or installment loans. Most importantly, what is the
source for your down payment? Is it in a savings account? Is it
the proceeds of selling shares or stock? If it is cash in hand, we
suggest you put it in a savings account.
U.S. financial
institutions allow a mortgage term to extend up to 30 years
regardless of your age. A judgment can only be based on your
credit history and your ability to pay.
Additional
Information for Overseas Buyers
An International
Credit Check is processed with your permission to see if you pay
your regular bills on time. They will want to know about your
other expenses to see if you can make the mortgage payments. By
becoming pre-qualified for a loan you can save a lot of your
valuable time upfront. Please ask TTV.com for
details on pre qualification for a mortgage.
Many overseas banks
now offer the option of having a separate account in U.S.
currency. This is important if you need to change your currency
into U.S. dollars. Ensure your bank is flexible so you can buy
dollars when the exchange rate is favourable.
Important Notice
All information,
prices and offers etc, were correct at the time of press. Real
Estate Laws, Rules and Regulations, Builder’s and Seller’s
offers can change without notice. Please feel free to consult your
own legal counsel before entering into any Real Estate
transaction. Information contained herein is intended to be used
only as a guide and does not reflect a guarantee of actual results
that you will experience. The information regarding potential
rental income and expenses is based on average returns being
experienced by homeowners who have their property managed by
Welcome Homes USA Inc.
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