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We are always being asked certain questions that are quite common. We would like to take this opportunity to answer some of these questions:
Q) We need a condo or home rental, in the Ft Lauderdale area, for a few days or maybe even 1 or 2 weeks. What do you have available?
A) Although such short term rentals are offered in other areas of Florida, Southeast Florida (Dade, Broward and Palm Beach counties) condo associations generally restrict rentals to a minimum period of 90 days. Many associations have 1 year minimum rental restrictions. Additionally, most homeowners in the area do not wish to rent their homes for such short periods for various reasons. There are a very few select number of single family homes throughout the area that are willing to rent on a minimum weekly basis. Generally, the weekly rents start at a minimum of $2500.00 plus approximately 11% in area taxes. We do not directly handle such rentals. However, we will gladly refer you to the local area Realtor® that specializes in this very limited market. Please call our office for further contact information.
Q) We are interested in a southeast Florida foreclosure property. Can you help us?
A) The best help we can provide you in this regard is educational. Contrary to the many books and videos on bank and government foreclosures the foreclosure process is not what most people imagine. Here are some of the unknown facts:
a) The successful bidder at a foreclosure auction must pay a minimum 10% deposit of the purchase price by cash and/or bank check at the time of winning the bid.
b) The successful bidder at a foreclosure must pay the balance of the purchase price in cash and/or by bank check within 2 hours of winning the bid or possibly lose their deposit.
c) In many cases the properties are bought at auction without the ability to inspect the interior of the subject property. Basically, they are being bought as-is and sight unseen.
d) In many cases the properties are occupied by the current owner and/or a tenant. The successful bidder, should they finally receive title, would then be required to evict these occupants.
e) There is no guarantee that all lien holders to the property have been named, and served process, correctly. Therefore, a successful bidder may face a future claim against the property by a past lien holder.
f) The monies paid at the auction to the court will be held by the clerk for a period of 10 days. The current owners have a right to redeem their property within those 10 days. Should this occur the successful bidder's monies will be returned by the clerk's office.
g) According to recent articles current area foreclosure are selling at approximately 95% of their actual value.
There are several other unknown facts that will generally cause most individuals to stay clear of the foreclosure market. The ones outlined above are usually enough to give most people a reason to avoid further consideration.
Q) We are interested in acquiring a condo or home as strictly an investment that we want to be able to rent out somewhere in the Ft Lauderdale area. (Remember, condos generally prohibit short term rentals less than 90 days unless you are purchasing a much more expensive condo/hotel.) Will the rent cover our expenses including mortgage, taxes, insurance and maintenance?
A) First, many condos built prior to 1990 prohibit renting the condo for the first 1 to 3 years of ownership. Generally, if you are obtaining a mortgage that is in excess of at least 60% of the purchase price you will not have a before tax positive cash flow. In fact, with all expenses considered you will probably have a before tax negative cash flow. The southeast Florida rental investment market is generally best suited for individuals that are in a high tax bracket that are willing to subsidize the before tax negative cash flow in consideration for the benefit from their tax savings and long term equity appreciation. We strongly recommend that you consult with your accountant in this regard.
Q) We are relocating to southeast Florida in the near future. It appears that it will cost us less each month to rent than to own when comparing rent vs. mortgage, taxes, maintenance, insurance, etc. Is this true?
A) Again, this depends on many factors including most importantly how much of a mortgage are you going to need. It is generally true that the costs to maintain a property, including a highly leveraged mortgage, will be more expensive than rent for a similar property. Many factors that people forget to consider is their tax savings and anticipated long term property appreciation. We are fully prepared to work with you in a preliminary review of what is in your best interest. However, we always recommend that you should consult with your accountant for a more detailed opinion based on your specific goals and situation.
Q) We see advertising for 1% and 2% mortgages. We can afford that but it seems too good to be true. What's the truth behind these low rates?
A) There are many names for these types of loans. Generally, they are best known as a "negative amortization" mortgage. The interest you are actually being charged is considerably more than the 1% or 2% advertised rate. These low interest rates are used to calculate your minimum monthly payment and not the interest rate of the mortgage. The difference in the rate that you do not pay is added to your principal balance each month. Therefore, it is very possible that your mortgage balance will be greater than the amount you originally borrowed. Furthermore, most of these types of mortgages have a maximum balance that they will allow the borrower to attain. Once the borrower attains this maximum balance their minimum payments default to a substantially higher amount that reflects the higher interest rates that are being incurred by the borrower. These mortgages should only be considered after careful consideration with your accountant and a full understanding of their complexities.
Q) What are the property taxes in your area?
A) The rule of thumb that is generally used is 2% of the purchase price. However, there are many situations that will cause the property tax to be substantially less expensive short term and long term. These include newly constructed condos and homes, under valued condominium buildings and subdivisions, and homesteading. You would also want to consult with your accountant to determine the net effect to you after income tax considerations have been applied.
Q) We are not sure if we want a house or a condo. Condo fees seem rather expensive. What's the truth?
A) Condo fees generally include insurance, water, trash removal and overall maintenance and management. These costs will generally be considerably less expensive when compared to the same expenses as incurred in a single family home.
Q) What is the difference between a Realtor® and someone that simply has a real estate license?
A) A Realtor® is an active real estate licensee that holds membership in the National Association of Realtor® and that subscribes to the association's Code of Ethics. There are many other benefits to working with a Realtor® and we invite you to visit the National Association of Realtors® website at www.realtor.org and the most popular real estate website in the country at www.realtor.com
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