Know Where Your Purchase Money is Coming From
Most foreign buyers purchase their vacation properties using all cash, since financing for foreign buyers can be difficult to obtain. If you intend to finance your vacation home, plan to pay a minimum down payment of 30 percent or more. In rare situations, some property sellers may offer owner financing. If you find a property that offers owner financing, expect to pay more for the property and the loan. You will also have fewer choices in properties, since most sellers want their proceeds for the sale of their property at the closing of escrow. Another popular strategy for funding the purchase of your vacation home is to leverage your existing home. By taking out a home equity line of credit (HELOC) on your existing home, you can use those funds to purchase the vacation property with cash. This method will put you in the position of a cash buyer which offers many negotiating benefits.
It’s a best practice to have your money in place first. Doing so will allow you to focus on finding the right home within your desired location. If you need to finance the purchase, your real estate agent may have experts who specialize in mortgages for foreign nationals.
Know How The MLS (Multiple Listing Service) Works
In many countries around the world, homebuyers have to go to many different real estate brokers to find a home. Homebuyers go from broker to broker to see what listings each broker has to offer. In much of the U.S. real estate market, buyers can find all of the real estate listings in one place, The MLS.
The MLS (Multiple Listing Service) is a collection of real estate listings aggregated into one database used by real estate brokers who agree to share their listing agreements with one another to locate homebuyers for property listings more quickly than they could on their own.
Orlando’s real estate listings are aggregated into the Mid Florida MLS, which gives each Orlando real estate broker access to all of the listings in the entire Orlando real estate market. Orlando’s MLS makes it considerably easier for international buyers, since they can choose one real estate broker/agent to help them locate and purchase any home in the entire Orlando real estate market.
Free Service to the Buyer
In most sales brokered through the MLS, the seller pays the real estate brokerage fee, which means the buyer gets the benefits of agent representation FREE of charge.
Find a Local Real Estate Agent – If you are a foreign buyer looking to purchase a vacation home in the Orlando, Florida area, find an Orlando real estate agent who specializes in working with foreign nationals. Look for agents who are well-versed in working with people from around the world, and handling online real estate transactions. An agent with international real estate skills will save you a lot of time and money, in addition to helping you locate the best vacation homes.
Visa Needed or Not? – Foreign buyers can purchase property in Orlando, Florida just like any American Citizen can. There is currently no special U.S. Visa requirement for foreign nationals buying Florida real estate. This can change, if you plan to stay longer than 90 days at a time. In addition, your country of origin may have rules that apply as well. I recommend that you contact an immigration attorney who specializes in matters between your country of origin and the U.S.
You can find out more about Visitor Visas on the U.S. Department of State’s website here: Visitor Visas – Business and Pleasure
Find a Home Inspector – Your real estate agent will help you find a great home and community. But there may be problems that can’t be spotted just by looking at the property. This is where your home inspector comes in. Your home inspector is your quality control person. They will make sure that your property is free of major defects, or they will at least let you know where the problems are. Your real estate agent should have a list of recommended home inspectors.
You can also find home inspectors by visiting:
American Society of Home Inspectors (ASHI)
Florida Association of Building Inspectors (FABI)
Know the Financial Stability of the Homeowners’ Association – Many vacation homes in Orlando belong to a homeowners’ association. You should review the financial records and copies of the meeting minutes to see what’s going on and how well things are running. Ask about any deferred maintenance, like a leaking roof, bad siding, or other items that may cause the homeowners’ association to levy an assessment on the owners to pay for the cost of needed repairs. Well-run communities will normally reserve for these regularly needed repairs so the owners won’t be hit with unforeseen expenses.
Know About the Taxes:
Property Taxes – Your property taxes should be between 1-3% of your vacation home’s assessed value, per year. The assessed value is typically less than your purchase price. You can find more and find links to the various counties property tax estimator tools here. These tools will give you a much more precise property tax estimate.
Taxes on Rental Income – If you decide to rent out (lease, let, put into the rental pool) your vacation home while not in use, you will likely be required to pay income tax.
Find out more about your income tax obligation by visiting the IRS website page here:
ITIN Guidance for Foreign Property Buyers and Sellers
Should you need to pay taxes, you will need an Individual Tax Identification Number. Find out how to obtain one here:
ITIN Filing Instructions, or just fill out the W-7 here.
Taxes on the Sale of Your Vacation Home – If you decide to sell your property in the future, you will likely be obligated to pay tax under the FIRPTA Withholding Guidelines.
Find out more about FIRPTA by visiting the IRS website page here:
FIRPTA Withholding of Tax on Dispositions of United States Real Property Interests
*Seek professional tax advice from a Certified Public Accountant, CPA*
Find a Property Manager – Many vacation properties provide onsite management of your vacation home, should you decide to put your home into the “rental pool.” In many cases the onsite management company is your best option, because they focus on their community and are best suited to keep your unit occupied, which produce revenue while you are not using the home.
Off-site management – Most communities will allow you to hire an off-site manager, if you want the option to find someone who may provide you better results, like, more rental income, less fees, etc. Most communities have online forums where owners discuss various issue, like, property managers and other matters.
Know the Cost of Ownership – At the very least, you will have to pay property taxes, insurance, maintenance and utilities. If you plan to use a property manager to rent out the home while not in use, know what percentage of the income you will receive.
Know How You Will Use Your Vacation Home – Now for the good stuff, and how you plan to enjoy your new vacation home in Orlando. Are you looking for a quiet getaway? Maybe you are looking for a place where the whole family can gather for family retreats? Whatever it is, Orlando has many options and offers so many things to do and see while you are on vacation. Let your real estate agent know how you plan to use the home, and then ask for the best locations that meet your goals and dreams.