Tips for Buying Florida Real Estate from Overseas
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Tips for Buying Florida Real Estate from Overseas


I’m Eric Lanigan with Lanigan and Lanigan
Attorneys in Winter Park Florida. We often take certain things about real estate
transactions for granted, yet I often forget when a foreign investor comes in the whole
thing is foreign to them in terms of how things work. I’m going to take a couple minutes to go
over a couple of things to take into consideration if you’re considering purchasing real estate
in Florida and you’re from overseas. So you’re not familiar with how transactions
work in our area. We often refer to the point where you complete
the transaction as the closing. And I’m going to use that phrase a little bit as I
talk forward. Sometimes it will be referred to as the settlement.
Either way what we’re talking about is that point and time where the buyer and the seller
the realtor and the lawyer comes together all the papers are signed, money changes hands,
and the title to the property changes. Now in Florida there are certain closing costs
that you need to take into consideration. One benefit we have in Florida is that there’s
no sales tax on real estate transactions in Florida. In other words, no percentage of
the selling price gets paid in taxes. But there can be significant costs. For example
if you have a mortgage you have documentary stamps on the mortgage and those are $3.50
on the thousand. It doesn’t sound like much but if you’re
buying a million dollar property it starts to all add up. You also have intangible tax on the mortgage
which is $2 a thousand. No if it’s a cash deal you don’t have either the documentary
stamps or the intangible tax on the mortgage. But there are other closing costs. There’s the real estate commission, the
inspection fees, unpaid taxes which may or may not be a buyers cost in a transaction.
One thing you want to make sure that you always do is get a good faith estimate of what your
closing costs will be before you sign the contract. Review it and all the pre-closing costs with
your attorney because there can be a great deal of negotiation of how the costs are divided
between buyer and seller. And you want to make sure that you’re getting at least a
fair shake on how those things are divided. And often times if somebody’s really anxious
to get rid of a property you can push a lot of those closing costs onto the seller and
they’ll pay the costs just to get the sale done. There’s no tax per se on the property when
a foreign national purchases the property. It’s treated just like any other purchaser.
If it’s rental property all rental income is subject to U.S. income taxes. Many countries, most countries, probably have
some form of double taxation treaty with the U.S. to prevent you from paying double taxes
both in the United States and in your home country. And generally speaking on rental properties
in Florida there tends to be very little taxes paid, because there are very generous deductions
paid for depreciation, mortgage interest and the full cost of two trips from whereof you
live to Florida to inspect and review your property each year. So when you take those things and you subtract
them out off of rental income at least on paper you appear to be breaking even at least
on the property. Now, when you get to the sale of the property
you get into the Foreign Investment in Real Property Tax Act which goes back to I think
1980, 1990 which requires that 10 percent of the sales price is held back if the seller
is a foreign national. Interestingly the responsibility falls on
the buyer to make sure that that happens not on the foreign national seller. If the buyer doesn’t make sure that those
funds are withheld then it is the buyer who the IRS is going to seek to collect that tax
from. So it’s a tax that should be withheld if
you are the seller, but ultimately it’s the seller who needs to make sure that it
happens. And that’s obviously based on the premise
that if it’s a foreign national selling the property there’s a high likelihood that
they’re going to take their sales proceeds and go back to their country of origin. And
at that point the ability of the U.S. to collect those taxes is slim and none. Now there is no requirement to do that withholding
if the property is selling for less than $300,000 and the property is going to be the buyer’s
personal residence. There can be significant benefits from buying
properties in what we call off-plan. Which is pre-construction. And I’m going to do a separate video which
talks about what are the benefits, what are the risks and rewards of looking into buying
a property off plan if you’re a foreign investor. Again, I’m Eric Lanigan with Lanigan and
Lanigan attorneys Winter Park.

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