WHY DO I NEED A REAL ESTATE AGENT?
In Florida the law is very strict when it comes to selling real estate, and the law only allows the representative in the sales office or the agent who is listing a property for sale on behalf of the owner to represent seller, not the buyer too. So in order that the Buyer has equal representation it is advisable that the buyer employs the services of a Licensed Real Estate Agent to act in their best interests.
Their real estate agent will act as a buyer’s agent only and it is their duty to ensure that the buyer is fully represented and aware of anything that can materially affect the value of their purchase. The agent will help them find the perfect property, negotiate on their behalf, help them find financing, property management and act as their representative in their absence for instance at walk-through.
The buyer’s agent is paid on a commission basis according to the sales price of the house, however as the seller is responsible for all real estate commission due in a real estate transaction the buyer’s agent’s services to the buyer are free of charge.
If you are a property owner and wish to sell your property and have a real estate agent list it for you, they will only represent you unless you agree to allow them to change status from a single agent to a transaction agent. For instance if a buyer comes directly to your agent and has no representation, the agent is allowed to change status from a singe agent to a transaction agent, meaning that they will handle the transaction of the sale and be fair to both parties.
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WHAT ARE THE MOST IMPORTANT CRITERIA TO TAKE INTO CONSIDERATION WHEN BUYING A VACATION/HOLIDAY HOME IN CENTRAL FLORIDA?
Location, it is very important that the home be within a maximum of 30 minutes of the Area Attractions.
Zoning, the subdivision/estate has to be zoned for short term rental
Size, although there are homes that can go up to 7 bedrooms the most popular are 3 to 4 bedrooms, it is very popular too to have 2 master bedrooms
A swimming pool with a heater
The direction the house is facing (see lot/plot selection)
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FOR LOCATION OF PROPERTIES, WHO TAKES THE AERIAL?
Cliff does he is a licensed private pilot with both fixed and rotor wing ratings in other words he can fly regular airplanes and helicopters. He usually uses a helicopter to take photos and has a safety pilot on board to help him when he is circling the area so Cliff can take the photos, once done with the taking pictures, Cliff will take control of the aircraft and move to the next location. So if would like photos taken or need to go look at homes in other areas quickly just call Cliff and make arrangements and he will be happy to do so.
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ON A NEW HOME PURCHASE, WHAT ARE UPGRADES, AND DO I NEED THEM?
The majority of the homes come with carpet and vinyl, all the appliances, including microwave, range, dishwasher, washer & dryer and waste disposal. The price will also include a pool, and pool screen. The basic model will be sufficiently equipped once the furniture is installed to rent out. It will be your personal choice if you want to upgrade anything. Some people choose to upgrade to ceramic tile for instance, or extend the pool deck and the size of the pool, but this is not necessary. The home will not make you any more income just because the kitchen units are upgraded, or the upgraded carpet has been installed.
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HOW DO I CHOOSE A HOME?
During your visit, as a Real Estate Agent, I can show you around all the new home developments that allow short term rental. As a member of the National Association of Realtors I also have the capability of finding and showing all the homes in the area that are listed for sale, re-sales as we call them.
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WHAT DO WE HAVE TO KEEP IN MIND WHEN CHOOSING A LOT, OR A RE-SALE?
Direction, it is very important that the home faces the best way to keep the sun on the pool area. Most people come to Florida for the sun as well as the attractions. Having the sun on the pool area most of the day is very important. Here in Florida the sun is very high in the sky as we’re much closer to the Equator. This means that if the home backs north or south the sun will be on the pool area all day. Backing south homes have the most sun, backing north homes have almost just as much during the summer months however in the winter as the sun is slightly lower in the southern sky, and this causes a shadow on the deck close to the house although the pool will be in the sun. Backing east homes get the sun in the morning until lunch time and backing west get the sun around lunch time until it sets in the evening.
Privacy, some buyers prefer to have no neighbors backing onto the house looking over the pool area. The builders know this and charge a premium of these privacy lots. Lots that back onto conservation areas, lakes and woodlands will cost you more money, but won’t necessary make you any more rental income. Backing south lots too will have a small premium even if they are overlooked by another home. The price of the home usually includes a standard lot. One thing to think about in favor of a standard lot because you’re overlooked by other homes will be added security. You can always plant a hedge, which will be much cheaper. You have to remember that this is an investment home and separate yourself from personal choices you would make if you were going to live there.
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HOW MUCH DO I HAVE TO PUT AS A DOWNPAYMENT?
The minimum required to purchase a home as a Foreign Investor is 20%. This will require some paperwork. Copies of your passport, pay stubs and P60’s will be required as proof of income. Employer references if you’re employed or two years accounts and tax returns if you’re self employed. A bank letter of reference and copies of bank statement, and other savings to prove you have sufficient funds to pay the down payment may be necessary.
If you can afford to put down more than 25%, minimum paperwork is required. Usually just letters of continued employment or a letter from your accountant if you’re self employed will be sufficient.
If you’re seriously considering purchasing while you’re visiting it would save a lot of time if you could bring these items with you.
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WHEN DO I HAVE TO PAY THIS DOWNPAYMENT?
A builder/seller will require you to put a $1000 to $5000 deposit when you sign the contract, this will hold the lot/house for you until you are qualified for a mortgage. You have 30-45 days to acquire mortgage qualification.
Your initial deposit can be refunded to you if you change your mind as long as you haven’t qualified for the mortgage. You can still cancel after you quality for the mortgage; however you will loose your deposit money.
If you are purchasing a new home, once you have qualified for the mortgage you will need to send half of the 20% deposit (less the $1000 or $5000 already paid), on receipt of this money the builder will start building. The balance will be due at closing when the house is complete along with closing costs.
If you are purchasing a re-sale, as soon as you are qualified for the mortgage you will be able to close one the property and take ownership.
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WHAT ARE CLOSING COSTS?
In the UK you would employ the services of a Solicitor, he would act on your behalf and do title searches, recordings etc. The seller would have his Solicitor doing the same on his behalf.
Here in the US a Title Company takes the place of Solicitors, they do all the title searches, recording; calculate taxes arrange for deeds etc. They calculate all the figures and handle all the moneys in the transaction. The costs they calculate are called the closing costs. The buyer is responsible for most of these costs. It is their job to ensure all the necessary paperwork is done to convey to property into your name. They also work with the Tax Offices such as the Property Taxes, Recording Office, and Appraisers etc.
The closing costs will also include pre-payments, this is money that is required up front and held in escrow. For instance, the lender might want to see 4 months insurance, and 4 months property tax. The homeowners association might require that there is 6 months homeowners association dues paid in advance. These are just examples of what might be required.
Once you have selected your home, we can get the mortgage company to calculate a Good Faith Estimate which will detail all these costs very close to the expected amounts.
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HOW LONG DOES IT TAKE TO BUILD A HOME?
At this point in time, it can take anywhere from 6 months to 2 years depending on where you choose to build. Once you have signed a contract, been approved for a mortgage, and paid the deposits, the builder has to apply for permits; this can take up to 3 months. Once he has received the permits the builder can start on the home.
As part of my service I will take periodic photographs of the house as its being built, and I will send them to you via email.
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HOW DO I FINANCE THE PROPERTY?
Financing can be arranged during your trip, or beforehand, an appointment can be made with the builder’s preferred lender or we can introduce you to other lenders to find the best mortgage to suit your needs.
There are lots of programs to choose from. From fixed interest conventional mortgages for 3, 5, or 30 years, adjustable rate mortgages (ARM’s) to interest only mortgages. They usually come with no pre-payment penalties so you can pay off more if you wish and sell at any time without penalty.
Remember that if you can pay just one extra payment per year on a conventional mortgage you will reduce the term of your mortgage by almost 12 years!
Note: Just so you understand, mortgage lenders here sell the mortgages to other lenders. That’s how they make more money. It will not be unusual for you to be informed that you have a new lender. This will not affect your payment or your rate just that you have to pay a different lender. Please ensure that if you do buy that the lender has your UK address to send all your correspondence. It has been know that letters have been addressed to the vacation home and the homeowner has continued paying the original lender and this can cause payments to go missing and the new loan holder place the home into foreclosure.
To work out how approximately how much your mortgage will be, for every $1000 you borrow it will cost you approximately $6 per month to repay.
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I’M THINKING OF FINANCING MY UK PROPERTY TO PAY FOR MY VACATION/HOLIDAY HOME IN CASH, IS THIS WISE?
Of course this is your decision, and I know a lot of people think about doing this as sometimes the interest rate is lower in the UK than it is here.
However, you must understand that here in Florida all the interest paid on a US mortgage is tax deductible, unlike in the UK. So if you take out finance against your UK home there is no way of claiming it as tax relief. You can however finance the property in the US with a UK lender and still claim all the interest in tax relief as the home being financed is here in the US.
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HOW LONG DOES IT TAKE TO CLOSE ON A PROPERTY?
The average time is usually 30 business days however Cliff has been able to close in two weeks or less on most occasions. This will depend on many factors like who is the lender, will the seller cooperate to move out that quickly or is the property vacant. Commercial deals and Vacant land are usually much more complex and can take more time to complete.
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DO I HAVE TO BE IN THE U.S. TO CLOSE ON THE HOUSE?
It isn’t necessary for you to be here, they will mail you the closing package and you will have to take it to a solicitor who can witness your signatures as a Power of Attorney. It is very important that this is done in a timely manner as all the figures have been calculated to a certain day.
They will send the closing package to you via courier and include a courier package for you to return it once it’s signed.
I will perform the walk-through and make sure the Property Management Company get the keys and can set up the utilities in your name so that it’s ready to rent.
They will need a power of attorney signed by you giving them permission to manage you home in your absence.
They will also need deposits for the utility companies; this is something they will discuss with you. A meeting can be set up during your visit.
I prefer the buyer to be the first person to stay in their home, and as we can predict near enough to the week when it will close, the buyer can arrange flights for after the closing. This means the buyer can close on the home in the UK and it will give me time to arrange for the Property Management to get the home ready for them.
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WHAT OTHER COSTS ARE INVOLVED?
Along with the mortgage payment, there will be Property Taxes, Insurance, Homeowners Association and Property Management.
Property Taxes are the equivalent of Council Taxes in the UK, and they are collected each month along with your mortgage payment in 12 monthly installments and held in an escrow account, so when the bill is due the money is there.
Insurance is also collected in 12 monthly installments along with your mortgage and held in an escrow account. It goes to pay Hazard Insurance; this insurance covers you for any hazard, including bad weather, fire etc., contents, theft, and liability.
Property Management; is required as you will be an absentee homeowner. You will need to employ the services of a Property Management Company to look after the home, keep it clean and maintained, pay all the utility bills such as electricity, water, cable, telephone, and to take care of the lawn, pool and pest control. They will also procure reservations for your home and manage the guests. I always encourage my owners to find rentals for they home as well as the management company, as the management company will charge you a commission.
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HOW MUCH WILL THESE COST?
Property Taxes average around $200 per month.
Hazard Insurance averages around $50 per month, (This also includes contents, and liability.)
Property Management averages around $700 per month. (This covers administration, weekly lawn and pool care, pest control, electricity, water, cable, and telephone).
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WHAT IS AN ESCROW ACCOUNT?
An escrow account is a holding account set up by the lender within their company, every mortgage payment will include a 12th payment of the property taxes and insurance. When the property tax or insurance becomes due for payment the bill will be sent to the lender and they will issue a check to pay them from this account. Escrow accounts set up by lenders are regulated and strictly monitored by the State of Florida.
The Property Management Company will have something similar, and they sometimes call it an escrow account, again it is very similar, they will set up an account within their company in your name, and you will be required to keep a minimum balance with them to ensure that they always have sufficient funds to pay the utility bills and their services.
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HOW MUCH DOES THE MANAGEMENT COMPANY EXPECT ME TO KEEP IN THE ESCROW ACCOUNT AS A CONTINUED BALANCE?
This can very from Management Company to Management Company, there isn’t any specific amount. It can range from $700 to $1,500.
You have to realize that it is your responsibility to keep a balance in the account. If there are no funds in the account to pay the bills, the Management Company cannot be expected to pay them! They are not a bank and can’t allow you an overdraft! You can’t expect them to cover your account just because you have some reservations coming in soon!
Equally if you are renting out the property yourself and collecting the revenue, the Management Company will not be receiving any income, so you must ensure that they have sufficient funds to cover the outgoings. There is nothing more embarrassing than having a guest call you early in the morning complaining and demanding compensation because there is no electricity or water on in the home!
And remember, failing to pay, the mortgage, property taxes, insurance and Homeowners Association dues, can cost you your house. Failure to pay any of these can result in foreclosure on your home!
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WHAT SERVICES DO MANAGEMENT COMPANIES PROVIDE?
The management company’s services include, maintaining your home, ensuring that there is always someone just a phone call away 24 hours, 365 days of the year to answer any problems that might occur in your absence.
They pay all the utility bills for the home on your behalf from the escrow account set up in your name with their company, bills such as the electricity, water, cable, telephone, and they arrange monthly pest control, and weekly lawn and pool care. Initially the utility companies may need a deposit; this is usually refunded to the homeowner within the first 6 months
In order to get the utilities connected, the Management Company will need you to sign a Power of Attorney as mentioned above, giving them permission to act on your behalf, and photocopies of your passport.
I want to emphasize the word “Limited”. You don’t want to give them a Full Power of Attorney as this will give them too much control over your home.
They also provide key pickup when guests arrive and cleaning services after guests check-out.
They will handle any minor repairs, or arrange contractors for major repairs and even follow up on builder’s warranties on repairs that should be covered under their guarantee if the home is new.
They will also procure reservations for your property. They will collect income and taxes due on the reservation which are Sales Tax and Tourist Tax and it is their duty to pay any taxes they have received on your behalf to the State or County in a timely manner.
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WHAT IS SALES TAX AND TOURIST TAX?
As you are renting out your property to tourists, you are providing a product not unlike the Hotels and Motels in the area, and therefore your product is subject to Sales Tax which is levied by the State and Tourist Tax levied by the County.
The Sales Tax is usually 6%, unless your home is located in Osceola County where it is 7%. Tourist tax varies from County to County and is approximately 4 or 5%. So for instance if your home is located in Polk County you would have to add 10% tax to every reservation to cover both the Sales Tax and Tourist Tax.
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ARE THERE ANY OTHER REGULATIONS WE HAVE TO KNOW ABOUT?
Your home will also require a Hotel/Motel License; this is something your Management Company will arrange for you. Each house has to have a license whether it has an individual license or is covered by a blanket license owned by the Management Company.
You will see that most of the homes you look at in areas that allow short term rental have emergency lighting for instance as this is one of the requirements of obtaining a license.
Your Property Management Company will ensure that your home is compliant to all the requirements necessary to acquire a license.
You will also need a Tax ID Number; this is required as you have to file a tax return each year.
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DOES THE MANAGEMENT COMPANY HELP ME WITH MY TAX RETURN?
No. You will need the services of an accountant, I will make sure that a tax accountant contacts you as soon as you have chosen a home and signed a contract. It is important that he is brought into the transaction as soon as possible to ensure that you are compliant with US Income Tax regulations. This is not difficult, and the accountant will handle everything from applying for a Tax ID Number to filing your tax return. His services cost around $350 per year.
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WHAT HAPPENS IF A GUEST CAUSES DAMAGE TO MY HOME?
This will be the Property Management Company’s responsibility to monitor, and they will collect a security deposit from the guest when they arrive, it’s usually around $250 per reservation. This security deposit will be used to cover the cost of any damage caused during their stay, or refunded if they haven’t caused any damage.
However you have to expect some wear and tear, replacing the odd glass, sheet, towel has to be expected.
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HOW WILL I KNOW HOW MUCH IS IN MY ACCOUNT WITH THE MANAGEMENT COMPANY?
Each month the management company will send you a detailed statement showing all the payments made and income received for your home. Any balance over and above the minimum required can be deposited into your private bank account. Some management companies might not transfer it automatically; depending on their company policy they may require that you give them written permission.
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HOW MUCH RENTAL REVENUE CAN I EXPECT TO GET?
Depending on the Management Company, the rate per night for a 4 bedroom home should be in the range of $89 to $150. The lower rate is usually given to a Tour Operator as they bring volume and the Management Company will give this rate as an incentive to ensure more business. I would suggest an average rate would be $700 per week for a 4 bedroom home.
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