Purchasing property in Florida

I can't speak to Canadian law or taxation, but here, all you need to do is set up an LLC and operate the condo as a business. It is very easy to lose money on rental property when you net profit against all your costs. You really have to work at it and usually be in a tourist location to actually make a profit on Florida rentals.

fwebster
Good point set up as a company may be way around things.
We pay US taxes on dividend investment form US stocks there is a 15% holding tax that can be applied to Canadian taxes. To get the 15% rate you need to apply for it. If you do not apply the rate is 30% but you only get a credit in Canada for the 15% rate. I do not know the rules on rental property but I assume income is income. You might have to collect and submit state sales tax. If you creat a US company that makes income I assume you would need to file a tax return for it. Nothing is ever simple.

If you buy a place with a canal behind it thinking that you can simply hop in your boat and tool out to the gulf in minutes you may be surprised. My friend has a canal behind his with a dock. It takes him close to an hour of motoring thru no wake waters to get to the gulf. If you add up the $$ and time spent just getting to the gulf it may be cheaper to rent a wet slip on the gulf.

I work in real estate. And, I'm a long way from Florida, so our culture may be a little different here.

But, in the U.S. Midwest, we regard modular homes (trailers) as almost a used car sale. And, trailers usually have a one way downhill depreciation curve. They are made of materials that don't lend themselves to remodeling and updating. At least some cars have the potential to become classics. Trailers don't.

Also, there is the issue of the land underneath. Are you leasing it? Buying it? If you are buying it in a "park" or community environment, you are also buying into a condo regime. As you know these regimes can go broke, become management nightmares, etc.

I agree that there is potential that single family homes may have reached a market bottom. If you can prove that a reasonable 3-bed / 2-bath / two car in the area is selling for about 2 times local median annual household income, you may be in business.

If you are buying the trailer as a throwaway, on land that you own, in a decent location, the only thing you have to worry about is sleeping through storms. We call trailers "tornado magnets" where I live.

Good luck with your purchase.

moparlvr4406 said:

Doesn't seem so bad but never been to your house
if I remember correctly my taxes in Polk county were close to that in 1999 on about 3200sq/ft with a 1 acre lot and big inground pool

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And you thought that was "salty"?

I should have added one more problem with trailers. Financing them is always difficult, and lenders normally won't touch a trailer that is over 10 years old. So, if the trailer is new now, you may have a terrible time finding a buyer when it ages and the buyer can't get financing.

I am a landlord, but not involved in vacation rentals or trailers. I can't see how, or why, you would spend enough money trying to maintain it to offset your income if you keep the place occupied. When I put a new driveway on a rental, my cost basis and depreciation goes up. Would you be making any real capital improvements? If you are buying a trailer, you should pay cash, and you won't have any interest expense to offset your income. It also sounds like property taxes are VERY low in Florida compared to what I have to put up with, here I can always count on my County to assure me a nasty annual expense to write off.

floriduramax1 said:

And you thought that was "salty"?

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compared to the 400 or so a year for the same sq/ft in Indiana.....yup

The monkey wrench in the OP's plan is that he cannot long term rent the modular home if he is going to use it 1 month a year. That will put him in the short term rental business which is entirely different from renting trailers in trailer park. Short term renters do more damage than you can describe.

As far as costs are concerned, in NE you don't have to buy flood insurance ($1200/$250K coverage), windstorm insurance ($1800/$250K) and home owners insurance ($1200/$250K), in addition to paying property taxes (? about 1% $2500/$250K) so, assuming a $250K property, the cost for insurance and taxes is $558/month to which you have to add HOA fees ($250/Month ??, house trailer tag fees X2 ($30/month ??) since its a double wide and debt service if there is a mortgage, $200K X 5%/12 or $833/month. So now we have a break-even cost of $1671, if it is a $250K piece of property...........if it is 1/2 that you still get a breakeven of $800+ and I think that is probably more than the market in Florida for a mobile home. Oh, all this is before repairs and maintenance which is about 2X on the coast what it is in NE, TN ,etc.

I also think this would have to be a cash purchase because lenders almost never loan money unless there is land involved to reduce their risk.

My father in law had a park model trailer in Arizona paid 35,000 when he died 10 years later it sold for 10,000. His yearly space rental was 4,000. Very nice park designed for seniors, lots of activities and child could only visit at christmas and easter. When he had vistors he could alway rent an other trailer rent was 1,200 a month. The park had a few they rented out to residents only.

Apparently the rules are quite different for a Canadian buying/renting property in Florida. Enough so that I've abandoned the idea and will just rent for Dec, Jan, Feb.

Here's what I've determined. You need to use a US Company to administer rentals should you wish to gain income from the rental of your property (yes - fees). You cannot perform ANY maintenance of the property yourself since it would be considered employment and you don't have a visa to work in the US (could face stiff fines and refusal to enter the US - ouch). Down the road when you sell the property the US will hold back a rather hefty percentage of the sale until you complete a tax return - just in case you owe capital gain taxes (yes - more fees). This is all considering a cash purchase without financing (financing means more costs). Then there's the property tax issue. Apparently US Florida residences property tax increases are capped each year - not so for Canadian snow-birds owning Florida property.

I'm not an expert on the idea, but simply started seeing way too many roadblocks. A friend or mine bought a condo in Ft. Myers two years ago for $130000 + closing costs. His annual costs are about $8000 not including the constant upgrades. For example over the last 2 yrs he has purchased a new king size bed, replaced a toilet, removed carpets and installed laminate, and replaced furnace and A/C (which died). I can rent the same size unit in his complex for less than $6000 for the three months I'd want. Who's further ahead? Oh, by the way, the current market value of his condo is now under $100000.

Yes, as the market goes up so will the costs of renting. But I think it may be quite a few years before this would make financial sense for me as a Canadian to buy.

Jim,

I don't know anything about the Canadian implications, obviously, but from a US/Florida standpoint, you can make routine repairs to your own property as long as you don't exceed a threshhold where local codes require you to use a licensed contractor. In my area, its $25,000. You can not deduct any labor cost any work you personally do, only the cost of materials and subcontracted labor where you hire someone.

Administrating rentals is probably not required, but only makes sense just due to the logistics........you are not there to check the property or to see to minor repairs; an onsite rental agent is.

Increases in property taxes in Florida are only capped ( to a maximum of 3%/yr) for holders of a Florida homestead exemption, and the exemption must be initially applied for then renewed every year. Proving Florida residence can be a challenge. (for example my wife's driver's license had a different name than her birth certificate and social security card since they were in her maiden name..... that took 6 months to work out ...thank you Mr Homeland Security) Even residents of other states in the US can not get this exemption. With values so depressed, this could be very significant if you plan to hold your vacation property long term. I recall in the not so distant past where we were seeing 25-35% increases annually in valuations.


I bought a single family home on the beach when be decided to buy Florida property because I didn't like the risk and overhead associated with condos. We also wanted a long term investment to pass on to our kids and a beach house just worked better for us. If I were not interested in the investment aspects Florida property and only wanted a place to stay when at the beach, I would not own a condo but would long term lease one. I just cannot get over/past the maintenance fees......normal HOA fees for a condo in a decent complex on the beach is about $6000/year. I pay a fraction of that to maintain 2800 sq. ft. beach house, but I have no pool, no tennis court, no parking garage, no lobby and no employees.

Finally, and this might be a local thing, but snowbirds in our area have tons of leverage on winter rental rates. We are within driving distance of Tennessee, Va, AL, KY...all the southern states, so property rentals are geared toward the summer tourist season. Everyone with a condo figures that any snowbird income is just gravy and they don't count on it. Nice 3 br condos on the beach are usually rented in the $600-$850/month area, but you have to be out before about March 15.

Iprof aka Ken just bought a house down there,

He's from Canada so maybe he'll chime in and say something.

I came across this thread today and even though it is two years old I thought it would be good to respond to it.
I have a double wide manufactured home that I bought in Lakeland Fl in 2011, in Foxwood Lake Estates, we do own the land.
The property was a forclosure and the experience dealing with the company and buying the property was to say the least a nightmare. Being a Canadian we can bid on foreclosed property using our SIN ( Social Insurance Number) we can only bid on two properties at a time so if the bidding does not close for 3 months or they carry your bid over to the next round you are locked into those bids. If they except your bid you must pay for thr property within 48 hours, good luck. You cannot bring more than 10,000 a day into the USA. The TD bank America will not allow you to transfer more than $5,000.00 a day. I did get the property I wanted and at a great price but a had a company in the USA buy it and I bought it from them, cost me an extra10,000 grand but I ended up getting a place for .30 cents on the dollar. The was the good news the bad news Florida does not care what you paid for the place you are taxed on appraised value. For a non resident it's $500.00 on every $25,000.00 of property value that can add up to a lot really fast. Florida requires building permits for everything, I changed a water heater and was required to get a permit and an inspection, $125.00 for that. I am replacing all 16 windows in the house myself and the inspector said I won't need the permit and inspection until I am doing the last few. I am changing 4 each year gives me something to do. My HOA fees are $550.00 a year and my taxes just under $1,500.00. Canada requires us to report any foreign property that is valued at over 100,000, just found out why that box is one on our income tax form. If you sell a foreign property you are subject to capital gains tax in Canada ouch plus taxed it the USA. They don't use lawyers but title companies to transfer land titles. I have a deed for the land and two ownerships for the house. Because I own the land I don't have to buy tags for my house but if the land is leased you must. Florida also has a tax on maufactured homes that sit on leased land and this can be expensive. Buy in a park where you own the land. I would only rent to people I know, no need to open a can of worms with renting in Florida, high taxes for Canadians. Water is expensive in Florida, I pay 44.xx each month for water and sewer even though my water is shut off at the street. I leave the fridge turned on and the AC is on but set at 88 f my bill is around 30.00 to 50.00 a month when I am not there. Insurance is expensive and you will have two deductibles one if it is not a named storm and the second for a named storm. You can get a mortgage through TD Bank America on a manufactured home but you must be buying the land and be prepared to go through a lot of paper work. Because I was buying a foreclosure, I had to prove where every cent came from. I had to get sworn statements from my bank and years of statements that proved it. Way different than here. I escrow my insurance and taxes $114.00 a month and pay all my other bills. My fixed costs are less than $300.00 a month. Remember we can only stay in the USA 182 days a year. If you spend a lot on something or buy something at a bargain price, your fixed costs could make it very unattractive fast. I look at it as a cottage, I didn't need to be on the water as I am on the water all summer up here. I am a 45 min drive to a very nice beach an a 3 min walk to a very nice 40' by 80' pool and hot tub. I looked for almost 5 years and then it took my almost a year to buy this place. Right now we are using it for just 4 months a year but we will increase that to 5 1/2 months a year soon.
My lot is 60' by 80' and I have to cut it. I asked the neighbor who they use so I called the guy. Told him the size of the lot and said how much, he says $32.00. I said that seems like a lot of money for this size lot, he says "I cut it 4 times a month for that", I said well OK. You have to love the prices of things in Florida.

Hope this might help someone, if you have any other questions just ask.

Ken

better late than never! :thumbsup:

Just got my tax bill today property taxes up 10% again this year. :smt089

Ken