Buying a Home in Florida

Why 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 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.

Florida is experiencing a construction boom. Property price appreciation has been brisk, but has slowed in recent months. Some believe that the state’s fast-growing supply of new homes will drive prices down further.
 

Popular locations – an overview

The most popular areas with British second home purchasers – the central region around Orlando, the east (Atlantic) coast and the resorts on the southwest (Gulf) coast.

There are no restrictions on Britons buying a property in the US but there are limits to how long they can spend in the country each year. 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.

There are many resources to help with further research, including television and radio programmes, magazines, the Internet, property exhibitions, and estate agents in both the UK and Florida.
 

Central Florida

The central part of the state, around Tampa and Orlando, has long been a favourite with British holidaymakers, 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.
 

The Gulf Coast

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 Keys to Key West. It includes some of North America’s most desirable and hence expensive locations, such as Palm Beach, where prices routinely run to millions of dollars.

However, if you choose your location carefully, you can find a three-bedroom house with a pool for around $250,000 (approximately £132,000).

An apartment in a good area of Miami will start from around $300,000 (about £158,000) – 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.
 

Buying a property
 

The system of property purchase is quite different from the UK’s and has several pitfalls for those unfamiliar with it, so the 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 5% (five per cent) of the purchase price.

The purchase process

When 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% (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.
 

Mortgages

When working out how to finance your 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.

The other options are remortgaging 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.
 

 

Taxation
 

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 per cent 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.
 

Money matters

Florida’s currency is the US dollar (USD, or $US). The current exchange rate is $1 US = £0.53 sterling.

Only banks can exchange foreign currency. Banking hours are 9:00 am to 3:00 pm, Monday to Friday. ATMs are widespread, and credit cards and travellers’ cheques are widely accepted. The latter are best carried in US dollars.

There is no limit on the total amount of monetary instruments (including US or foreign coin, currency, travellers’ cheques, money orders, etc) that may be brought into or taken out of the US, but amounts in excess of $10,000 must be declared.

Anyone considering moving money overseas should consult a financial adviser or foreign exchange risk expert, who can advise on ways of reducing currency fluctuation risks.
 

Passports, visas and residency

British citizens may visit the US for business or pleasure without a visa for up to 90 days per year. A passport is required.

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.

Residency

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.
 

Healthcare

Hospitals in the US provide some of the most advanced healthcare in the world but 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 are 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 £50.00).