Why Should You Invest in Florida Plots?

The 2008 mortgage & credit crisis is creating spectacular opportunities to buy well located land at prices up to 80% lower than 2005 prices.  Rarely do buyers have the chance to buy at absolute market bottoms. Land will be the best way to participate when the Florida real estate market has its eventual price recovery.  The first seven of months of 2008 have shown an increase in buying activity compared to 2007, especially for lower priced Plots. After the real estate boom that topped out in mid-2005 we are seeing the bottom of a price collapse that has reduced land prices 60 to 80 percent.  Based on Florida's long term high growth rate from immigration, retiring baby-boomers, and others attracted to Florida's climate, beaches, and employment growth, this chance to buy property at these dramatically low prices will be the best we will see in our lifetimes. The need for well-located land is growing, Florida's population grew by 314,000 in 2007 and has grown by more than 2,000,000 since the year 2000.   

Price cycles are more extreme in land than other real estate.  We are passing the low point of this cycle, which is down 60 to 80% from the summer, 2005 high point of the last cycle. Buyers at this point in the cycle can possibly make 200% or more when prices get back to the levels of the summer of 2005. Since prices at each cycle high usually exceed the previous highs, potential gains are excellent compared to most other investments.  10,000 sq ft building Plots can be bought for $15,000 to $20,000 (down from $55,000 to $70,000 in 2005) 

Building Plot values will increase over long periods of time because the population of Florida is growing by 300,000 + people/year and the amount of available, well located, buildable land is shrinking. Land in Florida and within a 30 minute drive of the beaches is the most likely to increase in value because that's where most of the people want to live. 

Land doesn't give you management and maintenance headaches.

You've probably heard of the increasing number of foreign real estate investments in the Florida. This is not surprising. With the troubles that the real estate investment market is facing in the United States, greater opportunities in real estate investment were opened to foreign investors.

With the dollar's value in its all time low, foreign investors are finding real estate bargains in Florida. There are no shortages of deals in this market. More and more distressed properties are being sold everywhere and foreigners are pouring in millions buying these foreclosed or distressed properties. The Florida real estate has become a fairly attractive long-term investment for foreign investors.
 If you're a foreigner, you would find a lot of reasons why you should invest in the Florida real estate market. Aside from the fact that the floating exchange rate has given you a lot of leverage over the bargaining table, the financial market is a pretty good reason why you should invest in the US real estate.

The financial market in the United States in relation to the real estate market is quite liberal and the restrictions against foreign investors are pretty reasonable. Furthermore, despite the devaluation of the US dollar and the wide foreclosures of a lot of property, the real estate market remains to be stable, though slightly shaky, due to foreign investors' capital appreciation. Domestic real estate buyers may not necessarily share the same opinion, but the market has remained to be strong for foreign real estate buyers. This may be largely credited to the fact that there is minimal risk for them.

For more information for investing in Florida Real Estate please email Demetris Aspromallis, P.A a Licensed Real Estate Broker/Associate with Re/Max Masterpiece Realty in Port St Lucie Florida.

DEMETRIS ASPROMALLIS, P.A
Realtor/Broker Associate
Member of RE/MAX INTERNATIONAL INC.
Email: Demetris@Aspromallis.com

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Q. Can non-US citizens buy and own real estate in Florida?
A: Yes. Non-U.S. residents and citizens can own real estate in Florida.

Q: How easy is it to purchase a Property in Florida?
A: Purchasing a Property in America in general is much simpler than most countries. Due to the large number of overseas investors, this is even more so in Florida, which gives the buyer an easy and safe approach to Property ownership.

Q: Is purchasing a property in Florida a sound investment?
A: Providing the correct type of property is bought, and in a suitable location, then property investment in Florida is one of the best investments currently available worldwide.

Q: why should I invest in Florida Plots (Lots)?
A: Declining prices and a weak dollar have made U.S. property more appealing to overseas buyers. The National Association of Realtors conducted a study that demonstrated that the trend of foreign investors purchasing real estate in the United States is on the rise, and for good reason. The U.S. real estate bubble has burst and the value of the American dollar is at an all-time low, so there is no better time than right now for international clients to purchase and invest in U.S. real estate. In fact, the U.S. is now considered “the most stable and secure” country for international real estate investors. Now is the moment of opportunity!

Q: what are the characteristics of a Plot (Lot?)
A: The Plots (Lots) are carefully selected making sure no environmental or protected species issues exist, addition to that making sure they are high and dry( no flood zone). Most of the Plots (Lots) are 10,000 square feet (80 feet front and 125 feet deep) they are all buildable on paved street with electric available. When purchased the Plot (Lot) you will get a Clear Title along with a Title Insurance guarantying the Title. All Plots (Lots) are surrounded by new homes, they are Close to Schools, Medical, Malls, Shopping Centers, international airports, all major roadways     I-75 and US-41(Tamiami Trail), also 25 minutes from the beach.

Q:What is a closing?
A: The process of finalizing all the dealing associated with the sale and purchase of a Real Estate Property. (Also known as a settlement)

Q: What are closing costs?
A: Closing costs are expenses incurred by buyers and sellers in transferring ownership of a property.

Q: Is there a Land Registry in Florida where the real estate ownerships are registered?
A: Yes, the Clerk of Court is the place where all property records are kept. After the title has been signed by the seller it’s sent to Clerk of Court of the county that the property is located, where is recorded in the public records.

Q: Do the various positions of land distinguished in zones / uses according to their permitted uses (e.g. commercial, residential etc.), construction limits (e.g. number of stories), etc. and how are these classified?  What types of land is available in Florida?
A: Yes, there are all of different kind of land uses and every zoning have there own requirements, for example there is RSF( Residential Single Family), RTF (Residential  Two Family),RMF (Residential Multi-Family) CG ( Commercial General) OPI ( Office/Professional/Institutional) NC-LI (Neighborhood Commercial – Low Intensity) NC-HI (Neighborhood Commercial – High Intensity).

Q: What is the typical procedure surrounding the purchase of a real estate property in Florida?  What steps need to be undertaken by the potential buyer and seller?
A: This are the following step regarding buying a property in Florida:
        1. Find a Property
        2. The Purchase Contract (A purchase contract will be prepared for you and the seller to sign).
        3. Checking the Legal Formalities
After the contract for purchase is signed by both buyer and seller the contract goes to the Title Company.
The title company will do an “abstract of title” which means searching the real estate records in the county where that particular piece of property is located. An abstract will (1) determine the legal owner of the property; (2) reveal any mortgages, liens, judgments, or unpaid taxes that will have to be satisfied before the property is conveyed; and (3) detail any existing easements, restrictions, or leases that affect the property.

After the abstract is completed, it will prepare a “Commitment of Title Insurance” the prospective buyer. The title insurance commitment will each set forth all things that need to be completed and any problems that need to be corrected before the purchaser can receive “good title”. The title insurance company will complete all the necessary documents and will undertake to correct any problems. Once these things are done the parties are ready to exchange paperwork and “close” the deal.

This is done by preparing a closing statement or what is referred to in the industry as a “HUD 1”. The closing statement will include, charges for preparing documents, the title company’s fees, recording costs, pro-ration of city and county taxes, real estate commission fees, and any other costs associated with the deal.

At closing, the title company will collect the purchase money funds from the buyer as well as the settlement costs from each party. With these funds, the title company then pays all of the expenses of the transaction and pays the seller the net proceeds of sale. All of this is done in accordance with the HUD 1 settlement statement.

After the closing, the title company will record the legal document (Warranty Deed) at the county courthouse and then return the original documents to the Buyer in about 4-5 weeks. The only expense you are going to have after the closing is annual property taxes.
Regarding selling the property:

Q: Are there any limitations for a foreign physical person or a legal entity in relation to real estate investing in Florida?
A: Generally speaking, there are no limitations on ownership of Florida property by foreign nationals.

Q: What are the typical fees and taxation involved in both purchasing and selling real estate in Florida?
A: Buying a property usual there fees associated with the Title (Title Insurance, Recording fees, Title examination and search) or if you’re getting financing there is fees associated with the loan. Also like I mention earlier you have to pay your annual taxes.

Selling a property,

FIRPTA Withholding (Foreign Investment in Real Property Tax Act)

Withholding of Tax on Dispositions of United States Real Property Interests

The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A U.S. real property interest includes sales of interests in parcels of real property as well as sales of shares in certain U.S. corporations that are considered U.S. real property holding corporations. Persons purchasing U.S. real property interests (transferee) from foreign persons, certain purchasers’ agents, and settlement officers are required to withhold 10 percent of the amount realized (special rules for foreign corporations) Withholding is intended to ensure U.S. taxation of gains realized on disposition of such interests. The transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax.

Q: Where should the money is paid?
A: The payments are made to a designated Title Company. The Closing Agent receives all deposits in escrow. He produces a closing statement which apportions and pro-rates any taxes and other charges accruing to the property. Then, after making the previously mentioned adjustments, he pays the Seller the sum due at Closing

Q: What is the ownership status freehold or leasehold?
A: It is a Fee simple or freehold: The most common interest or right in real estate and provides the owner the right to use the real estate for any lawful purpose and sell the interest when and to whom the owner wishes.

Q: What are some of the common forms of property ownership?
A: The more common forms of ownership include:

(1) Joint Tenancy: property owned by two or more people at the same time in equal shares; typically referred to as the four unities (unity of time, title, interest and possession vesting in each joint tenant). Each joint tenant has an undivided right to possess the whole property and a proportionate right of equal ownership interest. When one joint tenant dies, his/her interest automatically vests in the surviving joint tenant(s) by operation of law. Words in the deed such as "John and Mary, as joint tenants with right of survivorship and not as tenants in common" establishes title in joint tenancy. Not all the states allow this form of property ownership.

(2) Tenancy in the Entirety: some states have a special form of joint tenancy when the joint tenants are husband and wife -- with each owning one-half. Neither spouse can sell the property without the consent of the other. Words in the deed such as “John and Mary, husband and wife as tenancy in the entirety” establish title in tenancy by the entireties.

(3) Sole Ownership: owned entirely by one person. Words in the deed such as “John, a single man” establish title as sole ownership.

(4) Tenants in Common: property owned by two or more persons at the same time. The proportionate interests and right to possess and enjoy the property between the tenants in common do not have to be equal. Upon death, the decedent’s interest passes to his/her heirs named in the will who then become new tenants in common with the surviving tenants in common. Words in the deed such as “Peter, Paul, John and Mary as tenants in common” establish tenancy in common.

(5) Community Property: only in states that recognize community property, a special form of joint tenancy between husband and wife, each owning one-half. Upon death, the decedent's interest passes in a manner similar to tenants in common. Words in the deed such as “John and Mary, husband and wife as community property” establish community property ownership.

The above ways for owning real property are all present interests - that is, the owner has the rights now. There are also future interests - that is, interests in property that come into effect in the future. Typically future interests are based upon the occurrence of a contingency, such as someone dies and the decedent's interest in the property passes in accordance with his/her last will or trust.

Q: What are the asking prices concerning Florida Plots (Lots)?  Who currently owns the Plot (Lots) for sale?
A: The asking prices for a builtable Single Family Residential Lot (80”FrontX 125”Deep) on a nice area with new homes close to school shopping and all major roadway is between $16,000 and $20,000.
The Plots (Lots) are currently being sold by distressed builders orindividuals, Banks, Short sale deal and foreclosures. 

Q: What are assessments? Will I have to pay them?
A: Assessments are special taxes or fees imposed by city, township, county or state government offices on land owners to pay for public improvements that would benefit the lot owners, such as for the installation of water, sewer or irrigation infrastructure to service the Plot (Lot). Since North Port, is relatively new city, not all sections have had these services installed. So, yes, some Plots (Lots) are subject to possible future assessments which you, as the lot owner, would be responsible for paying.

Q: What is Title Insurance?
A: Title insurance is an insurance policy that protects the owner against defects in title.

OWNER’S TITLE INSURANCE will protect you against these hidden risks which would not be disclosed by even the most meticulous search of public records.
Q: what is the tax liability in case I sell the property in the future and make a profit?
A: When you sell the property there is a 10% withholding of the purchase price, see below:

FIRPTA Withholding (Foreign Investment in Real Property Tax Act)

Withholding of Tax on Dispositions of United States Real Property Interests

The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A U.S. real property interest includes sales of interests in parcels of real property as well as sales of shares in certain U.S. corporations that are considered U.S. real property holding corporations. Persons purchasing U.S. real property interests (transferee) from foreign persons, certain purchasers’ agents, and settlement officers are required to withhold 10 percent of the amount realized (special rules for foreign corporations) Withholding is intended to ensure U.S. taxation of gains realized on disposition of such interests. The transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax.

Q: Can companies purchase real estate in Florida? Can non-U.S. companies purchase real estate in Florida, or must the company be based in the United States?
A: You would have to get a recommendation from a tax professional, however it is usually recommended that you form a U.S. subsidiary of an offshore company (BVI) -- this is driven by estate tax concerns. Of course, the best course of action for each individual or group of investors depends on your situation. The tax treatment can depend on such variables as your home country, tax treaty, family succession intentions, the age and health of the buyer, the marital situation and whether or not funds are “declared” in home country.

Q: Can a non-US citizen establish a company in the United States for the purpose of purchasing property in Florida? If so, how can a non-U.S. citizen establish a company in the United States?
A: A European resident can form a U.S. company. To do this they will need a U.S. tax identification number. This is a service offered by specialized companies.

Q: Do I have to be in the US to complete the transaction?
A: No, everything is being done via mail or email.

Q: How is property appraised by the Tax Collector?
A: There are three approaches to value stipulated in the Florida Statutes: 1.) “Direct Sales Comparison”, 2.) “Replacement Cost”, and 3.) “Capitalization of Income”. In Sarasota County, we use a computer assisted mass appraisal system that incorporates elements of all three approaches to value. Please keep in mind, however, that the best evidence of the fair market value is when several properties similar to yours sell. The property’s fair market value can be determined employing one or more of three different methods. The first method is to find properties like yours which have recently sold. However, their selling prices must be analyzed very carefully to get the true picture. One property may have sold for more than it was really worth because the buyer was in a hurry to occupy it and would pay any price to get in. Another may have sold for less than it was really worth because the owner needed cash right away, so was willing to sell to the first buyer making an offer. The Property Appraiser must always consider such over or under sales price to arrive at a fair valuation of your property. The second method is based on how much money it would take, at current material and labor costs, to replace your property with one just like it. If any improvements are not new, the amount of depreciation must also be determined. The final method is used in addition to the other two if you own property which does, or could, provide an income, such as an apartment complex, retail store space, or office building. In that case, the Property Appraiser must consider such dollar facts as your revenues, operating expenses, insurance, maintenance costs, degree of financial risk incurred by owning the property, and finally, the return most people would expect to receive on that kind of property.

Q: Can I view an aerial map of my Plot (Lot)?
A: Yes you can view an aerial map via Google Earth or Google maps.

For more information for investing in Florida Real Estate please email Demetris Aspromallis, P.A a Licensed Real Estate Broker/Associate with Re/Max Masterpiece Realty in Port St Lucie Florida.

DEMETRIS ASPROMALLIS, P.A
Realtor/Broker Associate
Member of RE/MAX INTERNATIONAL INC.
Email: Demetris@Aspromallis.com