Looking To Buy Real Estate in Sarasota? Avoid the Pitfalls in 8 Easy Steps

Buyers coming from both the US and from other countries understandably have a fair amount of apprehension about buying real estate in Sarasota or Florida in general, especially if they do not know the process. Whether you are a US Citizen or a global buyer, the process is nearly the same.

For global buyers, there are a few more considerations surrounding the movement of money, perhaps, but that’s about all. If the buyer is a cash buyer then these minor complications are reduced. If the deal is to be financed there are a few more hoops to jump through.

But overall the process of purchasing real estate in Sarasota is as simple and straightforward as any home purchase in the US. It just requires a real estate agent who is a good steward of the process and has experience making sure all the due processes are observed speedily and efficiently.

Need help deciding where to buy in Sarasota? Learn about the unique places to live in Sarasota.

Buying Real Estate in Sarasota: Step One – Engage a Realtor

We’ve written at length, and constantly advise our readers, that hiring a Realtor to represent them is the most important decision they will make (other than the house) when buying real estate in Sarasota.

It does not cost you anything as a buyer to use a Realtor as the commission is paid by the proceeds of the Seller at the time of closing. The right expert will ensure you have every bit of information at your fingertips as you begin your search, and steer you through every possible aspect of the property purchase process.

Step Two: Showings and Open Houses — A Great Place to Begin

Once you have decided on a Realtor, showings and open houses are a great place to start your property search.

Open houses, we’ve been told, are not common in some European countries so it’s probably a good idea to explain them here.

In addition to giving you a good perspective on what is available in the market at what price point, open houses offer an opportunity for you, as a buyer, to meet and interview potential Realtors.

Some real estate Realtors hold a listing open so that members of the public can come and view the house. Agents’ opinions on the effectiveness of holding a house open to attract potential buyers are mixed. Some find that open houses can attract people not really interested in buying, only “lookers” who are curious to see the inside of the house.

In our opinion there can’t be any harm in getting some exposure for a listing. As a buyer, open houses offer a good opportunity to get a feel for the market, really understand what you can afford, and to compare properties in your price range.

Once you have found a Realtor that’s going to do a great job for you, you should continue to look at open houses for your own education. However, as a professional courtesy and to be sure that your best interests will be served, you should let other Realtors who are hosting open houses know that you’re working with a buyer’s agent on a purchase. You may be pleasantly surprised to learn they’ll answer questions more candidly, and with greater detail, once they know this, as they will take you more seriously as a buyer.

When you are interested in seeing specific properties your Realtor will make the showing appointments. Usually, the owners of the house are out while you’re shown the property.

Sometimes the seller’s agent will be present to answer your questions about the property and give you more information. Your Realtor should also be fairly well informed and have done their homework on the property.

If the seller’s agent isn’t present they should leave you a listing sheet with all the property’s details. Make sure you make notes of all the things you like, all the things you don’t, and all the things you need further information on.

Step Three: Mortgage Pre-approval – The Next Step in Securing Your Dream Home

The other key step in buying Sarasota real estate is of course having financing in place if you need it. Before you start your property hunt in earnest it’s a really good idea to get pre-approved for a mortgage, just in case you see something you really like.

Without pre-approval you’ll most certainly not be the seller’s first choice should there be several offers, and you won’t really know for sure that you can even afford the property, or get a mortgage.

Please note: pre-qualified is not the same thing as pre-approved. Pre-qualified means you’ve given a lender your income details and financial commitments and they’ve estimated what you can afford.

Pre-approved means they’ve actually checked your credit report, your debt to income ratio, and properly analyzed your financial situation. Once they’ve done this you’re given a pre-approval letter.

This can certainly help in sealing the deal when in negotiations with a seller and indicates that there’s a really good chance you will get a mortgage and the sale will go through.

Step Four: Making a Serious Offer

Once you’ve found the right property, read through the Seller’s Disclosure, and are ready to make a move on it, it’s time to make an offer. In Florida, this is done with a formal contract that lays out the specific requirements and terms on the part of the buyer and seller.

Some Realtors may approach the seller’s Realtor first with an oral offer, to see how the other party responds before they take the time to put anything in writing. We strongly encourage all offers to be presented in writing from the beginning. Offers that come in writing are generally more seriously considered by virtue of the fact that the terms are in writing.

What is a Seller’s Disclosure?

In Florida, it is the homeowner’s responsibility to disclose any issues or material defects not readily visible or known to a Buyer. Your Realtor typically obtains the Seller’s Disclosure form from the Seller’s real estate agent before constructing an offer. This information is critical as it will help you to see if there are any details about the condition of the property that may affect the value you want to offer.

Please see this link for an example of a Florida Association of Realtors Seller’s Disclosure Form as a PDF.

Step Five: The Purchase Contract and What It Should Include

Realtors Primarily Work with One of Two Types of Contracts

1. The Florida Realtors/Florida Bar Residential Contract for Sale and Purchase

The standard contract provides that if there are issues uncovered during the inspection with warranted items — i.e. items that affect the integrity of the property, such as a broken roof tile which could lead to a roof leak — the seller is obligated to make repairs of the warranted items (up to a limit agreed upon during the negotiation of the contract).

The standard contract, if not otherwise specified, provides a default of 1.5 percent of the purchase price for repairs. Non- warranted items refer to cosmetic issues, such as discoloration of floor coverings, wallpaper, or window treatments.

To see the most recent version of this contract, and to read the exact verbiage defining warranted and non-warranted items, click here for a PDF download.

1. The Florida Realtors/Florida Bar “As-is” Residential Contract for Sale and Purchase

Typically bank-owned, investor-owned, estate sales, or older homes will be marketed and sold “As-is”. This means that should the inspection report reveal issues with the house, the seller is not obligated under the contract to make those repairs.

While the perception is that once the seller agrees to a buyer’s purchase price they will have no further responsibility for the property, our experience dictates that this is not the reality.

In many situations, we actually prefer using the “As-is” contract with our buyers as we believe it protects them more fully should they decide they do not want to proceed with the purchase for any reason during the due diligence process.

There are two primary reasons we prefer to work with an “As-is” contract:

• First, this is the only contract that allows the buyer to receive a full refund of the deposit should they determine that the property is not right for them.
• Second, the seller will most likely agree to make repairs that any subsequent buyer is likely to find an issue with as well.
• As an example, if a house has a termite problem, the seller will likely take action to resolve it, as nearly any future buyer would not proceed with a purchase with the knowledge that an active infestation exists.

Should anything major about the house be revealed during the due diligence period, it will not only be a concern for you but for almost every other buyer as well. So the onus is pushed back to the seller — although they are not obligated to do anything under the terms of the contract — to make the needed repairs or reduce the purchase price accordingly as the problem is not going to disappear and their goal is to sell.

The purchase contract should be drawn up by your Realtor with all the details and signed by you. In many cases, buyers are asked to put up “earnest money” which is a small amount of the deposit, to demonstrate that you are serious about the purchase. Do bear in mind, if your offer is accepted and you then later pull out of the deal without the necessary provisions in the contract, you’ll forfeit that money.

Here’s What the Contract Should Include:

• The price you’re offering for the property
• The percentage or value of the earnest money you will put down. Just as a rule of thumb, many sellers like to see 10% put down for the total deposit. This may take the form of the initial earnest money deposit upfront (within three days usually), and the remainder of the deposit usually is due within ten days of signing, or sometimes at the end of the due diligence period
• Response time to the offer by the seller. The contract should set out in writing the date and time by which you expect a response to the offer. This ensures all parties have a clear idea of how long the offer is valid and helps to keep things moving along or have a definitive end point
• Proposed closing date. In Florida, the majority of closings occur within 30 to 45 days of going to contract. This can vary greatly, however, depending on specific circumstances
• Number of days allotted for due diligence. The default amount in the standard contracts is 15 days
• Repair limits. This is applicable if you’re not using an “as-is” contract
• Financing contingency and time frame. These should be included to protect yourself if you don’t get the mortgage deal you’d hoped for. It should be stated in the contract that the sale will only go through if your mortgage gets approved, and specify the maximum interest, and terms of the mortgage that are acceptable to you
• Inventory of items included in the purchase. Typically, major appliances stay with the property, unless otherwise specified, including fridges, sinks, stoves, microwaves, and often the washer and dryer. It is important to be sure this is clearly spelled out, though, as we have had the experience of very large transactions becoming contentious over these relatively small things.

Obviously, the seller doesn’t have to accept the offer, even if you offer the full price of the listing. And sellers are under no obligation to explain why they reject a particular offer.

Usually, we find most buyers hear back within a day or so, and in most cases, the seller will let you know if the offer was too low, which is where the negotiation begins! You can bide your time at this point and gamble on seeing what happens, or increase your offer hoping to secure the property immediately.

Step Six: Offer Acceptance and Due Diligence – The Devil is in the Details

The minute you learn your offer has been accepted ranks up there as one of life’s most exciting moments. It is important to keep grounded, however, in the fact that there are still many steps in the due diligence stage that may uncover issues or problems on either side. As with much in life, when it comes to real estate deals, the devil is in the details.

After your offer is accepted, if you haven’t already put down earnest money you will be expected to do so on the signing of the contract. Always be aware that earnest money could be at risk if the seller does what he or she is required to by contract and you do not.

Depending on how the terms were set out in the contract, usually within the first few days after execution of the contract, you’ll put down the remaining deposit for the property.

Then it’s time to begin checking off the contingencies set out in your contract, which is where the skill of your Realtor and the quality of the team he or she’s assembled becomes paramount, beginning with the home inspection.

Step Seven: The Home Inspection – Making Sure It Isn’t a Lemon

An inspection checks the condition of the house itself. Even with a brand new house inspections are critical. With new homes, there is usually a guarantee against anything that is wrong, so it may turn out to be really beneficial to get an inspection done.

If the “As-Is” contract is in place, the buyer’s decision to move forward will usually be contingent on the inspection being satisfactory. If the inspection is not satisfactory, the buyer may want to pull out, or some negotiation may be required between buyer and seller to find a solution both are comfortable with.

Some things may need to be fixed, but really the main purpose is to provide an outline of the state of the house so the buyer understands what they’re buying. There are so many issues that can hide in houses, and even if they’re not deal-breakers you need to know what potential costs or issues you’re taking on.

We feel it is important to set the expectation that no house is perfect, even brand new homes, and it is quite normal for there to be in the range of $1000-$2000 worth of work needed. Again, if these are material defects then they will generally be covered by the seller if the standard purchase contract is being used.

Your Realtor should be able to provide you with choices for experienced, professional inspectors and have a preferred inspector they can personally recommend as an exemplary professional. It’s important to make sure that the person who performs the inspection is truly independent and able to provide unbiased, objective information about the condition of the house.

Your inspector should be certified by the American Society of Home Inspectors. Please see our article on Professionals You Need and What They Do for more on this.

Here are the major areas the inspector will cover:

FOUNDATION

Checking if the foundation is sound. If there is a crawl space or basement they will check for signs of water damage, cracks that could indicate structural issues, and moisture.

CONSTRUCTION

The inspector will check if the property is well-constructed or not. While 90 percent of homes in the U.S. are made of wood, many homes in Florida are of concrete block construction. In a wooden home, they will check if the wood is in good condition, with flashing to protect it. In a concrete block home, they will check the quality of the construction, and that the blocks are not degrading. The condition of the roof, as well as windows and any other woodwork, exterior cladding, and guttering, will also be checked.

PLUMBING

The inspection will check if the plumbing is fully functional if there is evidence of leaks, and if all the pipework is in good shape. For houses with wells and septic tanks, the inspection should include these as well.

HEATING AND COOLING SYSTEMS

The inspection will check the condition of the units, how soon they will need replacing, and check the temperature differential to see that the system is operating correctly. In some cases, we may recommend that a specialist in heating and cooling do a separate inspection. For example, when there are multiple cooling systems in a home or there are signs that something is amiss.

ELECTRICAL

Check for any electrical problems or issues, and flag any wiring that may need replacing. Identify any potential safety hazards.

INTERIOR

The inspection will check that floors are level, uncover any mildew concerns, and any drywall or finishing issues on the inside of the property, examine windows and doors, and touch most things that move, open, and close on the inside of the home.

The cost of an inspection in Sarasota, FL usually ranges from $400 to $500. Please see this link for a PDF example of a home inspection report from a firm we regularly work with.

PEST INSPECTION

We always recommend that our clients have a pest inspection done when buying a property, for peace of mind. An average pest inspection costs $30-$50. In Sarasota and Florida in general, these inspections check for Wood Destroying Organisms (commonly referred to as termites), rodent infestations, and also scope out areas that can be sealed to prevent any rodents from gaining access to a home in the future.

If termites are found they need to be treated by a pest expert. To those who are unfamiliar, this might seem like an overwhelming issue, but in fact, the problem is not uncommon in Sarasota and there are well-defined solutions. Termite inspectors make a joke — there are two types of houses…those that have termites and those that will get termites. 😄

If the inspector finds any rodents inhabiting the property, they are typically removed through traps.

How Inspections Play into Insuring your Property

With any house, you buy it’s important to remember that the condition of the house will affect the insurance premiums too. In order to get the most accurate insurance quotes, you must first have the completed inspection report.

Insurance rates tend to be higher in Florida than in other places in the world. As soon as the inspection report is ready it is important to share it with the insurance agent because insurance premiums (the annual amount charged to insure the property) are set based on a combination of factors.

The subset of the inspection reports that will be helpful to your insurance agent will be a four-point inspection (specifically roof, electric, plumbing, and cooling/heating systems) and the wind mitigation inspection. Other aspects of the home that will likely play a role in the insurance rates will be the home’s current condition, age, the cost to rebuild with the current finish, quality of materials, ceiling heights, etc. The proximity of the house to the water and a fire station may also play a factor.

If you are using the standard purchase contract, we would recommend an insurance addendum, so that if you get insurance quotes that may be beyond your budget or willingness to pay, you have another protection as the buyer to legally get out of the contract and get a return of your deposit. Another reason we like working with the “As-Is” contract is that no additional addendum is required. As long as you give notice during the due diligence period you can exit the contract for any reason and get a full return of the deposit.

Step Eight: The Closing

You will attend a closing meeting (or your Realtor will go in your stead) with a closing agent or a real estate attorney.

Here, you will go through and sign all the paperwork necessary to finish the deal. Your Realtor or lawyer should review all of the documents to ensure that everything is as it should be as you go along.

Then funds will be transferred from escrow and you will get your keys. Congratulations, you’re a Sarasota homeowner!

In our conversations with new clients and friends we meet when we’re working in Europe and the UK, we often find there is some apprehension about the process when buying a home in Sarasota or in Florida in general, as for many people it’s a complete unknown. Happily, we’re able to reassure everyone we talk to because the process is actually incredibly transparent, simple, and easy – when compared with a lot of European countries.

Additionally, buyers from the UK give a sigh of relief when they realize that the dreaded ‘gazumping’ cannot happen in a real estate transaction in Sarasota. Once an offer is accepted here money is put down, and unless something comes up in due diligence which causes the contract to be broken, you can be confident the sale will be proceeding. For a lot of Brits this is the opposite from buying in the UK, when you can only be confident of the purchase when you have the keys in your hands on move-in day!

To help clarify just exactly what’s involved in the sale process we’ve put together this guide to buying Sarasota home, to really demonstrate how simple it is. For a more in-depth explanation of every single part of the process, from finding a property to renting it out, please check out our book Your Guide to Florida Property Investment for Global Buyers.

Guide to Buying Property in Sarasota

Step 1 – Engage a Realtor in Sarasota

We’ve written at length, and constantly advise our readers, that hiring a Realtor to represent them is the most important decision they will make (other than the house) when buying Sarasota real estate. Read more about how the right Realtor will smooth the process, and how it costs you nothing as a buyer here. But trust us, this is the important first step. The right expert will ensure you have every bit of information at your fingertips as you begin your search, and steer you through every possible aspect of the house or condo purchase process.

Step 2 – Find a Property

Begin your search. Prices are rising steadily, and the deal you could get today, won’t necessarily be as well priced tomorrow. Your Realtor has access to the MLS (Multiple Listings Service) and will be actively using their expertise to find listings that suit your criteria and lifestyle goals, but you can also get proactive searching online.

The more you look at, the more informed you are about price points and what’s really in your budget. When searching online be prepared to listen to your Realtor’s feedback and advice on neighborhood and streets though, as he or she is the expert on the ground and has the experience to know if something is too good to be true, overpriced or not the right location for your needs. Your Realtor’s local knowledge will be priceless in assisting you on this part of your journey.

Once you’ve found some listings which may work for you, we highly recommend making the trip to check them out in person. On the ground in Sarasota, you have the option of attending open houses, or your Realtor can book showing appointments with the listing Realtor on your behalf. If you really can’t make it to Sarasota, then it’s even more imperative that your Realtor is of the highest standard and has impeccable local knowledge and market info!

Step 3 – Mortgage Pre-approval (If you are paying cash, move-on to Step 4)

The other key step in buying a home is of course having financing in place if you need it. Before you start your property hunt in earnest it’s a really good idea to get pre-approved for a mortgage, just in case you see something you really like. Without pre-approval you’ll most certainly not be the seller’s first choice should there be several offers, and you won’t really know for sure that you can even afford the home, or get a mortgage.

Please note: pre-qualified is not the same thing as pre-approved. Pre-qualified means you’ve given a lender your income details and financial commitments and they’ve estimated what you can afford. Pre-approved means they’ve actually checked your credit report, and your debt to income ratio, and properly analyzed your financial situation. Once they’ve done this you’re given a pre-approval letter. This can certainly help in sealing the deal when in negotiations with a seller, and indicates there’s a really good chance you will get a mortgage and the sale will go through.

Step 4 – Making an Offer

Once you’ve found the right house or condo and read through the Seller’s Disclosure (where the homeowner discloses any known issues with the property) it’s time to make an offer. In Florida, this is done with a formal contract that lays out the specific requirements and terms on the part of the buyer and seller.

Some Realtors may approach the seller’s Realtor first with an oral offer, to see how the other party responds before they take the time to put anything in writing. From our perspective, we strongly encourage all offers to be presented in writing from the beginning. Offers that come in writing are generally more seriously considered by virtue of the fact that the terms are in writing.

Obviously, the seller doesn’t have to accept the offer, even if you offer the full price of the listing. And sellers are under no obligation to explain why they reject a particular offer. Usually, we find most buyers hear back within a day or so, and in most cases, the seller will let you know if the offer was too low, which is where the negotiation begins! You can bide your time at this point and gamble on seeing what happens, or increase your offer hoping to secure the property immediately.

Step 5 – Offer Acceptance

The minute you learn your offer has been accepted ranks up there as one of life’s most exciting moments. It is important to keep grounded, however, in the fact that there are still many steps in the due diligence stage that may uncover issues or problems on either side. As with much in life, when it comes to real estate deals, the devil is in the details.

After your offer is accepted, if you haven’t already put down earnest money you will be expected to do so upon signing the contract. Always be aware that earnest money could be at risk if the seller does what he or she is required to by contract and you do not.

Depending on how the terms were set out in the contract, usually within the first few days after execution of the contract, you’ll put down the remaining deposit for the property. Then it’s time to begin checking off the contingencies set out in your contract, which is where the skill of your Realtor and the quality of the team he or she’s assembled becomes paramount.

Step 6 – Contracts

The purchase contract should be drawn up by your Realtor with all the details and signed by you. In many cases, buyers are asked to put up “earnest money” which is a small amount of the deposit, to demonstrate that you are serious about the purchase. Do bear in mind, that if your offer is accepted and you then later pull out of the deal without the necessary provisions in the contract, you’ll forfeit that money.

There are two main contracts in Florida property purchase. The standard contract provides that should problems be found with certain parts of the home during the inspection, the seller is obligated to fix them, and there is an allowance for these repairs accounting for up to 1.5% of the house price.

We prefer to work with the alternative “As-is” contract. With this type of contract if the inspection report reveals issues with the house the seller is not obligated to make those repairs. This means the buyer has more flexibility to pull out, should they decide the house is not for them, and this is the only contract that allows the buyer to receive a full refund of the deposit should they be unhappy with anything in the due diligence phase.

The contract includes:

• The price you’re offering
• The percentage or value of the earnest money (like a pre-deposit) you will put down, and the value of the full deposit due at the end of due diligence (Usually 10%)
• Response time to the offer by the seller
• Proposed closing date. In Florida the majority of closings occur within 30 to 45 days of going to
  contract. This can vary greatly, however, depending on specific circumstances
• Number of days allotted for due diligence. The default amount in the standard contracts is 15 days
• Repair limits. This is applicable if you’re not using an “as-is” contract
• Financing contingency and time frame. It should be stated in the contract that the sale will only go through if your mortgage gets approved, and specify the maximum interest, and terms of the mortgage that are acceptable to you
• Inventory of items included in the purchase.

Step 7 – Closing

You will attend a closing meeting (or your Realtor will go in your stead) with a closing agent or a real estate attorney. You’ll go through and sign all the paperwork, your Realtor or lawyer will check everything is as it should be as you go along. Then funds will be transferred from escrow and you will get your keys. Congratulations, you’re a Sarasota homeowner.😄

The Pros and Cons of Real Estate Types, so that You Don’t Make the Wrong Choice!

The type of property you choose as your future Sarasota home will be decided by several factors including whether it’s intended for a financial return or holiday home, your budget, and your personal wants/needs. As the types of homes available have different pros and cons, it’s useful to outline the most commonly found real estate types.

Types of Property Defined Like Never Before

Oceanfront, Gulf Front and Waterfront Real Estate

If you are in the position to pay the premiums demanded for Oceanfront (Atlantic Ocean side of Florida), Gulf Front (Gulf of Mexico side), beachfront, or waterfront property then do it!

Getting more house for your money off the water may be tempting, but being on the water is the surest way to guarantee you get the most amount of return for your money when re-selling. If your aim is to rent, waterfront also commands the highest rental returns.

A beachfront property will always be in demand as the sun-seekers, holiday-makers, and property buyers flock to beachfront locations to purchase a bit of the Sarasota good life.

However, waterfront living doesn’t begin and end with the beach — many of Sarasota’s houses and condos are located on canals, rivers, and bays, which offer specific and desirable niche markets for people searching for particular lifestyles: be that fishing, birding, boating, kayaking, or simply being close to the calming properties of the water.

These properties each offer different lifestyles for buyers and holidaymakers and present different niche markets for rental income.

Considerations to remember about waterfront real estate include that upkeep is significant and a cost to be factored in over and above what it regularly costs to maintain a home. Insurance can also be much higher for properties on the coast.

PROS

• WATER!! WATER!!! WATER!!
• Commands highest prices both for rental and resale
• Most desirable properties in the market generally
• More in demand

CONS

• Much more exterior maintenance and costs
• Higher insurance
• Can be nerve-wracking in storm/flood situations
• Maybe safety issues for children

Single Family Homes

If you can afford to choose a single family home for your investment or holiday home, you are making a wise use of your money as these homes tend to produce the highest appreciation over time and also the highest rental incomes.

The downsides with single-family homes include higher cost, higher upkeep costs, and more labor-intensive maintenance, especially pool homes. But the rewards are well worth it, especially if you intend to use the home with your family.

Note: even if your single family home is not within a Homeowners’ Association, there are still likely to be restrictions and rules in place concerning different issues which are often written into the deeds for the home. Your attorney or Realtor should look into these in detail as part of their due diligence on the property on your behalf.

PROS

• Privacy
• Usually good outdoor space
• Feeling of own home
• Usually more say over the appearance of the home
• Higher desirability for renting

CONS

• More maintenance than townhouses and condos
• Higher price than townhouses and condos
• Higher insurance

Condos

The bread and butter of the Sarasota real estate market, condos and especially new construction downtown condos are a great choice for investors. Not only are they somewhat plentifully available in most of the major areas, they tend to be more affordable, and much easier in terms of upkeep. This is beneficial for international buyers who will only be using the condominium themselves for part of the year, or not at all.

In addition to the perceived ease of ownership, condo living typically affords lower budget accessibility to areas such as beachfront and downtown locations, than the buyer would be able to afford in a single-family home. Since condos in the most desirable locations are vertical, the buyer is only paying a fraction of the actual land cost.

Condominiums are usually set up so that each owner owns his or her unit individually, and all the owners in the building have a share of ownership of the common spaces. A board of directors manages the Condominium Association, and this is responsible for the maintenance, upkeep, and repair of common areas such as entrances, hallways, stairs, and roof.

Condominium associations have very specific rules which govern living in the building. The rules and conditions for owners vary hugely between different Condo Associations. These may include restrictions on pets, or limitations on the size of pets, as well as restrictions on renting out the condo.

Most condos also have fees that are paid annually for the upkeep of the building and exterior areas, so it’s important to factor those into your cost of ownership calculations. It’s also important to know all of these things upfront in order to decide if the building you choose is suitable for your lifestyle.

Condo Associations have a responsibility to disclose these rules and make the paperwork available to you.

Condos are a great choice to achieve value in the Sarasota real estate market also, as return to investment ratio tends to be quite good when renting, and condos are appreciating. The actual amount varies area to area.

PROS

• Generally very secure
• Very minimal maintenance – only the interior
• More affordable than townhouses or single family homes
• Return rates may still be good despite lower cost
• Condo Association handles all maintenance

CONS

• Unusual to have outdoor space
• Neighbor Noise
• Little Privacy
• Condo Association fees

Townhouses

Townhouses are properties that tend to be arranged over two or more floors, in areas where the ground footprint is at a higher premium. These tend to be good value, as the land value is generally lower than on a similar single-family home which is more spread out.

Townhouses are hot investments because, although the price is about the same as that of a condo, they tend to have lower monthly fees. These properties also tend draw slightly higher rents and generally attract more family-oriented clients. Townhouses are also a great option for vacation and seasonal rentals.

PROS

• Slightly lower heating/cooling bills due to houses on either side.
• Less exterior maintenance than single family homes
• Usually exterior upkeep managed by HOA
• “House” living experience, but usually more affordable than a single family home
• Ease of living in a close community – safety and security
• You own the land the home sits on as well as the interior and exterior of the home
  Often have security
• “House” experience but less garden to look after

CONS

• Possible neighbor noise
• Small gardens or outdoor space
• Little say in the exterior look of the property HOA fees
• Sometimes less light than stand alone homes Less privacy than stand alone homes

Retirement Homes / Villages

Retirement homes and villages are becoming more and more popular as the population ages and more and more baby boomers enter retirement with disposable income and a desire to enjoy their golden years. Retirement villages tend to offer good security, facilities on hand which appeal to seniors, often organized group activities, and social common spaces or entertainment venues.

Retirement communities very often have staff on hand, and it may be possible to buy a long-term lease rather than ownership of the entire home, thereby saving you capital but giving you a home of your ‘own’ for a long time. This may be a simple way of avoiding some of the complications of homeownership.

PROS

• Safety and security
• Help on hand should you need it
• Little or no maintenance
• Properties set up for older people
• Activities and facilities on site

Other Community Factors to Consider

Homeowner’s Associations

It’s pertinent to note here that most homes, particularly in upper scale neighborhoods in Florida, are managed by Homeowners’ Associations or HOAs. These differ slightly from the concept of Condominium Associations because the owners of the individual lots do not share ownership of the common areas.

These common areas are owned by the HOA itself. Usually, they own the title deed, but similar to a Condominium Association, the HOA is responsible for the maintenance and upkeep of the common areas.

Homeowners’ Associations are generally responsible for everything that affects the community as a whole, most specifically the exterior appearance of the community.

Regulations can manage everything from open house signs, exterior property maintenance, colors you may paint your property, and plants you may use in your garden to what your mailbox looks like, your fencing, and even curtains.

While to many international buyers these restrictions may seem incredibly over-bearing, their purpose is to ensure that the look and feel of the community are maintained and there are myriad benefits to having an HOA manage your community. Specifically, they ensure that home prices are maintained, and no building can be “letting down the neighborhood.”

Gated Communities

Gated communities are a particularly American phenomenon. They are enclaves of homes—often developed all at the same time with an identical or very similar feel—which has some kind of security or entrance that separates them from the wider community.

Gated communities are prized for the security they offer residents, as well as their feeling of community. Often these communities are created around golf courses, so a shared interest brings residents together with other like-minded individuals. They are almost always managed by an HOA.

In many parts of the world, it is common to pay taxes in some form. In Florida, there is no state income tax as there is in other US states. But if you do make money from renting or when you sell your property there will be Federal taxes (to the US government) to pay on the profit. There is also the annual tax on the value of the property that you own.

Before we begin, we would like to strongly advise all non-resident buyers to invest a few hundred dollars to meet with a Florida Tax Accountant who has a breadth of experience working with international clients. It’s one of the most important things to understand when buying real estate in another country, as the tax costs could drastically affect your projected return on investment.

A professional accountant will be able to help you understand your own unique tax situation and make sure you are compliant with all aspects of tax law. In many cases, the tax to pay may be zero, but the costs of not filing or defaulting may be much higher.

Because an international buyer’s overall tax liability may be different than that of a US resident, depending upon the buyer’s home country’s tax treaty with the US We also think it is best to consult a tax advisor within your home country that is familiar with the tax treaty.

For instance, the capital gains rate for US residents is 15-20 percent (if the property was owned for more than one year). Foreign nationals, however, could be required to pay a higher rate, depending on their home country’s tax treaty with the US a tax accountant within your home country, who is familiar with your home country’s treaty, would be the best resource for answers to these questions.

Three Types of Taxes Relating to Florida Real Estate

• First, all properties in Florida are assessed a taxable value and owners pay an annual Florida property tax based on this value (except churches, schools, government entities). This tax is paid to the local municipality
• Second, if you sell your home, there may be a capital gains tax on the profit realized from the sale. For this scenario, there are federal guidelines set forth for global buyers under the Foreign Investment in Real Property Tax Act (FIRPTA).

Because FIRPTA is a rather complex Act, we discuss it at length in our article FIRPTA and the Case of the Foreign Seller. We strongly recommend global buyers reference this article. Furthermore, it is something you should definitely be aware of for your future tax planning purposes, especially since it is an important topic to discuss with your tax advisor in your initial meeting.

• The third tax category only applies to rental properties. If there is net profit on the rental income, there may be a federal tax on the profit generated from renting out a vacation home or other investment property. In addition, for short-term rentals, there is a sales tax which is generally charged to the renter and submitted to the local government.

In this section we will discuss Florida property tax, since it is applicable to all property owners on a recurring annual basis and capital gain tax, as it is applicable to all property owners when considering the sale of their property.

Florida Property Tax

In Florida, property taxes go towards public schools and infrastructure, including roads, libraries, and medical services. The local county property appraiser sets the assessed value (based on market data of the prior calendar year) to your property as of January first of each year.

In our experience, there seem to be some significant misunderstandings regarding Florida property taxes. The tax rates are determined by the local municipality and are the same for a property regardless of who owns the property.

There are a handful of opportunities to slightly reduce the property value but not the tax rate itself. For example, property owners who are widowers/widows or are disabled veterans may receive a credit against taxes owed. However, in order to be eligible, the property must be the primary residence of the primary owner — not a second home or rental property.

The Florida statutes direct how each county determines property values. That value is published/released around late summer each year. Each county has its own website defining the process for its residents, so you can look this up for your particular location.

You can visit the website of the Florida Department of Revenue for this information and more.

Florida Property taxes are not due until March first. However, you can begin to pay from the first of November of the tax year. For each month that you pay in advance (for a total of four months), you receive a one percent discount on your total tax bill (for a maximum total discount of four percent).

For example, if your property tax is $4000, by paying in November you save $160.

If you do decide to make Florida your primary residence, you will be entitled to a slight reduction (up to $50,000) in the assessed value of your property plus the assessed value cannot increase by more than 3% in any one year (Save Our Homes Act), thereby reducing your property tax, through something called the Homestead Exemption.

Capital Gains Tax

Like many countries, one of the ways the U.S. Government generates its income is by taxing the profits on the sale of real estate investments made within the country. This is a type of capital gains tax, which applies to citizens and non-citizens alike, who sell investment property (the sale of a primary residence is handled differently).

Capital gains tax is effectively tax you pay on the profit you’ve made on your property’s appreciation since you bought it. The capital gains tax is calculated on the profit made from the sale of real estate. The profit is revenue (sale price less purchase price) minus expenses. An accountant will guide you as to what qualifies as expenses.

💡 Pro Tip
We advise that you keep very accurate records of the costs associated with the purchase and sale of your property and everything in between. This may include things that are not as obvious such as travel expenses to visit your property.

The capital gains tax rate applied to your profit will depend on how you hold title and the amount of profit that you will generate. For more information on how you hold title and why it matters, see our article “Taxes And Titles: The Name on Your Property’s Title Matters.”

Tax Returns and Refunds: A Few Things To Consider

Regardless of whether you are a U.S. citizen or a foreign investor, the IRS requires you to file a tax return upon the sale of your property. If you are due a refund, be aware that the IRS begins processing tax returns and refunds at the beginning of the next calendar year.

1031 Exchange

A 1031 Exchange is a mechanism for real estate investors to delay (or defer) taxes on the gain they realized from the sale of their real estate investment. This mechanism is available to all owners/sellers of real estate in the U.S.

For all sellers that want to defer their capital gain, they are required to:

1. Place the proceeds of the sale into an escrow account of a qualified intermediary
2. Identify up to three properties targeted for investment within 45 calendar days of the sale of the prior investment
3. The investor must close on the purchase of one of those three properties within 180 calendar days of the sale of the prior investment.

Generically, these are the basic steps for all investors. There is a fee for the 1031 Exchange and global investors will also have to comply with the FIRPTA requirements in addition to the general investor requirements. However, in our experience, 1031 exchanges are straightforward to facilitate.

When you are contemplating the sale of your investment property, work with your accountant and Realtor to figure out if in your situation it makes sense to do a 1031 exchange, or if it would be better to simply pay the taxes on the profit. Once you calculate each financial scenario and take into account your personal objectives, it usually will be pretty clear which is the better option for your personal situation.

Final Points on Capital Gains Tax Advantages for Residents

In the U.S., a married couple is able to earn $500,000 on the sale of their primary residence tax-free. If you are single this number is $250,000. One way to realize a non-taxable gain is by making your U.S. home your primary residence.

Obviously, if this is the case, you must have an applicable residency visa. If you are a resident in your house for 183 days per year, or two years out of a five-year period, and have owned the property for at least two years, then each resident owner is entitled to $250,000 in tax-free earnings.

As a working example: if you purchased a home for $500,000 as a couple, and two years later sell it for $1 million, then the $500,000 gain can be split between two resident spouses as income, and there will be no tax on that gain.

Knowing Your Residency Status for Tax Purposes: The 183 Day Rule

You can be taxed for U.S. income tax purposes either as a resident or as a non-resident. Residents are required to report their worldwide income to the U.S. taxing authorities. Non-residents are required to report only income arising from U.S. sources.

There are several ways you can be treated as a resident for U.S. income tax purposes. U.S. citizens are always U.S. income tax residents, regardless of where they live. Under most circumstances, an individual who obtains a Green Card (which allows the holder to reside permanently in the U.S.) will be taxed as a resident.

Even if you are not a U.S. citizen, you could be determined to be an income tax resident in the U.S. merely by the number of days in which you are physically present in the U.S. during the current calendar year, or a combination of days over the last three years. If you’re physically present in the U.S. for 183 days or more in a calendar year, you are treated as a U.S. income tax resident.

Although all of this information may seem intimidating at first, a good realtor with a well-established network should be able to put you in contact with the professionals you need to make sure that you understand the rules and can enjoy your new Florida home worry-free!

There are so many places around the world to spend your money. So many hotspots to snap up a deal on investment property, so why choose Florida? Most people think they know what Florida’s about, but some of the reasons to invest your money here might surprise you.

1) Incredible Climate

The state of Florida boasts one of the most wonderful climates in the world. You likely already know the weather’s pretty good – it being called the Sunshine State and all – but did you know that we have an average of 300 days of sunshine per year? Even in the months of January and February, Florida offers blue skies and warm days. In fact this past February 1st the temperature in Miami was 79 degrees Fahrenheit!

For those of you coming from colder climates – where you’re lucky to see the sun for six months of the year – that’s pretty impressive. Add to that year-round swimmable, crystal clear waters, some of the best beaches in the world, and an abundance of natural flora and fauna, and you really have a climate that facilitates dream living.

2) A Huge Tourism Market – Growing Year on Year

When you invest in Florida property you are investing in a strong and growing tourism market. The United States Commerce Department’s National Travel and Tourism Office has as its goal to welcome 100 million global visitors each year by the end of 2021. Estimates are that these visitors will spend $250 billion during their stay.

For investors looking to make a return by renting their home short term to vacationers, there are few better places to do it than in Florida, and especially in Sarasota. You are buying in a state which welcomed 89.3 million visitors in 2012 and expects that number to increase by 5% this year.

That number includes 10.2 million overseas visitors, up 9% on the previous year. What this means, and what the numbers say loud and clear, is that Florida is a thriving tourism economy. Add to that the fact that the state’s service sector is highly geared towards tourism, and you have a package of great returns and holiday properties that are easy to manage from abroad.

3) Transparency & Ease of Process in Real Estate Transactions

With the right advice and guidance, you will find that Florida is one of the easiest places in the world to buy investment property. Real estate transactions are highly transparent and efficient. Timelines and processes are clearly defined, and most contracts offer a “time is of the essence” clause- meaning parties responsible for the transaction must work in a timely manner.

Florida is also one of the few places in the world to have title insurance: which means your title is 100% guaranteed rock solid. No one can ever claim they own your property, and that is backed up by a cast-iron guarantee from the title insurance company. This is a marked contrast to many European countries, where tracing the ownership of a property can be onerous and in some cases virtually impossible, which means you can never be 100 percent certain of your ownership.

4) Competitive Pricing & Great Returns

From talking to clients and people on our travels one of the biggest misconceptions about Florida investment property is that it’s expensive. While it’s true that there are mega-mansions costing tens of millions for sale, it’s also true that Florida has some incredibly affordable properties…in some cases beginning as low as $100,000. Add to that great returns that are achievable in Florida investment property, and you may find yourself enjoying free holidays as well as generating income. A win-win situation.

You can find out all the information you need on buying your Florida holiday home or property investment from our book “Your Guide to Florida Investment Property.”

Alternatively, click the button below to be put in touch with one of our hand-selected team of Realtors, who can advise you on location and lifestyle, and suggest properties that suit your needs.

With so many types of insurance out there, it can be confusing to understand your choices. Here we share with you what is important to know regarding Florida homeowners insurance so you don’t get caught unprotected.

Here’s How It All Shakes Out

Florida Homeowner’s Insurance

Homeowners insurance helps pay to repair or rebuild your home and replace personal property due to a covered loss. A typical policy would include loss from theft and structural damage from fire, leaks, water discharge, fallen trees, or as a result of a storm.

In our experience, the majority of claims tend to be for water leaks; from air conditioning systems, water heaters, plumbing, and roofs, rather than the more dramatic possibilities.

Mortgage lenders usually require homeowners insurance as part of the mortgage terms. If you are getting financing you must at a minimum have a basic policy.

Most policies include coverage for the house itself, as well as for the property inside the house.

Key Components of the Standard Homeowners Insurance Policy Include:

• Dwelling
• Other Structures (shed, detached garage…)
• Personal Property
• Loss of Use/Additional Living Expenses (if your house is uninhabitable after a covered loss)
• Personal Liability (if someone claims you caused them injury or property damage)
• Medical Payments (to others)

When you own a condominium, the structure will usually be insured by the condominium association and you will pay a portion of that cost through your association fees. You may then only need a policy that insures the interior portion— also known as “improvements and betterments”, that is, of your unit and the contents of your condo.

Typically insurance policies include a “deductible” or excess, which is the amount of money that the homeowner contributes to the repair or replacement cost of the property. Generally, the higher the deductible/excess the lower the annual premium.

Be sure you thoroughly review the type of policy you purchase and ask any questions. It is important to have the proper insurance and understanding of what you purchased.

In addition to the standard coverage, you may want to discuss the relevance of additional coverage. Some examples include identity fraud, pet liability, pool cages, and screen enclosures, mold, sewer backup, or valuable items such as jewelry.

Wind Policy: What To Know So You Don’t Get Blown Away

Wind or windstorm insurance generally is included as part of your Homeowners Insurance, but we want to discuss the topic a bit more thoroughly here as we consider it an important aspect of your policy to understand.

In much of Florida, we are susceptible to tropical storms or hurricane-force winds. As such, we guide our clients to ensure they are fully informed about the wind coverage that is included in their insurance package.

This includes providing them with information on how to help protect their home from damage, potentially reducing the costs of this portion of the insurance in the first place.

Protecting your home may even reduce the payout towards your deductible/excess.

Building Codes and Wind Policy: How Hurricane Andrew Changed Everything!

After Hurricane Andrew hit south Florida in 1992, municipalities around the state of Florida created higher standards to better protect homes from damage from winds and wind-borne debris. We refer to these as building codes.

These building codes include improved methods for attaching the roof to the house, reinforcing garage doors, installing windows that can withstand debris hurled at greater speeds, etc. The benefit of living in a home built to newer codes (or retrofitted with these features) is both a safer home and lower costs of insurance.

Older homes are more susceptible to wind damage as they are not made to resist as much wind as the newer builds. Examples of the types of damage that can occur from excess wind are having the shingles or roof ripped off, windows smashed from flying debris, garage doors or walls knocked down.

Many older homes have incredible charm, character, and features that newer homes may not have, so we are not discouraging you from looking at older homes, we just want you to know that there are measures you can take to help protect your home and reduce insurance costs.

Some examples would be to install new windows that have impact glass or hurricane shutters. You can have hurricane straps added to your roof system and also install a new impact-resistant garage door.

Building codes and building materials are both continually evolving. Have your Realtor, insurance professional, and home inspector help you understand the different trade-offs and costs associated with the different options.

Here’s an example to further explain this point:
You want to install a set of storm shutters (protection for windows and doors) and the cost is estimated at $6000, and you learn it will reduce your premium by $3000 per year. Most would consider this a good investment because the payback is 2 years. However, if the same shutters cost $150,000 then the payback would be 50 years and probably not a good investment.

The World Meteorological Association will name any storm that has sustained winds over 39 mph. With wind insurance, a standard deductible/excess is two percent for a named storm. For any other storm, the deductible you have pre-chosen in your contract will apply.

It is commonplace for the wind policy to use a percentage of the total coverage limit rather than a flat cost. For example, a wind policy for $250,000 with a two percent deductible/ excess means the insured pays the first $5,000 of repairs.

Again, you can choose the amount of deductible/excess based on where you are and how much you are willing to pay in premiums. Note, however, that sometimes the mortgage company may limit the amount of deductible/excess you are allowed to have on the policy.

Flood Insurance: How To Stay Above Water

A flood insurance policy protects your home against potential flood damage. The question of whether a property is in a flood zone comes up all the time from buyers. Even within our own real estate profession, however, many do not know how to respond accurately.

In the past few years, there have been numerous legislative and rate changes for homeowners’ flood policies due to the National Flood Insurance Program (NFIP). Even information from the current seller of a property—especially if they have an older home—may not be applicable as they may themselves not be aware of how their property has been affected by the changes.

The bottom line? It is best to consult a trusted insurance professional at the very start of the due diligence process with any property you put under contract, to get an accurate flood insurance quote and explanation of flood zones.

When and Where It Can Flood

Let’s dive into some basic explanations to help you get oriented to this topic in very simple terms.

Anywhere it rains, it can flood!

There are two main types of flooding. The first scenario occurs when there is a tropical storm or hurricane that produces a tidal surge: such as when water from the Atlantic Ocean or the Gulf of Mexico moves over the beach and onto normally dry land.

The second happens with heavy, rapid rainfall when storm waters have nowhere else to go. In other words, the water drainage systems, lakes, rivers, and streams cannot absorb excess water fast enough and so it overflows onto land, streets, car parks, or neighborhoods and then into homes.

Other conditions such as an outdated or clogged drainage system, or new development (a building, car park, or road) may also change the ability of the land to absorb excess precipitation and can result in a flood.

What Are Flood Zones?

Every area in the United States is classified as a flood zone. What does that mean? Everyone lives in a flood zone — it’s just a question of the degree of severity of the risk. You may live in a low, moderate, or high-risk area.

While most perceive that the closer you are to bodies of water the greater the risk, there are more factors that come into play. You can be in an area of the mountains and experience flooding because the water flowing from higher levels pools faster than it can drain or be absorbed.

While there are many codes used to define flood zones, there are two main categories: Special Flood Hazard Areas and Preferred Flood Zones.

What is a Special Flood Hazard Area

Areas that are at high risk for flooding are called Special Flood Hazard Areas (SFHAs). Most, if not all barrier islands around Florida are considered SFHAs, as are areas close to the coast and other bodies of water.

If you are in an SFHA and you are financing your property, flood insurance is required. If you pay cash it is optional, but again highly recommended. We personally advise everyone to get flood insurance.

If you are in a Special Hazard flood zone, an Elevation Certificate will be required to determine how high above or below the Base Flood Elevation (BFE) you are.

BFE is the height, relative to the mean sea level, that has a one percent chance or greater of flooding in a given year as determined by FEMA and adopted by your local jurisdiction.

Rates will go up sharply for each foot you are below the BFE and will go lower for each foot you are above the BFE.

Where we live in Sarasota, all new homes within Special Hazard flood zones are required to be built with the first living floor at or above the Base Flood Elevation. This applies even to non-waterfront property.

Insurance professionals refer to Flood Insurance Rate Maps (FIRMs) to be able to identify which type of flood zone a property falls within based on its address. These maps are constantly being updated due to changes in geography, construction and mitigation activities, and meteorological events.

Therefore, even though you may find sites available to the general public online that give flood zone codes, for truly accurate information you must contact your insurance agent or mortgage broker. These are the two parties who by contract have access to the definitive mapping site.

Other Factors To Consider

Another complexity that may affect flood insurance rates is the value and location of appliances/equipment in and around the house that serves the home. Insurance companies may want to know how elevated the appliances are inside or outside the home, how many stories exist in the home, and where the main living areas are.

Florida homeowners are able to purchase flood insurance through various providers, but by virtue of the National Flood Insurance Program (NFIP), the federal government has standardized the rates so your annual cost will be the same irrespective of what insurance company you choose.

Currently, the maximum coverage available through the NFIP is $250,000 for the structure and $100,000 for the contents. The current annual cost if you are in a Preferred Flood Zone and is $414, with a $1000 deductible/excess for each claim.

One of our German clients purchased a home in 2013 on a barrier island about 200 meters from the Gulf of Mexico. Even though his home is in a Special Hazard Zone, he currently pays about $404 per year. The home was built in 2006 and the first living level (air conditioned space) is roughly eight feet above the base flood elevation.

Flood insurance normally requires a 30 day waiting period from the time you sign up before the coverage is effective. Exceptions are only made for certain circumstances such as if you’re purchasing a home and there is a loan being taken out to finance the purchase.

You can find more details about The National Flood Insurance Program at: www.floodsmart.gov

There are several options for how to hold title on your Florida real estate. However, if you are financing, you only have one option. Lenders require your property title to be in the individual’s name(s).

If you pay cash, some of the more common ways you can elect to hold title are as an individual, as a U.S. or foreign corporation, as a limited liability corporation (LLC), or as a trust.

How You Hold Title Determines Your Property Tax Liability

We want to begin by emphasizing two key points:

• First, the biggest consideration for how to set up your property title is how each scenario will affect your tax liability, especially capital gains and estate tax. Estate tax (tax on your right to transfer property at your death) can be particularly onerous if not planned for up front.
• Second, the tax codes are generic, so it is really important to find out how your specific situation may be affected based on the tax treaties that exist between the U.S. and your home country. Many countries have tax treaties with the U.S., which can reduce or eliminate certain tax obligations in/to the U.S.

Each form of ownership has its tradeoffs—some large, some small. Our advice, as always, is to make an informed choice. Everyone’s financial and personal circumstances are unique; it’s worth investing the few hundred dollars to find out whether the pros of using an LLC or foreign corporation to hold ownership make sense for you.

Below we illustrate some of the tax advantages and disadvantages of the most commonly used ways to own U.S. real estate available to nonresidents.

Property Title and Individual Ownership

Taking title in the individual’s name is the most frequently used option for holding property title. Its advantage is that it is the method that results in the least amount of U.S. income tax when a property is sold.

If the property is held for at least one year before it is sold, the maximum tax is calculated at 15-20 percent (depending on the individual’s tax bracket) of the profit. If the net income from any one year is greater than $250,000 there is an additional 3.8 percent tax on the gain.

However, this could be the most disadvantageous way of holding title if the non-resident dies while still owning the property. The estate tax is assessed on the fair market value of the property at the date of death of the owner. It is payable to the IRS no later than nine months after the date of death and, if not paid in a timely manner, it is subject to penalties and interest, which are payable in addition to the estate tax.

For non-US residents, the estate tax applies to property valued in excess of $60,000. The marginal rate for the estate tax imposed on the estate of decedents dying after December 31, 2012 is 40 percent.

U.S. Corporate Ownership

Non-residents are eligible to take title to U.S. real estate in the name of a US corporation. Unlike individual ownership, the corporation does not get the preferential capital gains tax rate of 15 percent or 20 percent (depending on one’s tax bracket) on long-term capital gains.

If the property is located in Florida, then there is a state corporate income tax of 5.5 percent of profit in excess of $5,000 that must also be paid. The overall highest federal income tax rate for property in Florida held through a US corporation is approximately 38 percent.

Compared to the maximum individual tax rate of 15%-20% on the sale of the property, the corporate income tax rate is very high. This is obviously a disadvantage of U.S. corporate ownership of real estate.

The potential advantage of US corporate ownership of US real estate is from the standpoint of US estate taxes. Although the value of shares in a US corporation owned by a non-resident is generally subject to US estate tax upon the death of the owner, estate tax treaties with certain countries (for example, United Kingdom and Germany) provide for an exemption of these shares from the US estate tax. This can be a substantial benefit for those non-residents who qualify.

Foreign Corporate Ownership

This is a fairly rare method to hold title and brings with it some complications. But is worth knowing about as it may suit your unique personal situation, especially if you are older, don’t have an income as such, and are seeking to avoid estate tax.

The foreign (non-US) corporation is subject to the same income tax rates as the US corporation. The advantage of the foreign corporation lies with the U.S. estate tax. Unlike the US corporation, all nonresidents are exempt from US estate tax upon their death if the property title is held by a foreign corporation. The country of residence of the owner is irrelevant.

US Limited Liability Corporation Ownership

US limited liability companies have become increasingly popular as an alternative for ownership of US real estate by non-residents, due to their extreme flexibility.

The limited liability company is a legal entity. The taxability of a limited liability company is dependent on several factors. A limited liability company with two or more members is taxed as a partnership, unless it has elected to be taxed in another manner, such as a corporation.

If the limited liability company has only one member and it has not elected to be taxed as a corporation, then it is treated, for income tax purposes, as a “disregarded entity” and the owner is taxed directly.

For example, if the owner of a single-member limited liability company is a foreign individual, then the rules and tax rates applicable to foreign individuals will apply. The single-member limited liability company will provide the owner with limited legal liability, but it will be taxed in the US for income and estate tax purposes as if the company did not exist.

Because there are so many variables involved, it is critical that you understand your options and how they relate to your given circumstances when it comes to deciding how to hold title on your new Florida property.

Your real estate agent should be able to put you into contact with an accredited tax consultant to find out what will ultimately make the most sense for you before you buy so that your transition into your new Florida home is smooth and worry free.