Dreams of swaying palm trees and living near warm beaches lure many into hanging up their snow shovels and moving to Florida.
Why Buy Property in Florida?
The US is the most popular country after Spain for British people buying second homes abroad, and the majority of them buy in Florida. Attractions include the climate, favourable exchange rates and the availability of flights (and bargain fares) from all major UK airports. Few purchasers appear to be put off by travel time – a minimum of eight hours from London, depending on whereabouts in the state you are flying to.
As the US economy slid into recession and the long-standing property boom came to an end, many developers in Florida faced tough market conditions in which to promote their projects. One consequence of this has been that intrepid British buyers have been able to get some great discounts on new properties. Another is that the exchange rate between the US Dollar and Sterling means Brits are getting far more property for their Pounds.
Some watchers are predicting that the fall in Florida property is almost at an end, and prices have nearly ‘bottomed out’, so for people buying now it could be the perfect time for an investment.
Popular locations in Florida
This guide gives a flavour of the areas of Florida most popular with British second home purchasers – the central region around Orlando, the east (Atlantic) coast and the resorts on the southwest (Gulf) coast.
Although there are no restrictions on Britons buying a property in Florida or anywhere else in the US, there are limits to how long they can spend in the country each year (see Passports, visas and residency section). Many areas of Florida also impose restrictions on the number of days per year that homeowners are allowed to let their property. Some ban letting altogether, so if you are counting on your property in Florida to pay for itself through rentals in any way, it is vital that you know what the letting situation is as early as possible.
The central part of the state, particularly around Tampa and Orlando, has long been a favorite with British holidaymakers, especially families, as it is there that most of the big attractions are located, including Disney World, Universal Studios, Busch Gardens and Sea World. Unlike some other parts of Florida, it is warm all year round, and there is less rain than in coastal areas.
Its popularity, and the resulting healthy rental market, which offers owners the best returns in Florida, makes the area a magnet for both second home purchasers and buy-to-let investors. Prices reflect this, but generally still represent good value as the volume of new construction helps keep them competitive. Most purchasers here are looking for detached villas with pools.
Down a beachside highway with the top down, soaking in the scenery and good vibrations? Ever wondered how man reached the moon? Or just want to get back to nature? Stretching 72 miles along Florida’s East Coast, the Space Coast continues to enliven, entertain and inspire more and more visitors each year. While it is best known as the home of America’s space program, Orlando’s closest beaches and some of the best surfing in the country, this is only a taste of what this area has to offer.
The Gulf Coast
Unlike the inland areas around Orlando, the Gulf Coast tends to be wet, particularly in July and August, so the potential for letting properties, certainly to families, is not as good. However, it makes up for these disadvantages with magnificent white beaches, azure seas, plentiful moorings and fine restaurants – attributes that have made it popular with the super-rich. Around 60 per cent of the US’s wealthiest citizens winter at Naples, an exclusive resort on the Gulf Coast, or at Palm Beach, on the Atlantic Coast.
Consequently, the Gulf Coast is a hugely expensive area. Houses on the waterfront, in particular, command prices easily in excess of twice those of similar-sized ones in the Orlando area. Properties further inland or up the coast are slightly less expensive.
The Atlantic Coast
Florida’s Atlantic Coast stretches from St Augustine through Daytona Beach, Fort Lauderdale and Miami, right down through the Florida Keys to Key West. It includes some of North America’s most desirable (and expensive) locations, such as Palm Beach, where prices routinely run to millions of dollars.
However, not everywhere on the Atlantic Coast is this pricey, and if you choose your location carefully, you can find a three-bedroom house with a pool for less than previous prices of around $250,000 (approximately £159,000).
An apartment in a good area of Miami will start from around $300,000 (about £190,500) or less if the developer is keen to sell – not bad considering how much the city offers: beautiful beaches, blue seas, non-stop nightlife, a varied arts and culture scene, fascinating Art Deco architecture and a consistently warm climate. Many current buyers are taking advantage of the stressful situation of developers involved in Miami condo projects to get some of the best discounts available in international real estate.
Buying a property in Florida: Costs & Process
The Floridian system of property purchase is quite different from the UK’s and has several pitfalls for those unfamiliar with it, so appropriate professional guidance is essential.
In Florida, nearly every property for sale is listed on a central database available to all estate agents (known as realtors in the US), so there is no need to visit individual agents. Agents tend to work as seller’s agents or buyer’s agents. It is wise to consult a buyer’s agent experienced in working with British purchasers.
To cover legal, title insurer and notary fees, title insurance premiums, transfer taxes, property taxes and mortgage fees (if applicable), you should allow around five per cent of the purchase price.
The purchase process
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 is binding, though contingency clauses allow either side to withdraw in defined circumstances.
A 10 per cent deposit is then paid into an escrow account. A title insurance company scrutinises the public records and insures the property against any third party claims. Completion, including the transfer of the balance of the purchase price into the escrow account, can then take place.
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.
Florida Property: Mortgages
When working out how to finance your property purchase, consider all the options. Paying cash, if you can afford to, is often recommended, but you may not want to tie up a relatively large sum in this way. If this is an option for you, be sure to consult one of the specialist currency exchange companies in the market, as you can get far better exchange rates and potentially save thousands in the process.
The other options are re-mortgaging your UK home or arranging a mortgage on your Florida property through a UK or US lender. Remortgaging offers the easiest solution. Releasing equity in a UK home means that the second home can be purchased for cash, without the need for another mortgage. However, this may only be feasible for those who own their first home outright.
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.
Getting a mortgage in Florida
If you decide to obtain finance in the US, bear in mind that most mortgages available to foreign nationals require a minimum 20 per cent down payment. Some even stipulate 30 or 35 per cent.
At the beginning of the process, make sure you obtain what is known as a Good Faith Estimate. This is a standardised document used to detail all the costs of obtaining your mortgage, including both monthly and one-off payments.
If possible, try to secure a self-certified mortgage. Unlike in the UK, this kind of mortgage does not necessarily carry a higher interest rate than a fully documented mortgage, and it could save you a lot of time and trouble spent assembling documents.
The US taxation system is a complex one, and may involve payments to at least four different levels of government: local, regional, state and federal. A Double Taxation Treaty between the US and the UK prevents double payment of taxes.
Income tax, a progressive tax ranging from zero to 35 per cent of taxable income, forms the bulk of taxes collected by the US government.
Florida ranks lower than many other US states in terms of the tax burden it imposes. It is one of only nine states that do not levy a personal income tax. More than half of its non-federal revenue is collected at local level, mostly through property taxes, which, for homeowners, amount to approximately 1.5 per cent of their property’s value per annum.
All rental income in Florida is subject to tax, which is charged on a sliding scale (currently 15 to 34 per cent), depending on the amount. ‘Intangible personal property’ (that is, stocks, bonds, mutual funds and so on) is also taxed.
Florida’s sales and use taxes provide over half of state revenue. Sales tax applies to most retail items (excluding groceries, medicines and certain other items), as well as to car and hotel room rentals and theatre tickets. The rate is currently 6 per cent. Local governments may levy an additional local sales tax of up to 1.5 per cent.
The use tax is levied on wholesale items brought into Florida for sale.
Passports, visas and residency
Passports and visas
British citizens may visit the US for business or pleasure without a visa for up to 90 days per year. A passport is required. The traditional Visa Waiver programme in operation for most European nationals allowing them to stay in the US for up to 90 days is set to change in January 2009. From this point, all travelers wishing to use the Visa Waiver will be required to register themselves online before departure for the US.
This should preferably be done at least 72 hours in advance, and is intended to afford an extra layer of security for the US authorities. The online registration will be valid for up to two years; will be named the Electronic System for Travel Authorization; and will be similar to Australia’s Electronic Travel Authority in operation. The ESTA is also valid for multiple entries into the US, so for property owners it is possible to fill out the online registration once and then travel for two years under the normal Visa Waiver Program.
Those wishing to stay between 90 days and six months must hold a B2 visa. To be successful, applicants must prove they have sufficient funds to support themselves during their stay.
Florida’s immigration laws are strictly enforced. Those seeking a Florida Green Card, which entitles them to live and work in the state, face close scrutiny by the Immigration and Naturalization Service, particularly if they wish to start a business.
Those not planning to work, including retirees, must be able to demonstrate substantial means. This can be an obstacle to many people’s dream of retiring to Florida.
Hospitals in the US provide some of the most advanced healthcare in the world. Most are private.
The US spends around 13 per cent of its gross domestic product on healthcare, much of it through insurance schemes provided by employers and the two federal schemes, Medicare and Medicaid. There is no national health service as such. Approximately 14 per cent of the population is estimated to be without any form of health insurance.
For visitors, private medical insurance or travel insurance is essential. If you are seriously injured, the emergency services will treat you and charge you later. If the injury is not serious and you need to consult a doctor, a basic consultation will cost approximately $100 (around £50). There are a variety of policies available for overseas travelers and those intending to live overseas, and they do not have to cost huge sums.
Florida Property: Investment potential
The recent economic slowdown in the US has caused many people to be nervous about investing in property in America, but for long-term investors there are still great opportunities and potential to be found. Developers are having trouble selling projects right across the country, so they are keen to offer deals on projects that are nearing completion so that they can release more funds and begin to move on to new projects.
In some cases there have been stories of developers offering discounts of up to 40 per cent and anecdotal y, it is said that new apartments in Miami can be found for as little as $200,000 (£127,500). This means that there are developments available where you can buy with as little as £10,000 down and developers are offering extensive guaranteed rentals and generous terms. The trick here is to remain detached enough not to get overawed by the prices on offer, and plan carefully for your needs and wants. Spending less on a property is ideal if you are able to, and it is worth shopping around for the best deal on the type of property you are looking for, but there is little value in buying somewhere just because it is cheap.
The issue for US buyers, and for anyone from the UK seeking finance in the UK, has been the sub-prime lending fiasco. This is making it very hard for buyers to get finance in the US as lenders are nervous about granting approvals, so cash buyers or those with finance already arranged are being welcomed with open arms.
Should you prefer to try to raise finance locally in the US, there is the advantage of the current low interest rates that the US Federal Reserve has introduced to stimulate the markets.
Despite the fact that the US in enduring an economic slowdown, buyers who want to get their own property in Florida should not be discouraged. The reasons for buying in the Sunshine State remain the same, whether it is for the weather, the theme parks or the rental potential. The US economy is having a tough time, but this will not stop people going there for holidays – in fact, the favourable exchange rates at the moment may encourage more visitors to the region.
Buying property abroad 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.
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