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Buying in Florida


Property Taxes
Property taxes are sky high for foregin investors. The current taxes on listings are NOT what you will be paying - ask what taxes YOU will be paying after purchase. You may be in for a big shock.   For example, in Florida, the state's Homestead Act and "Save our Homes" amendment gives permanent residents of Florida the first $25,000 of the assessed value of their home tax free and caps the rest of their property tax at three per cent", but this advantage isn't conferred upon visitors - who end up paying much of the difference. 
Property Insurance
Property insurance is also sky high, IF you can get it. In  Florida, for example, tax and insurance alone are more than a lot of mortgage payments. Talk to Canadians (or anyone) who has been a snowbird for a few years = many are desperately trying to dump their properties here for this reason.   Escalating problems with condos near the water and without hurricane proof windows (i.e. anything not built recently) is sometimes very difficult to insure - some purchasers finding that insurance is impossible to get. 
Condo, Association and Homeowner Fees
These fees, which are known as a variety of different things in the US, can and DO change without notice. When insurance for the development goes up, you get hit with an fee to cover it. Hurricane damage to the development (even if you have none) - you get hit with a fee. 
Residual Cash Requirements for Cash-Strapped Municipalities, Counties, Insurance Agencies, Condo Association and Banks
One particularly intelligent and forward seeing comment at one of our meetings was about what was going to happen to the tax base for municipalities if a large majority of the properties were being place in positions of default?   It stands to reason that the costs will end up being shared by the remaining howeowners who will be left holding the bag.   This comment should be considered possibly being applied across the board, i.e. what about a condo development only receiving 1/2 of the fees it had grown to expect from past years?
Neigbours and Emptiness
In a development where flippers bought property, and are now desperate and unable to sell (with the 18 months of stock holding up in Florida, this seems likely), homes and condos will sit empty or be rented to anyone available.  This means you could end up with neighbours who don't maintain the property, seedy renters as neighbours, or lots of vacant houses, which for vacation property could be dangerous.
Immigration and Border Changes
Immigration and border-crossing policies are changing, so make sure you know what restrictions you'll face. As of 2007, Canadian citizens who spend less than 183 days in the US, calculated over a period covering the current year and two previous years (where even a few hours in the US on one date is counted as a day), are considered non-resident aliens, but landed immigrants residing in Canada experience greater restrictions, some countries of origin require the landed immigrant to get a US visa if being a permanent resident in Canada has been less than 10 years. Longer stays involve a wide range of complications depending on the state involved.
Income Tax
Selling real estate in Florida is easier than in North Carolina or Georgia since Florida has no state income tax. If you are a non-resident in Florida you may be subject to holding tax if the selling price is more than US$300,000. To pay this tax, each seller must file a US tax return—another expense. Then, there's capital gain on the profit you make. You'll pay tax on this to the US government in US dollars and also to the Canada Revenue Agency (CRA), with a credit for US tax already paid.
If your Florida property is not your principal residence, you will pay much higher property taxes than locals, capital gains and estate taxes if you sell. One way around this is to place your sunbelt property in a Canadian limited liability company which will pay capital gain but not U.S. estate taxes. Also, rental properties held by foreigners must file separate annual tax returns to the U.S. tax officials. This is an annual cost which must be included.
Another tax trap that many couples fall into—buying in one spouse's name, expecting to switch ownership to the other spouse later as easily as they could in Canada. However, in the US, this name change may be subject to gift tax, which starts at about 18% and may go as high as 48%. This expensive mistake is one example of how, although buying seems easy, problems may materialize on selling or when the owner dies.
More on the tax implications in this article:
Estate Taxes
U.S. estate tax, which kicks in after death, applies to non-residents who own property in U.S. and taxes property at 45 per cent if the deceased's worldwide holdings are worth more than $2 million - which is the trap that a lot of people get into is that they buy U.S. real estate without knowing about the estate taxes.  Some accountants suggest having outside of the U.S. owned by one spouse and assets in the U.S. owned by another spouse, such that the spouse that owns the U.S. property gets the worldwide estate under the $2 million."
Taking Title
Most Canadians treat buying in the US as if they are buying a property  in Canada, but buying in the US is very different.  Depending on which state is involved, there are about 6 ways to title property, each with different implications for taxes on sale or at death, and on how to go through probate. Many estate issues go into a decision of how to take title [when you buy]. In a state like Arizona there is common property, so that's two more choices for title. 
Making an Offer
Prices are so low now and inventory is so high, it is really a buyer's market.   Diane Francis (the National Post) offers this suggestions for making an offer on a Florida property:  find out the 2006 value, divide in half - and offer that price.
I hope these tidbits satiate your interest in purchasing Florida property, as well as warning you about the possible pitfalls.   Remember, investing in property can be a windfall with the appropriate research and tempered understanding of the market, its fluctuations and our correct understanding of where we are in any market.   This is probably the single best moment during the last 30 years or so to buy property in Florida.   Take advantage of it, but take care in your decision-making.
For general information about buying US property to retire to, or as a Canadian, check out the Canadian Snowbirds Association's website for lots of great information.   They've been around for along time and have an excellent knowledge base: http://www.snowbirds.org/ 


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