The biggest thing to consider is that its a buyers market and your in a very strong position, theres plenty of empty propertys out there so make sure u haggle for a really good deal
Also carry out research on rental demands & ensure you can actually rent out the villa, you dont want to be in the situation where the property sits empty...
Prices peaked in autum 2005 the have been stagnant/faling since. On many of the sub-divisions (developments) that are zoned for STR in the Orlando area (US27/US192 there are between 4 and 10 years supply of resales at current rates of demand. Prices are down about -20% from the heady peak but will the collapse further (in my opinion peak autumn 2005 to trough late 2008/09/10 will be around -40%. I was fortunate saw it comming and sold my business/property in July 2005.
In Florida the cost of buying (as opposed to the price of the property, the cost of owning (utilities, insurance, HOA, management, maintenance and taxes), and the cost of selling are always hire than people assume. Conversely the rental demand/price is always lower!
Florida property normaly only goes up at about 3% per year meaning with all your costs you effectively loose money. The recent boom 2002 to 2005 was caused when the Fed artificially lowered US interest rates to 1% following 9/11 (fixed mortgage rates didn't go much below 5-6%)and many specuvestors bought homes with ARM's with 1 to 2 years honey trap low rates of 2% now re-setting at 6 to 8%, ouch! Hence the reason for over 30 mortgage lender have gone bust (across the US) with many more to follow.
The low interest rates caused Florida price to artificially increase
2002 circa 8% 2003 12% 2004 18% 2005 25%
Now the prices are just returning to their long term average (mean revision).
I know the area very well (and know every scam in the porperty buying/selling/management book. Where and what are you thinking of buying?
Davenport is in Polk County (see Polk county tax web site below) the majority of STR sub-divisions there are along the US27 (south of its junction with the US192), along Loughman Road/Ronald Regan parkway and Lake Wilson Road.
Be very careful with regards to buying off plan there are several huge developments that are still being sold, where the early buyers have been waiting up to 3 years for phase 1 to start!!! Despite being promised 1 year delivery of their villas (litigation is underway).
You will have an annual property tax (equivalent to our council tax) as an example a 4bed detached villa valued say $300k will have a property tax of between $2500 and $4000 pa. If you have a US mortgage this is normally collected by them (along with the mortgage payment), and paid direct to the tax collector (beware of taxes quoted by the vendor, they can reset much hire for the new owner on sale/purchase).
There is also a Tangible property tax paid on the value of the contents of your villa (off the top of my head this is quite low about 1.5% of the value of your contents pa.).
There is then the sales tax/tourist development tax (it works like VAT in the UK) it is payable monthly and is levied on all you gross rental income. It comes in 2 or 3 parts and is around 12%.
I have returned from that area back to the UK and know all the STR developments in that area. Let us know how you get on and feel free to ask any more questions.
With regards to buying in Davenport. Where would you suggest with a rough budget of $350,000. I really need to know all the ins and outs like what would the monthly outgoings be on such a property(ie mortgage, management, taxes etc) A rough estimate would help
$350k prop X 20% dep = $ 280k mort = circa $1300 per month
Property tax $300
Insurance (STR) $125
HOA fees $90
Electric, water, tele +cable TV $300
External pest control $20
Local management company to include yard maint = grass cutting, weekly pool clean, internal pest spraying and providing a local contact number/emergency service $300 (house keeping cleans after guests have stayed for a 4 bed $80 each clean).
Maintanence/emergency fund $150
I would work on circa $2500k per month to keep it empty if renting the elec +water will be much higher.
If i was to take the plunge and purchase, where would you suggest looking at to maximise short term rental. Also where would you suggest for the nicest area.
With regards to buying in Davenport. Where would you suggest with a rough budget of $350,000. I really need to know all the ins and outs like what would the monthly outgoings be on such a property(ie mortgage, management, taxes etc) A rough estimate would help
Thanks
Prices in Florida are falling like 1%/month. Besides, the hurricane season is coiming and a devastating hurricane cannot be over rulled.
Wait, 2009 might be the first good year to buy in Florida.
the STR market is soft at the moment and getting tougher. I certainly would not buy off plan and with many 'mature' developments in Davenport/US27/Four corners area having up to 10 years supply of resales, prices only have one way to go.
There are property's that sold in 2006 for $520k that you can buy now for $400k but I have no doubt that they'll be available for -$350k in 2008/9.
I could not recommend any developments in the Orlando STR area that currently are a good investment. If I were you I would bide my time and follow the market closely vis the web. Whats the rush now, with so much downside risk?
Advice taken on board. It was a thought because of the £ being so strong against the $. Do you still think it will stay as strong along with the prices coming down till 2008/9.
That would normally mean £ gets sronger v the $. But there are too many other variables involved, vis a vis the bigger picture.
Calling exchange rates at the moment is dificult. If you think this is a good £ to $ rate you could convert you deposit into $ and await further price reductions in the US.
Advice taken on board. It was a thought because of the £ being so strong against the $. Do you still think it will stay as strong along with the prices coming down till 2008/9.
I can guarantee that the price of houses in Florida will fall from now to 2009.
Unfortunately nobody really knows about the exchange rate.
If you want, you can buy some futures in USD/GBP and fix an exchange rate about 1 year in advance or more. Then you will know for sure what the exchage rate is.
I have been reading with great interest all the messages posted with regard to property buying in Orlando area. We have the finance in place to go ahead, but with the advice I have just read, have decided to sit it out and wait and see. If the property prices really are continuing to fall, then it seems to make sense to wait until end 2008 or early 2009. Many thanks to all who have contributed. It has helped a lot.
