Monday, November 24, 2014

Hidden Costs in Florida Real Estate Purchases

Florida Real Estate Often Has Hidden Purchase Costs

There are many real estate purchase costs in Florida. Refer to this point where you complete purchase as “the closing.” 

Some people will also refer to “the settlement.” It’s the point at which all the papers are signed and the money is transferred from buyer to seller.

Closing Costs

Closing costs on Florida real estate do not include sales tax on the selling price on the Florida real estate transactions. However, there can be very significant costs. 

Documentary stamps on mortgage $3.50 per $1,000 of mortgage. Intangible tax of $2.00 per $1,000 of mortgage. But, if it’s a cash deal, then it doesn’t apply. Other Closing Costs Include:
  • Real Estate Commissions
  • Property Inspection
  • Unpaid Taxes
Always get a “good faith” estimate of your closing costs before you sign the contract. Review it and all the pre-closing steps with your lawyer.

There is no tax on the purchase of property by foreign nationals.

Rental Property

All rental income is subject to U.S. income tax. Many double-taxation treaties to prevent paying taxes
in U.S. and in the home country.

Generally, very little if any taxes are paid because there are very generous deductions:
  • Mortgage interest
  • Cost of 2 trips to inspect property
  • These generally offset the rental income

Foreign Investment in Real Property Tax Act

On the sale, the Foreign Investment in Real Property Tax Act comes into play. This means there’s a requirement that 10% should be withheld from the sales price. The responsibility falls on the buyer who is a foreign nationals. 

The buyer does not withhold if property is over $300,000 and for his home.

There may be significant profit potential in buyer certain properties called off plan, otherwise known as pre-construction property. 

Now, this is just some basic information on real estate issues to be aware of in Florida. It is not formal legal advice. You may watch the video, "Foreign Florida Real Estate Investors Beware of Pitfalls" on the Lanigan & Lanigan YouTube channel. 

Wednesday, November 12, 2014

Do Your Homework Before Buying Into an Off-Plan Deal

You may build in the RIGHT neighborhood, or you could miss.
Buying U.S. property that is pre-construction which is also known as off-plan like so many real estate deals can be a great thing or it can be a nightmare.

Florida Real Estate Attorney

I'm attorney Eric Lanigan, a real estate attorney since 1976. I was born, raised, schooled and have worked in Florida so I know the market. 

There are ups, downs, good areas to buy and horrible places to buy investment properties. 

More importantly, I know Florida real estate pitfalls. All of them. I've seen really bad decisions made. I've seen people ripped off because they didn't know a home was full of black mold, or on swamp land or in a sink hole likely location. 

In Florida, it's what the sellers know that you don't know that will indeed hurt you. 

Tips for Buying an Off-Plan Property

When you’re buying an off-plan property, it means that the home has not yet been built. There are often great deals and deep discounts to get the property sold before construction costs kick in.

The builder is leveraging your money. For example, you pay $100,000 with 5% down and the balance due in two years.

If it goes up 10% per year, then they’ve made back 100% before you’re even closed.

Research the Neighborhoods

If the real estate market where you’re buying is active and prices are rising, then it can be very profitable.

Your job will be to do extensive research on the project and the area; the location of the property is imperative.

Benefit of Buying Off-Plan 

A practical benefit to buying off-plan property is that if the project does not work out and you refuse to close, the question will become with the developer really go through all the time and expense to attempt to collect from you?

It may become a win-win if you do your real estate homework.