The U.S. credit crunch and the flood of homes and condominiums for sale in Florida has created some outstanding opportunities for foreign nationals. Many "snowbirds" from Canada and the United Kingdom are taking advantage of this opportunity flocking to the warmer climate. The relative weakness of the dollar and dramatically reduced prices has given many visitors an opportunity to fulfill their vacation home dreams.
If you are a Canadian citizen, you would be well-advised to understand the differences between Canadian and U.S. home buying processes, as well as the tax implications of owning a second home south of the border.
Focus on Existing Properties in Established Developments
Real estate consultants have been advising foreign nationals to give preference to existing properties in established developments. This avoids the problems associated with unsuccessful developments where things can change quite dramatically if the original developer goes into default and the property is taken over by a different developer. While this may mean that you the buyer miss the opportunity to buy at so-called "pre-construction" bargain prices, the reduction in risk may prove well worth the slightly higher price you'll pay.
One of the great things about BeachWay is that we are a 100% completed and established development with no pre-construction or incomplete development uncertainties. We are 70% sold out and are very financially sound. You can feel secure knowing that what you see is what you are purchasing! Our developer has been in business for over 30 years in Florida. – Sharon Hunt
Qualifying to Buy
Since it is more difficult to track down foreign nationals in case of a mortgage default, Florida lenders may require more up-front evidence of financial stability. Some lenders require that buyers place closing costs plus 12 months of principal, interest, taxes, and insurance (PITI) in a U.S. bank account. They may also require you to put more money down, as much as 25 - 30% and demonstrate that you have liquid reserves available to cover three to six mortgage payments. Of course, if you pay cash, you don’t have to worry about these details.
Here at BeachWay, we are extremely proud to have the seal of approval from the Government. We are Fannie Mae approved which means we have passed all the tests! This approval allows our buyers the opportunity to obtain a mortgage to purchase a condo at BeachWay through one of our preferred lenders. – Kim Martinson
Financing and Closing Costs
Begin the loan pre-approval process before you begin searching for a home or condo in Florida. This way, when you find that dream second-home, you will be negotiating price with the seller from a position of strength. The seller will know upfront that you are fully prepared and "qualified" to buy.
Expect the length of your mortgage loan to differ from what you may be used to. For example, rather than the Canadian standard of one to ten-year mortgages, U.S. mortgages are typically written for 15 or 30 year terms.
It may take more time to complete a real estate sale in the U.S. Be prepared to wait three to five weeks or more to close on your Florida real estate property once you have a signed purchase contract. During that period, all of the third-parties involved (inspectors, appraisers, insurance companies, title companies, etc.) will be conducting their transaction responsibilities.
Since we have already sold a substantial number of condos to foreign buyers, at BeachWay our sales staff is very knowledgeable in assisting you through the process. We make sure you have all of your questions answered and feel confident in your purchase decision. The goal is to make this as smooth a transaction as possible for all involved.- Sharon Hunt
Minimizing Your Taxes and Protecting Your National Health Benefits
Understand that even though you are a citizen of another country, you may be treated as a U.S. citizen for tax purposes if you spend too much time at your Florida get-away. In general, limiting your time in Florida to less than six months each year minimizes your tax implications and may not compromise your national health care benefits.
If you rent your vacation property for the portion of the year that you spend at home, you will need to file a federal U.S. income tax return. You will have to declare your rental income, but you may be able to deduct expenses such as maintenance, utilities or mortgage interest. Since Florida doesn’t have a state income tax, income from your property will only be taxed by the federal government.
Be aware that non-residents do not get all of the property tax advantages granted to permanent Florida residents, so be sure to inquire about the difference this will make in your on-going costs. A competent Realtor or developer’s representative can explain these restrictions to you.
We can offer local referral recommendations to assist you in getting financial answers regarding taxes, etc. – Kim Martinson
Property insurance in Florida can be expensive. One way to limit this expense is to look for properties built after the most recent set of building code updates, which mandated that structures be able to withstand higher winds. Insurance companies charge less to cover properties that meet the latest code requirements. Homes and condos that are not located directly on or adjacent to the waterfront or in designated "flood zones," cost less to insure.
We are always upfront about expenses you will incur to carry the condo annually. These costs are very low at BeachWay compared to most other communities. Newer construction and low monthly maintenance fees are a big plus for us!
BeachWay is a newer development built in 2001. We are not in a Flood Zone as most beachfront properties are. This greatly reduces your cost of insurance.- Sharon Hunt
Avoiding Estate and Probate Taxes
Foreign nationals can reduce their exposure to U.S. estate taxes. For example, one of the best ways for Canadians is by placing a non-recourse mortgage against the property. A non-recourse mortgage gives the mortgage-holder recourse only against the property itself, not against any other assets of the borrower.
The probate process of transferring property to beneficiaries can be lengthy and costly. Putting the deed to your Florida home in the name of a Cross Border Revocable Living Trust (CBRLT) rather than in an individual's name may offer several advantages. Properties held by a CBRLT are exempt from Florida probate and thus have no filing requirements for U.S. or Canadian tax authorities, for example.
There may be other benefits under U.S. or your own country's rules to avoid estate and probate costs. Check with a Florida-based attorney to see what benefits may be available to you.
We can help you identify a competent attorney who deals with cross-border property investments. – Kim Martinson
In summary, as a foreign national considering buying a home or condominium in Florida, there are things you need to understand, but overall, there has never been a better time to buy a seasonal or second home you've been dreaming about, especially along Florida’s Gulf Coast.
Credit Andree Huffine 4/17/09
Updated by BeachWay sales staff 10/14/2010