Q & A Florida
Q & A Florida
Q&A on real estate and purchasing a residential property in Florida
I. What are a short sale and a foreclosure?
In a short sale and a foreclosure, the selling price is below the amount of the mortgage. The property has thus a lesser value than the amount owed to the bank. Note that the selling price won’t probably cover unpaid property taxes, closing costs or any other fees related to the sale of the property. The main difference between a short sale and a foreclosure is that a short sale is sold by the owner with the bank’s approval while a foreclosure is sold directly by the bank. In a foreclosure, a judge transfers the property deed to the bank so that the property becomes bank owned or REO (Real Estate Owned).
To know more about short sales, click here.
To know more about foreclosures, click here.
To know more about the U.S. Department of Housing and Urban Development (HUD), click here.
II. Are there any transfer fees when transferring foreign currencies to US Dollar (or €/$, £/¥, €/?....) using the services of our Forex specialists?
No. There are absolutely no setup fees, desk fees, intermediary fees, or transfer fees if you work with us. We are one of the very few to offer this incredible service. Introducing you to our partner is one of the many privileges you will obtain when working with us.
This way, you save on transfer fees that your bank would have made you pay if you had used its services, thus a saving of 4% to 8% in general for either currency exchange or transfer (from euro to dollar or any other currency in roughly 90% of the world). This, on condition that you transfer currencies from one bank account to another in 2 distinct countries, whether being between your personal accounts (France and the US) or a third party account. These benefits are acquired for life if you desire so for all your future transactions.
In addition, you are able to benefit from the purchase of a preferred exchange currency rate at term up to 2 years, with a minimum security deposit of 10% of the funds. This enables you to secure the rate of the currency that you are interested in at a given time to finalize your transaction later on. This is extremely interesting in case you do not have the total amount available immediately to purchase your property (you might be waiting for an inheritance, the sale of another property at home or abroad, the liquidation of a life insurance policy, etc).
This service is not a loan. Please note that you must be certain to collect the remaining funds within 24 months and to follow through with the purchase of the currency you blocked at term. In deed, if the rate were to fluctuate down and if you were to decide not to follow through, you would have to reimburse the difference. If the rate were to go up, you would not benefit from the appreciation. You will solely receive the rate you blocked 2 years ago.
To find out more on this subject, please click here.
More details will be provided by the Forex partners upon a personal and gratuitous session.
III. Everybody says that it is extremely interesting to invest in Florida at the moment. Why so?
Here are the main reasons why it is interesting for you to invest in Florida real estate today
- The Euro/US$ parity is very favorable to Europeans
- The Asian economic growth and the availability of discretionary funds comforts Asian buyers to diversify and shield in tangible hard assets
- Fighting volatility in your home country, offsetting political and economical incertitude, mitigating fears and perceived risk in volatile stock markets, bonds and commodities
- The amount of quality real estate properties available
- Real Estate mean prices in Florida are relatively low thanks to numerous short sales and foreclosures currently available on the market. However, because of the hype for this type of properties, prices are increasing and as a consequence, your choice might get more limited with time but you may benefit from important capital gain
- Bank interest rates are lower for now in most of your home countries compared to the USA, but we are already seeing an increase since November 2010
- Florida real estate market is one of the most attractive of North America with more than 260 days of sun, a warm subtropical climate and median temperatures averaging 80°F / 27°C
- Florida is the second world destination but mostly an international hub thanks to state of the art infrastructures (international airports, modern highways…), vibrant cities, leading industries and renowned universities
- Miami is the number one city for foreign investors and Asian clients are rapidly taking advantage of the many investment opportunities there
To know more about why investing in Florida, please click here.
To know more about how to invest in Florida, please click here.
To browse properties available in Florida and to subscribe to our free email alerts, please click here.
IV. What are the most common costs associated with the purchase of a property in Florida and how much are they in general?
Most common costs associated with the purchase of a property in Florida are as follow. Please note that the amounts given are estimates that may fluctuate and their sole purpose are to give you an idea and help you set up a provisional budget. Among others, these costs depend on your own project, the selected property and its location, HOA rules, laws of the State of Florida, of the County and the City as well as on professionals and/or other providers you are likely to select.
1. Costs of setting up a company (in case your company holds the property) as well as any legal and accounting fees:
a) Costs of setting up your company: you only pay them once when you set up your company.
b) Legal fees to your lawyer: roughly $800 to $1,500 depending on your specific needs including Florida State Department fees.
c) Closing fees: Unlike Napoleonic code countries such as France, there are no “notaries” in the US who work as “estate lawyers” handling the closing of any real estate transactions. Thus, you will need to turn to your lawyer whose costs and services vary greatly from a city and a county to the next in conjunction to Title Companies that issue proof of ownership.
d) Depending on your needs you may elect to retain a real estate attorney for REO foreclosed and short sale properties.
You can expect to pay between $900 and $1,000 if you are buying a residential property with no loan (based on recent numbers from the Housing and Urban Development - HUD - at closing). Please also read the following document. If you need a loan, you may pay an additional 3% to 4% of the selling price to the lawyer of the lending institution (that he or she may be entitled to bill) and who also represents the lender. Note that the lender’s lawyer works to your expenses for his or her client (the bank or the lesser) who in turns can make you a loan. There are also administrative costs during the transaction required by both the seller's and the buyer’s brokers. These costs are roughly of $150 to $600. We advise you to seek an independent lawyer who will represent you exclusively. The lawyer of the seller or of the lending institution has no obligation to assist you!
e) Certified Public Accountant (CPA) fees: these annual costs range from $300 to $700 prices vary from one practitioner to another and may sometimes amount to more than $1,500 according to the amount of work and the specific needs required to do your tax returns as a non-resident with or without revenue.
2. Homeowner Association (HOA) costs (or shared costs among all co-owners):
You can expect to pay a fee between $150 and $250 for your HOA application. You must be “approved” by the HOA in the event it requires an interview to verify your solvency as a prospective buyer and co-owner, even if the buyer is a company. This ensures a quality screening of future owners and that everyone will abide by the codes and regulations internal to the building or subdivision. A fee may apply to get a copy of the HOA manual.
3. Title Company fees:
It is advised to use a Title Company to research past liens from previous owners, clearing property title deed and insure your new title. This will further shield you against any third party claiming ownership of your property. Research costs are in general between $400 and $500. This amount includes all research, administrative and escrow costs. You may also add $450 of lawyer’s fees to analyze title deed as well and 2/3 of these fees are at the buyer's expense depending on the type of purchase. In addition, you have to pay a fee of about $250 for the “American Land Title Association®” (ALTA).
4. Clerk of the court's fees:
The clerk of the court notifies the tax revenue service that a property has been sold, giving all relevant documents and information such as the selling price and the existence or not of a loan. Clerk of the court's fees are from $100 to $400. To this, you should add $350 to $800 for recording the following documents: fixed rights on the loan and the mortgage, rights on the bill, the title deed, the tax on intangible “immobilization” and other certificates and doc stamps. There are also additional expenses related to the search of debts or lien encumbrances on the title (the search will be conducted on the chain of ownership). For instance liens put by local or federal government due to delinquent taxes or liens from contractors or the HOA. These expenses are roughly from $200 to $300 to have a lawyer or title company research the title but should already be included in the costs described above. You must also account for approximately $150 each year for the annual incorporation fee paid to the Florida State Department Division of Corporation.
All these expenses are not negotiable. They are mandatory for both residential and commercial purchases. However, some fees may vary from one law firm to another.
5. Sales Tax or Expenses:
In Florida, there are no real estate sales taxes for a purchase in full without a loan. However, since we act as a single agent broker for you, we ask for a buyer’s compensation. Our negotiable buyer’s commission is starting at 3.5% of the gross sale upon signature or closing under an exclusive right to represent. This commission may come on top of the seller’s negotiable commission from a co-brokerage that will be offered by the seller’s broker.
6. Closing fees:
They are the administrative fees associated with the closing. Please see above.
You can also read the HUD 1 Settlement.
7. Periodic Homeowners' Association (HOA) fees or co-ownership fees:
They may vary based on whether you purchase a condominium or a single house in a deeded subdivision, whether the property is new or a resale. They also vary according to the number of homeowners, the type of amenities available and the quality of services provided by the co-op, co-ownership or homeowner association. There might also be properties that are not within any co-ownerships/HOA and thus, free of any charges. We highly recommend you to spare the necessary expenses so to attract quality tenants as well as to sustain a strong resale value in the mid to long-term range.
8. Utilities and other monthly expenses (water, electricity, gas, telephone, Internet...):
Utilities charges are based on your own consumption and the city and county you reside in. Different providers may exist but we provide you with reasonable numbers you can expect to budget for your plan.
> Water: roughly $36 per month
> Electricity: roughly $100 per month
> Gas (city gas, NGV or propane): price may vary based on your area, city, individual contract and consumption
> TV, telephone and Internet : price may vary based on whether you have cable, satellite, triple or quadruple play with or without landline, with or without cell phone data plan and based on speed (excluding out of state communication). It is realistic to expect a minimum of $100 and up to $250
> Cell phone and data plan: you can roughly expect to pay $200 for unlimited data and communication with MMS and SMS text. The minimum you can realistically expect is $35 per month based on your own personal consumption and customer loyalty
It is good to note that some Co-Ownership/HOA/Co-Op provide through their monthly fee a base package for electricity, cable TV and other services such as a group insurance.
9. Home inspector:
We highly recommend you to use a home inspector who will take care of many technical diagnostics that will ensure you of the quality and current state of your home. The inspector will check that your property respects legal norms for electrical and plumbing matters as well as environmental concerns. You can realistically expect to pay between $220 and $500. This price varies off course on the size of your property and a good rule of thumb would be to know that when your property is less than 1000 sq feet (90 m2), the cost is incremental per 1000 sq feet slot.
Upon request, we will gladly provide a list of friendly and professional home inspectors.
10. Repair costs and refurbishment expenses before moving-in:
They considerably vary based on your personal needs and your lifestyle. Indeed, you may need to change the windows, floors, ceilings, a/c system, repaint the house inside or outside, clean the roof, pressure wash some areas, buy new furniture, fixtures and appliances. Depending on the property's condition, the selling price may take into account these repair costs and eventual refurbishment expenses.
If needed, we will gladly provide you with a list of contractors or service providers, retail outlets and preferred partners for all of your interior and exterior decoration needs.
11. Annual property tax:
They vary from one county to the next. We will take 2 examples to illustrate this subject:
For the city of Sarasota on the west coast of Florida (Tampa Bay area): from 1.2% to 1.5% of the purchase value.
For the city of Miami, on the Atlantic coast: from 1.8% to 2.5% of the purchase value.
In these two examples, the amount of the annual property tax is known mid-August (TRIM) and is payable on November 30th of the year with a 4% discount if you pay as early as November, then each following month you lose 1% of the discount until the due date on March 31st of the following year where you get no discount. Beyond March 31st the payment becomes delinquent. A penalty tax will apply and a senior lien will be placed on the property. The amount is taxable from January 1st of the current year based on the assessed value and certain exemptions and discounts may apply based on your personal situation (Homestead, incapacities, total or partial disability, handicapped persons, widow’s and widower’s exemption etc…). The IRS, the county or the tax collector may apply a lien if you don’t pay your tax. The rate may vary based on where your property is located and its usage (primary home vs. secondary home, rental property, etc).
To learn more about the Property Appraiser, click here.
12. Annual local taxes:
They vary from one county to another. For a commercial rental, you must add sales taxes up to 7.5% to the tenant. For a residential property for less than 183 days or 6 months and 1 day (whether it is a daily rental, weekly rental or 3 times each 2 months) you must add, per renter by law, as much as 7.5% sales taxes plus a tourist tax of roughly 13% (sales and tourist tax vary by county). We advise you to visit the property appraiser website to learn more about this and contact your accountant for precise case-by-case answers.
To access the State of Florida Department of Revenue, please click here.
For more information on the payment of your local taxes to the "property tax collector", please click here.
Short term rentals suggest that the property is rented furnished and may come with cleaning service and/or an on-site janitor for common repairs. An extra fee will be paid by the tenant for these. The deposit may be claimed by the Landlord if any damages are noted.
The legislation on the deposit and pre-paid rent for residential rental creates an obligation established by the Supreme Court of the State of Florida. This includes all rental periods – from very short ones to those of over 6 months and a day, whether as a written or an oral contract. It is required to detain an escrow account in a Florida bank to deposit 2 of the 3 months received from the renter; interests are in the renter's favor. This is not mandatory if there is a pre-payment for a tourist rental, or if you purchase a federal deposit certificate from the US Treasury; this is the landlord-tenant act.
For more information on all legal and fiscal matters, always contact your lawyer and accountant first.
13. Annual fees for a home dwelling insurance policy:
We highly advise you to subscribe to a "home/dwelling insurance policy", which is different from a "home warranty policy" that will cover your property and your personal belongings while offering you an insurance for your appliances from a variety of terms. The premium on this type of insurance varies and can be negotiated from one broker to another based on your personal criteria. You will note that beyond 10 years, the deductible becomes prohibitive; the property being obsolete.
14. Resale tax:
This tax varies whether or not you have a loan. A minimum of 2.5% is considered a reasonable assumption for your budget.
15. Monthly property management fees:
The agency that you hire to manage your property on your behalf will be in charge of finding suitable tenants and provide them with a quality stay. The agency will assist them with their moving and the entry assessment, maintenance and all necessary repairs needed during their stay. You must account for a minimum of 8% (for one or two entries excluding advertizing and search for renters) up to 25% (with several entry assessments for weekly/seasonal rentals). For maintenance, cleaning services and small work by skilled workers, you should account between $20 to $30 per hour with a minimum of 3 to 4 hours each time; these expenses are often charged to the renter.
We have noted that most agency require a 15% property management fee, although this is negotiable.
16. Other additional maintenance expenses you can expect in Florida:
If you have a garden, a swimming pool and/or an alarm monitoring system, monthly expenses may greatly vary based on the selected providers. If you are in a deed-restricted community/HOA, you may benefit from a community pool or 24-hour security that you pay through your community expenses.
We highly recommend you not to postpone monthly maintenance expenses to ensure durability and quality of your property but most importantly to get a stable return on investment (happy tenants = good paying and long term tenants) and, in the mid to long term range, a stronger resale value as your property won't depreciate as much.
V. What are mandatory or highly advised insurance policies in Florida?
There are a numerous insurance policies that will cover you for a variety of risks: hurricanes, water flooding and any obligations to compensate any persons you may have caused harm to (in many countries this type of insurance is built in your home insurance policy), etc.
As you may soon realize, insurance policies in the US, and more particularly in Florida, are relatively close to what you may know in your home country (Europe or Asia), although insurance premiums are higher!
You shall note that unlike many European countries, there is no insurance for unpaid rent or refurbishment of your property in case of negligence by your tenant.
Your insurance broker will always be the best professional to advise you on how to protect yourself, third parties and your property. Here are a few examples of popular insurances:
1. Home insurance for an occupied or vacant property:
For a property of 250 to 300 m2 (3,000 sq feet to 3.500 sq ft) you should budget for roughly $2,500 to $3,000 per year for an occupied property and more for a vacant property.
In Florida, homeowner insurance is more expensive between June 1st and November 30th. Price varies from one insurance provider to the next, your broker, the period at which the quote was made, your personal history, the type of property and its environment.
The "quality" of the demand is based on several factors and the probability of several risks. A broker will verify your credit history, your records from diverse sources (if you have already been insured in the US or as an owner), any claims that may have been posted against you (some people are non-insurable such as certain artists or professions). The price depends also on the type of property, its size, its age and its amenities. Does it have a garden, a swimming pool or additional land? Is it in a deed-restricted community, in a building, with a security system, with recent and updated features? Is it in a non-flooding zone, within 300 ft of a fire hydrant, near a risk zone - such as the ocean - in land or near a factory, etc?
Insurance premiums are based on the value of the construction rather than on the land or the renter's personal belongings. Premiums are adjusted according to the number of days the property is used. If the number is greater than 45 to 90 days and if the property is owned by a non-resident, you will be impacted with an extra premium. We advise you to shop around and get different quotes. Insurance is a business and like any free market service industries, you should compare before settling for the right provider. A policy is never issued when a Hurricane alert is transmitted (5 to 8 days prior to a broadcast via the "Federal Emergency Management Agency" (FEMA). According to the official site of the National Flood Insurance Program (NFIP), the average flood insurance policy costs about $600 per year. Premiums change every year. You can click here to download the NFIP Summary of Coverage.
Thanks to our affiliation with the Institute for Luxury Home Marketing (ILHM), we have access to insurance brokers who specialize in high profile properties to suit all your needs (luxury, international owners…). Do not hesitate to contact us for more information.
For more information on this, please visit the US Federal official websites:
2. Insurance for furnished property used by a tenant:
The cost of this insurance policy will depend on your insurance broker according to your tenant personal background.
3. Insurance for personal liability and home dwelling policy:
Please read above as these 2 policies may be obtained under a group policy. You can also ask your insurance broker for more information.
4. Hurricane Insurance:
You may obtain it in a global insurance policy to help reduce costs. Bundle insurances are often financially advantageous.
VI. Can you give me an example of an income producing property?
A steady rental income is dependent of several factors:
- The type of property: is it a villa, a single home, an apartment, a condominium...?
- The location of the property: is it in a touristic area, a university campus, downtown, inland, in the countryside, waterfront or in a suburban area...?
- Will you partially use it yourself and rent it out for the remaining time, is it a seasonal rental, an intensive rental based on your HOA/Condo’s rules...?
- Is the rental furnished or not?
- Does the property cater to foreigners/tourists or domestic tenants?
- Term of rental: weekly, monthly, trimester or annual?
- The type and level of amenities proposed: golf, tennis, swimming pool, club house, home theater rooms, gated security, etc. Don’t forget sales tax and tourist tax that may apply.
- Was the property purchased with or without a loan?
The higher-end the property, the less return on investment you can expect. For a purchase inferior to $300,000 and in a desirable location, industry specialists have agreed that you can expect to get between 4% net to 15% to 20% gross, this is in relation of course to how much HOA fees there are, the total cost of maintenance and the level of amenities available.
It is good to know that most utilities and personal expenses are to be paid by the tenant such as water, gas, electricity, TV, Internet, bundle plan, personal insurance etc. Tenants don’t pay local taxes or the home dwelling insurance, which remain at the owner’s expenses. There is also no transfer of HOA fees to the tenant – the rent is usually net, otherwise stated.
Concrete example of an income producing property in Sarasota, Florida:
Type of Property
Gross purchase price
Property built in 1978
HOA type R + 1
2 bathrooms (or 1 shower and a half bath), 2 toilets
Big family/living room
On parking spot
Good quality of common areas and private areas
New air conditioning and heating units, new carpeting
Sold with a tenant with one-year lease
Small community pool
Property located on a quiet and private road
Close to the city center and highway access. Airport and beach access within 15 minute-drive
Shops within a 3 minute-walk. Near local bus stop
Good roofing quality
> Additional costs
These additional consulting costs are optional and may be charged per hour. The less expensive the property, proportionally the more expensive the costs are. The purchase of $500,000 property is identical in terms of administrative work, but weaker in terms of percentage. It is good to budget $3,500 for diverse professional expenses to be retained in the US on top of our consulting packages of $5,600 or €4,186 all taxes included (depending on currency exchange rates).
> Rental Price
Property rent based on average leases in the same building for equivalent properties: $750 gross per month, thus a gross rental price of $9,000 per year
> Setup fees
- Cost associated with the creation of an LLC (corporation): $1,500
- Legal fees: depend on your individual needs and number of attorneys retained (real estate lawyer, immigration lawyer, estate lawyer…). A good base would be $1,600 (obtaining a work permit, visa, ITN/EIN number...)
- Accountant (CPA) base fees: $500
- Opening cost for a bank account: varies from one bank to another, with our package, it is FREE!
> Closing costs with
- A seller’s loan (not with a bank) based on a mortgage, a promissory note of 75% thus $45,000 with a 6% yearly rate, with a 5-year term, with interests calculated through capital depreciation on a 30 year-period also known as a « balloon mortgage », reimbursement anticipated with no allowed fees, no insurance, “turn key”, diagnosis ($220)
- HOA fees: $200
- Monthly reimbursement fee on the loan (interest and capital): $270
- Vacant Homeowner insurance when purchasing the property and to be paid in advance: $1,040/year
- Monthly HOA fees for common expenses: $206/month
- County property tax: $1,267 per year
- Closing, Real Estate Lawyer, Title company, Insurance, Purchase, Legal and recording fees, taxes pro-rata, HOA fees: $9,500 + a 25% contribution for a $14,975 + our package (€4,186 or $5,600 based on €1 = $1.33)
Property’s price: $74,000. Rent: $9,000 gross.
- Annual CPA fees: $1,000 + Florida State Dept Corp. $150
- Gross return EBIDTA => 12.20% and 7.26% after CPA and Florida State Dept Corp.
- Return net before income taxes (which will be null and before loan’s interests. As a reminder, interest rate: 6%/year)
- NOI = $9,000 - $1,040 - $2,472 - $1,267 - $1,150 => $3,071 thus a 4.15% net.
- In terms of “cash on cash”, that is on return on invested capital (not including loan, liquidities and net cash flow): $3,071/$30,075 = 10.21% net ROI. To this, you must add the US depreciation of 27.5 years on the purchasing price, thus a 3.36%
- This gives a return after taxes, fees, interest, depreciation, insurance of 4.15% + 3.36% = 7.51% net per year.
The return on investment is identical in case of no-rental, personal use as a secondary residence or partial use with seasonal rental of more or less 183 days. If you use your property yourself you become your own tenant and you should bill yourself as such.
Disclaimer: Information and data as of May 2012, not binding and likely to be modified without prior notice. Please see a licensed and certified professional and seek legal counseling should you wish to invest in Florida. Please note that the amounts given are estimates and their sole purpose is to give you an idea and help you set up a provisional budget.