Florida Homes and Properties

Archive for December, 2008

A key factor in the present Florida real estate troubles is home affordability. Many other issues exist and can be considered part of the normal market fluctuations. However, affordability is invariably the essential element.

Comparisons of Home Prices and Family Income in 1980 and 2005

Let’s use Miami-Dade’s median home price and Florida’s median family income statistics for this purpose.
Median Home Price in 1980 – $75,000.

Median Home Price in 2005 – $372,000.

1989 Median Family Income in Florida = $ 21,355.

2005 Median Family Income in Florida (estimated) = $60,000.

Increase of Median Family income in the same period = 181%.

Increase of Median Home Price between 1980 and 2006 = 396%.

Note: These figures have not been fully verified. They have been taken from different sources, and could reflect some inaccuracy. They are used to graphically explain a tendency, and only in this context, will they serve the purpose of this essay.

Average property tax for new buyer (including Homestead exemption) in 1980: $ 850.

Average property tax for new buyer (including Homestead exemption) in 2005: $5,899. (Approximate figures)

Homestead exemption grants a $ 25,000 deduction on the home assessed value for homeowners who qualify and register with their county appraiser.

What is Save our Homes ?

In 1992, Florida voters approved an amendment to the Florida constitution that limited the amount of value a homestead property could increase for tax calculation’s purposes.
The law limits assessment increases to 3% percent or the increase of the Consumer price Index – whichever is less.
Non-Homestead property is assessed at the full market value annually.

Home Affordability as considered through FNMA guidelines

$36,588 Minimum Yearly Income, as per FNMA guidelines, was necessary to cover Median Home purchase in 1980, assuming 90% financing @ 12.5% annual interest, 1% insurance annual rate, (PITI= $854).

Note the very high interest rates prevailing in the 80’s. (PITI = Principal + Interest + Taxes + Insurance)

$134,086 Minimum Yearly Income as per FNMA guidelines, was necessary to cover Median Home purchase in 2005; assuming a 90% financing @ 6.5% annual interest, 1% insurance rates, (PITI=$3,152)

Roughly, FNMA basic guidelines require that no more than 28% of the buyer’s gross income should be dedicated to pay for his monthly PITI (Principal + Interest + Taxes + Insurance).

To be noted is the dwindling affordability despite the fact that mortgage rates in 2005 were half of what they were in 1980.

Impact of Property taxes as compared to median home values in 1980 and 2005

Property Tax for new buyers as a proportion of median home value in 1980 = 1,133%

Property Tax for new buyers as a proportion of median home value in 2005 = 1.586%

The heavier burden is partly due to the decline of the homestead exemption as a proportion of home value.

The $25,000 exemption represented 33.3% of the median home value in 1980.

It represented a measly 6.7% in 2005.

Percentage of Median Family income dedicated to Home Property Tax in 1980 = 4%

Percentage of Median Family income dedicated to Home Property Tax in 2006 = 9,83%

However, this increase is only valid for new buyers in this market. The Save our Homes Tax break
unfairly burdens new buyers, vacation-home owners and investors, and protects Old Homestead Owners with the limitation to 3% yearly increase in their property taxes.

Fact: Even though Median Home Values have increased proportionally more than double the Median Family Income, and substantially increased the tax base, Counties and Cities, as beneficiaries of property taxes, have found their way to increase their mileage (or tax rate), further aggravating the cost of owning a property in Florida.

Do we fully understand the message that these irrefutable facts are sending to all parties?

To old homeowners in Florida: Do not ever, ever move from your house or condo. You will be punished by an unsustainable raise in property taxes, even if you downgrade to a smaller and more affordable home.
Do not try to add space, build or remodel. Every added square foot will be taxed at the full market value, because it would not be covered by the Save Our Homes exemption. You would be surprised by how much it could raise your tax bill.

To Owners of second homes or vacation homes in Florida: Congratulations, your equity has tripled in the last 10 years. Now, take your money and run. From now on, you are being hit with taxes three or four times higher then 10 years ago; while you are not taking advantage of schools and other infrastructure designed for permanent residents, you are paying the highest bills. Conclusion: Sell

To Investors who have held their property for more than 5 to 10 years. Congratulations; time to take your profits and find a better investment. Your tax expenses are 3 or 4 times what they were when you bought the property. You have tried to raise the rents you collect to cover your rising costs, but you have not been able to keep up to tax and maintenance fees increases. The fact is that renters cannot afford to pay a rent that would make sense for your investment.

To Investors who bought recently. Good luck. You have paid the high price. Your property taxes are high and relentlessly increasing. Your rents barely cover your taxes, maintenance fees and a tiny part of your monthly mortgage payments. The message: Cut your losses, sell and run… But this is the sticky situation of thousands of other “lucky” investors. As a last recourse, just try to rent it, take a monthly loss and hope for the best.

To New Homebuyers. Good luck. You are paying the highest prices. You are paying the highest property taxes. Your expectations of a quick valuation of your new home will have to wait for better times. Meanwhile, just clench your teeth, take the hit and hold on.

To Renters. You are already experiencing a strong pressure on rent prices and it will persist for some time. Your American dream of homeownership is being crushed and is almost unattainable now, but what you are paying in rent is almost a bargain. But expect progressive and unavoidable raises.

And the message that Florida residents are increasingly sending:

To Local Governments: You have been running wild with our dollars. You are fat and rich but you would not give up; you keep wasting our money and you keep increasing our taxes, and today you are the only beneficiaries of the real estate mayhem that is threatening our state. What about some legislature-mandated spending limits?

Correcting the problem:

Whoever is now a beneficiary of the Save our Homes taxation should not tolerate any intent to take away this privilege. After all, 3% cumulative annual increase (as allowed by the Save our Homes rules) is more than fair.

Cost of living has not on average increased more than this percentage during the last 10 or 15 years. So, why accept to be taxed on hypothetical sales value of your homes by greedy local government? We all know that county and city services have not improved in any way to justify three and four times larger tax bills. Therefore, their expenses should have increased at the same rate as the national inflation rate. Unless they have chosen to mask their inefficiency at taxpayers’ expense.

To the contrary, we can even argue that the mushrooming new constructions have already increased their tax base in such a way that the common homeowner should have expected a reduction in tax rates.
Legislators should better consider new regulation to transfer these Save our Homes advantages, when homestead owners switch properties of the same of lesser values. This would surely reactivate the real estate market.

There is no doubt that the present level of property taxes should face a serious examination in order to place them back at their historical levels, as a reasonable proportion of median family incomes, as opposed to their now almost confiscatory levels. I am talking about reduction of tax bills.

The present real estate recession is not due to circumstantial or accidental factors. There are deep economical reasons which can and should be corrected. Affordability of homes is part of our government responsibility and should be addressed accordingly.
Unfair and abusive property taxes are one known issue and voters should put pressure on their representatives to correct it.

We are not talking about tentative and timid measures. I have heard of a motion to increase the Homestead exemption from $ 25,000 to $50,000. This will not solve anything. It would just be a symbolic and political step.

Why about a real study of the impact that 25 years of inflation have done to nullify the economical and social effect of this exemption? Shouldn’t we roll it back to be the same proportion of basic home values as was in its original intent?
Wouldn’t a $ 100,000 exemption be closer to reality? Wouldn’t that help the first time home buyer achieve the American dream? Wouldn’t that be a real injection of reality to our real estate market and our economy in general?

Affordable housing for Floridians is an urgent necessity. No doubt that million-dollars homes and condos have contributed to our economy, but will there be any economy left when working people start leaving the state because of unsustainable home values?

The “save our homes” laws have somehow protected a portion of our homeowners. However, they are an incomplete and unfair arrangement. A complete revision to maintain this protection and also protect new homebuyers, vacation home buyers and investors against abusive property tax increase would be welcome.

Of course, the property tax issue is not the only element in home affordability. Interests and financing costs, inflation, salaries, cost of building, land values, are also determinant factors.

But property taxes are a cumulative burden on the homeowner and they will haunt him year after year. It is time for local governments and our legislators to address this issue that is vital for the survival of our battered middle class.

Disclaimer: This article represents the personal opinions of the writer and are not related to any firm, association or business with which this writer maintains any kind of relationship.

Given the fact that the housing market is at an all time low in the State of Florida, owning a vacation property in Florida is now considered to be a realistic endeavor for those that otherwise could not make their dream a reality. There is a large surplus of beach houses, private villas, luxury homes, and standard homes on the market in Florida, but there is a rapid decline in interested buyers. It does not matter if you want a luxury vacation home that sits on Miami Beach or a home that is tucked away in a quiet community, there are many that you may choose from and the prices are just right! In this guide, you will learn how to choose the best vacation home in the Sunshine State for your needs.

The first step to discovering that perfect vacation get a way in the luxurious State of Florida is to research the state as a whole in order to determine which area is right for you as well as those that will be vacationing in the home with you. You may like to have a home that is located on a beach, or close to a beach. You may want to purchase a home that is located on one of the many islands that are part of Florida. You may want to purchase a home that is located on a river or lake, in the wooded and private areas of Florida, or even near the larger cities located in Florida, such as Miami, Orlando, or Jacksonville. It is important to know right from the beginning what type of location is ideal for you.

When purchasing a vacation home in Florida, it is important to consider the taxes that you will need to pay that is real estate based, the type of homeowner’s insurance that you will be responsible for keeping on the home, and other expenses. If you purchase a vacation home that is near the coast, you can expect to pay higher taxes due to the fact that these areas are typically congested as far as tourists, and the general population is concerned. You should also understand that having a home near the coast will have higher insurance rates. This is mostly due to the fact that Florida experiences many annual tropical cyclones and damages typically occur as a result of them.

You will also need to determine if your vacation home needs to be in an area that puts you in close proximity to employment opportunities, medical services, and educational facilities. There are many small communities in the State of Florida that only have access to a limited number of resources when it comes to employment, health services, and schools. Then, there are extremely large, populated areas that are close to many of these types of institutions, opportunities, and services. Knowing what you need, what you want, and how to access sources that you will depend on while in Florida will help you choose the best possible vacation home in the state!

When considering investment properties, first of all, it must be determined that it is profitable and a good idea to purchase rental properties. Let’s talk about this aspect. Owning rental property produces rental income which, if after expenses are deducted produces a profit, would be viewed as a good investment. Add to this the possibility that property has the potential to increase in value over time and you have some solid reasons to purchase investment properties.

If the rental income is paying more than the monthly mortgage amount leaving some excess for home repairs, it is possible the home could be paid off entirely by renters. At some point in the future, this same home can be sold with the seller receiving the full value of the property. Sounds like you can’t go wrong in owning rental properties. But is this true? It all depends on whether the investor has thoroughly completed their homework.

If you are presently considering an investment in rental properties, be sure you do some thorough research. It’s important for the property investor to gather adequate information before committing to rental property ownership. Searching the internet, reading real estate publications, attending seminars, and speaking personally with property investors is a great beginning that will place you on the road to making a wise, informed decision. Starting up a business is a little like real estate investment. Knowing the facts and putting time into the purchase gives you a much greater chance of success. Doing your homework can prevent disastrous property investment decisions.
Why a Real Estate Investment in Florida?
There are many issues that need careful consideration before making a final decision on property investment. These include the location of the property, Are you interested in an urban or rural location? What is the condition of the property, how much maintenance will be required to keep it in good working order? What are your financing options? What do taxes run on that particular piece of property in that location? How will you select tenants?

These are all vital questions that could determine the success or failure of your venture. Let’s refer to the first and probably most important of questions to ask regarding property investment. What location will you choose? In searching for the best possible location, it is important to look at trends among renters. The American population continues to grow with a gain of about one person every 14 seconds. Where are all these new people coming from? An increase in our own population and immigration account for this strong growth. With this in mind, it is safe to say there will be a continued need for housing in the future. Concerning the immigration population, California, New York and Florida lead the list, in that order, in new residents. What a potential pool of people to pull from! Looking at the cost of real estate purchase in these three states, a real estate investment in Florida ranks among the most reasonably priced. Along with the strong immigration growth, Florida is a hot tourist destination, making it an ideal location for the purchase of rental property.

Real Estate Investment in Florida – Where is a Good Choice?

Along with having the 3rd highest rate of population growth, the high tourism rate is definitely a great reason for a real estate investment in Florida. With its year-round temperate climate and vast array of attractions, both natural and created, it is the ideal location for family holiday vacations. Families and singles return again and again to enjoy the delightful holidays Florida offers. Deciding where to purchase your real estate investment in Florida may be a difficult decision. Tourists in Florida are searching for sun and fun. A real estate investment near the beach, from Key West in the south to Jacksonville in the north and east from Daytona Beach to Fort Myers would offer good returns on your investment. Beach lovers will pay top dollar for rentals near the ocean. Let’s consider Central Florida as a wise real estate investment. Walt Disney World has made Orlando the 3rd favorite tourist destination for overseas travelers. Only Los Angeles and New York City rank higher. With its resplendent and numerous lakes, tropical landscaping and modern, clean skyline, Orlando, the largest city in Central Florida, has aptly earned its title of “The City Beautiful”. Along with the biggest drawing card of all, Walt Disney World, theme parks such as Universal Studios and Sea World, have made Orlando one of the largest markets in the world for tourism. 2.6million international travelers flocked to Orlando in 2004, according to the Orlando/Orange County Convention & Visitors Bureau, a 12 percent increase from 2003.

Real Estate Investment in Florida – Where in Central Florida?

Having established the fact that Central Florida is a hot tourist market, it would stand to reason that a real estate investment in Florida, particularly the Central Florida area, would make good business sense. But how would one go about locating a desirable area and property for this investment? A beginning search would lead you to researching properties listed with the major real estate companies or visit craigslist.org in your area. Deciding which type of property is important. Do you prefer a single family residence, a townhouse or condo? Keep in mind that townhouse and condo purchases may offer onsite property management services. Will your real estate investment in Florida purchase be in a new development, or in an established, older area? Purchasing rental property in a new development often offers pre-construction prices which can be substantially lower than prices post construction. Are you available to manage the property, or do you wish to employ a property management company to take care of the details of property upkeep, record keeping and renter booking? Doing it yourself can save you 6 percent and more of the cost of rent, but can end up costing you if you don’t know what you are doing. If you do not plan on living in close proximity to your rental property, it would be wise to consider spending some extra dollars to employ a property management company. This will save you headaches and time, your own time for property maintenance and the time it takes to locate renters.

Real Estate Investment in Florida – Consider Davenport, Fl
Considering a real estate investment in Florida, just 5 miles southwest of Disney you will discover the quiet, quaint town of Davenport, Fl. Its central location yet off the beaten track give it an appeal all its own. Davenport, Fl is only 2 square miles in size. With its small town appeal, it is an attractive rental option for tourists. Davenport, FL is under 30 minutes from Universal Studios, Sea World, Disney World and other Orlando attractions. It is just one and ? hours from Kennedy Space Center and within an hour’s drive to Tampa (home of Busch Gardens) and Cocoa Beach. After a hectic day at the major tourist attractions, what a welcome respite it would be for renters to lodge in this quiet location which is surrounded by orange groves. Convenience is another drawing card with a Super Wal-Mart, open 24 hours a day, just nine miles away. Kissimmee is just a short drive with its spectacular nightlife entertainment options such as Arabian Nights and Medieval Times. Family oriented Kissimmee attractions, Green Meadows Farm and the Silver Spurs Rodeo are also nearby. The small town environment of Davenport, Fl offers a quiet stay that is near all the most popular attractions, including theme parks, family spots and great shopping and dining, located not far from the Florida Mall, outlet malls and the Orlando Mall.

Bimini Bay, Davenport, Fl

Located in Davenport, Fl in close proximity to Walt Disney World, is a brand new development, Bimini Bay. On 80 acres, 360 three bedroom two bath townhouses are ready for purchase. The Davenport, Fl townhouses are turnkey ready with fully equipped kitchens, appliances and all that is needed to set up house including linens. There will also be 360 fully equipped one bedroom apartments. The planned amenities include a resort pool, two movie theatres with stadium seating, a major chain restaurant, a large Club House, a pool, lazy river, water slides, exercise room, tennis and volleyball courts along with many other features. The best part about an investment in a townhouse at Bimini Bay, Davenport, Fl is that the property maintenance aspect is taken care of for you. The investor reaps the benefits of ownership such as property appreciation and the ability to stay in the purchased property for a minimal fee without the headaches of property management. The onsite management team takes care of maintenance, markets the property and secures renters. The investor receives the same rental income each month, making this a low stress investment. At the beginning of this article, there was discussion on managing rental property yourself or obtaining a management company for this purpose. Purchasing property at Bimini Bay ensures the on-site management will handle all the issues of property management, while allowing the investor the advantage of a steady income along with the benefit of using the property.