Buying a home in Florida

Let’s be realistic. When it comes down to it, most Canadians don’t like winter. Shovelling snow isn’t our favorite pastime. Icy walks don’t win popularity contests. Wind chill factors aren’t what we want to hear about just as we’re setting out to walk the dog.

So it’s hardly surprising that tens of thousands of us flock south every winter, with Florida still the number one destination. Many of these snowbirds end up buying a Florida property as a winter escape or as a permanent retirement residence.

My wife and I are in that group. After several years of renting, we decided four years ago to buy a single-family home on the Gulf Coast. We love the place. But the experience has taught us a lot about Florida real estate and some of the pitfalls to avoid when buying.

10 tips for buying:
If you decide you want to live this particular dream, here are 10 tips that may help you make the best choice:

Tip 1 – Get to know the state
Florida is not homogeneous. For example, there is a significant difference in winter weather patterns between the north (often wet and stormy) and the south (usually dry and warm).

>Tip 2 – Rent before you buy
 If you’re considering a specific community, spend at least one winter season in rental accommodation. You may discover things that turn you off. Better to “test drive” before you buy.

Tip 3 – Check out the market carefully
Although prices of resale properties moved up only four per cent on average across the state in 2000, some areas are experiencing heavy demand, especially the southwest.

  • Average prices in Fort Myers/Cape Coral rose nine per cent.
  • In Naples they were up seven per cent.
  • Average prices in Fort Walton Beach in the Florida panhandle fell 10 per cent.
  • In the Sarasota area they remained stable.

Next page: Be clear on what you want

Tip 4 – Be clear on what you want.
Golf course communities are very popular, but there’s a lot of cheek-by-jowl construction. If you crave privacy, they may not be your best choice.

Tip 5 – Research ongoing expenses
It may cost a lot more than you think to own a Florida property. Requirements will vary depending on what you buy. However, you may have to pay for services such as:

  • Pest control (roaches are a major problem in many areas)
  • Sprinkler system maintenance
  • Pool maintenance
  • Landscape maintenance
  • Home security Insurance is expensive because of the need for hurricane and flood protection.
  • Water bills are on the rise because most of Florida is prone to drought.

Tip 6 – Have a reserve for extras
Your Florida home may require add-ons that can cost thousands of dollars. Two examples:

  • Hurricane shutters
  • Screens for your balcony, patio or lanai to deter those pesky critters that breed in the many canals and marshes.

Tip 7 – Investigate the mortgage market
Obtaining a mortgage may be more complicated than you expect. Many U.S. lenders won’t provide mortgages to non-resident aliens-which is what you’ll be unless you move there permanently. Lenders are concerned about legal action should problems arise. Try to identify at least two lenders willing to advance funds.

Next, check out the rates. They may not be what they seem. As of late February, rates for a 15-year fixed mortgage were running in the 5.75 per cent to 6.5 per cent range. But some lenders charge points on top of the posted rate.

This is a one-time payment assessed at closing. Supposedly it covers a variety of services, but it’s mainly an interest rate buy-down. If you pay points, you should get a reduced rate.

Next page: Don’t plan on renting out your property

Tip 8 – Don’t plan on renting out your property
Many Canadians have the idea they’ll rent their place when they’re not in residence to help cover expenses. Unfortunately, non-resident aliens must pay a 30 per cent withholding tax to the U.S. Internal Revenue Service on gross mortgage income with no deductions allowed.

You’ll also be taxed on your rental income when you file your Canadian return. Add on the fees of a rental agency, and there’s not a lot left.

Tip 9 – Watch out for U.S. estate taxes
Although the Bush administration is talking about abolishing U.S. estate taxes, it may not happen. There’s a $600,000 US exemption covering most properties, but a number of technicalities could reduce the eligible amount. If you’re planning on buying an expensive property, get the facts first.

Tip 10 – Beware the falling loonie
Your ongoing expenses will be in U.S. dollars. That means if the loonie continues to weaken, the cost of your Florida property will continue to escalate.

One way to reduce this danger is to take out a mortgage on your Canadian home (assuming it’s paid off) and use that money to buy the Florida place. This ensures your mortgage repayment will be in Canadian currency.