If you are going to invest in Florida real estate, there are a number of important things to consider beforehand.
As statistics show, in recent years, the sunny state has become the most popular among US citizens and foreign investors. This trend can easily be explained by the wonderful climate that more people can enjoy with the advent of remote work. As a result of strong demand, the average cost of housing in the state grew at an incredible pace in 2021-2022. For 24 months, from November 2020 to November 2022, this figure increased by more than 30%. Rental prices for the first nine months of 2022 have increased by 20%. Price growth slowed down in the fourth quarter of the year. However, experts believe that the demand for investment real estate in the region in the next five years will continue to grow faster than the national average.
Let’s consider the main points that you need to pay attention to when buying a property in Florida.
- Finding a Realtor
- Additional utilities
- Property condition
- Rent permit
- Non-resident status when buying a property
Purchasing real estate with the help of a realtor in the United States is different from a similar process in other countries. Each state in the United States has its own laws. Therefore, realtors in the United States work with real estate only in their own state. This allows them to better understand the legislation and study the taxation system in detail.
If you’re going to purchase a residential or commercial property in Florida, you need to contact an expert who has experience in this particular state.
When purchasing a property, especially for the purpose of generating income, you need to understand what taxes you will have to pay when you become a property owner.
Taxes in the US are high compared to other countries popular with real estate investors. However, specifically in the state of Florida, favorable conditions have been created for taxpayers. This is one of the reasons that attracts investors to the state. For example, the real estate tax in the resort region is one of the lowest in the country: the rate is 0.8% of the property value. For example, in Texas this figure is 1.84%. If you take a $1,000,000 apartment, then Florida residents save $10,000 in taxes annually compared to owners of houses and apartments in Texas.
It is also important to check the council tax beforehand. These taxes are county-specific and are used to improve local infrastructure, such as developing schools or playgrounds. Depending on the decisions of the administration of a particular township, municipal taxes may be higher or lower.
You can ask the previous owner about paying such taxes, ask a realtor or lawyer to do the calculations, or check the data yourself on the website of the local municipality.
When buying an apartment or a house that are part of a residential community, the buyer must be prepared for the fact that a column for the maintenance of public areas will be added to the standard utility costs. Such a payment is not meant for every property owner, but only for those who own a property in a facility offering a number of additional services.
For example, if the residential community has a swimming pool, gym or garden, you will have to pay fees for their maintenance. The cost depends on the level of comfort offered by the community. In Florida, community property maintenance costs start at $200 per month and can go well beyond that.
After the buyer has chosen a residential facility, it should be clarified what utility payments will need to be paid when the person becomes its owner.
Florida is popular not only among luxury villas’ buyers, but also among people who want to invest in good waterfront housing. Apartments with a view in high-rise towers can be found along the entire coast of Florida. Such properties are always in demand in the long-term and short-term rental market. Apartments in northern areas, where nighttime temperatures can drop to freezing in winter, are cheaper than in Miami or neighboring Fort Lauderdale in the south of the state. The median price for a condominium apartment in Greater Miami as of November 2022 was $390,000. In the past five years, real estate prices in this region have grown by an average of 20% per year. Even more in demand are apartments and houses on the island of Miami Beach, connected to mainland Miami by several bridges.
Away from the coast, there are less popular areas, where real estate prices look much more attractive at first glance. However, these places may not be safe. Besides, the lack of nearby beaches sharply reduces demand from tenants. When choosing real estate in Florida, it is always important to find out why a particular property is being offered at a price below the market. Realtors are advised to purchase only such properties, the shortcomings of which can be corrected with the help of repairs.
In Florida, it is especially important to pay attention to the reliability of a property design. It is necessary to find out from what materials and according to what project the facility was constructed, whether there are other buildings in the district built from similar materials, and how much their condition has deteriorated over time. Many buildings, especially single-family homes, are constructed from lightweight blocks and thin partition walls. This is due to the fact that in a sunny state you do not have to worry about keeping warm. Such houses may not be insured against natural disasters. It is better to consult an insurance company before purchasing a property than to discover this issue after the transaction is completed.
Miami-Dade County property owners are prohibited from short-term rentals without a proper license. To date, such a license costs $136.17, and the bulk of this amount falls on the payment for the services of a real estate inspector. Registration of the permit takes 10 days. Besides, some rules regarding the real estate rental may also apply to the residential community in whole, where the apartment or house is located. If you’re choosing a residential property and going to rent it out after purchasing, it is necessary to clarify what laws are in force in this regard in a particular district and whether such activity is allowed by the rules of the residential community.
Residents and non-residents of the United States have the same rights when buying real estate in the country. At the official level, there are no orders regarding the prohibition of transactions for any foreign citizens. To draw up a contract of sale, you do not even need to obtain a visa and come to the United States: today a real estate transaction in the United States can be completed remotely. For non-residents, buying property in Florida has only two differences compared to the same process for US residents:
- It is very difficult for non-residents to get a mortgage in the US today. Therefore, when purchasing residential or commercial real estate in the country, investors need to rely on their own funds.
- In case of real estate sale by a non-resident of the country, the buyer is obliged to withhold 15% of the total property cost in favor of the tax authority to pay the FIRPTA tax. After the seller completes the tax documents and pays the corresponding tax, a part of this amount will be transferred to his account. Since US tax calculations are sometimes overwhelming for Americans themselves, it is best for a foreigner to consult a tax advisor before selling or buying real estate.
When buying real estate in Florida, you need to understand the peculiarities of the local market, and focus not so much on US federal laws as on state rules. You should also study the list of prosperous and dangerous areas in the city where you’re going to purchase a property, as well as consult with tax and insurance advisers. If the buyer decides to purchase a property with the help of a realtor, the task of collecting all this information can be entrusted to this person.