Hello,
I?ve been asked to invest in a 4 bedroom villa in Florida. I have no idea about this type of thing but wondered what the general feeling towards buying such a property in that area is at the moment. The property would be purchased on a 30 year repayment mortgage and then rented out for 40 weeks a year through a management company who take 30%. Anybody who knows any positives or negatives please chip in.
Thanks

Hello Nicholas,
Until recently (July 2006) we lived in Florida close to Disney. I have 3 years direct experience of the vacation villa market (both sales, rental/management. Sale prices peaked about Sept 05. There are many subdivisions (estates) zoned for STR aimed at Brits. Some have over 30% of the 'New' (bought in the last 3 years) villas for sale and nothing and I mean nothing has sold in the last 7 months. Why the rush for the exit? Well the vast majority of Brits who bought in Central Florida relied on commission driven VI's for advice. They massively overestimated both the number of weeks they could rent and the price they could achieve whilst at the same time discovering cost increases (the rise in insurance and utility charges make ours look cheap), taxes and maintenance. Avoid guaranteed rental schemes unless the T&C of the contract have been read and interpreted for you by an independent Florida Real Estate Attorney.

Where is the Villa your are considering investing in?

Below is a comparison between figures given out in the ?Everything America-A Place in the Sun? magazine and the real figures.

Annual running costs of a 4/5 bed Villa

note Cost
Fix/
Var Cost item A Place in the
Sun costs
2005/06 $US Actual costs
2005/06 $US
* F Mortgage? 14763.00
F Mortgage 25 yrs ($319200.00
@ 5.5%) 23520.00
** F Property Taxes 4219.00 5700.00
*** F Tangible PP Tax Not included 144.00
F Home Owners Assoc Fee 350.00 420.00
F Pool & Lawn 2400.00 2400.00
F Insurance 1080.00 1200.00
F Minor Repairs & Replace 300.00 500.00
F Major Contingency fund Not included 1320.00
V Electricity 2040.00 2400.00
V Water 780.00 960.00
F Phone 540.00 540.00
F Cable TV 540.00 540.00
F Pest Control 360.00 540.00
V Two Cleans per Month 2400.00 2400.00
F Spring Clean + Carpet Clean Not included 360.00
**** F Admin Fee? 780.00 Not included
**** F Management Fee Not included 1440.00
F Occupational License Not included 60.00
F Hotel & Motel License Not included 180.00
F Annual Air Con Service Not included 90.00
F Pool Heat Pump Service Not included 90.00
F Termite Inspect/Insurance Not included 130.00
F Account Fee/Tax return Not included 600.00
***** Total 30552.00 45534.00

Notes
* A Place in the Sun state they are using an interest rate of 4.63%. They make no mention of a deposit on the property or how much is being funded on mortgage. There is also no mention of the mortgage term i.e. 25, 30 or 50 years?
** Property tax is collected by the state and is the equivalent as UK council tax.
*** TPP stands for Tangible personal property tax and is payable to the County. If your property is rented out, you are classed as a business and have to pay a tax on the value of the contents of your villa.
**** A Place in the Sun state a $65.00 per month ?Admin fee?. We have incorporated this in the $120.00 per month Management charge.
***** A Place in the Sun annual running cost came out at $31572 not the $30552 that they added up to. For the purpose of our comparison we are using their $31572.
Cost Fix/Var. Only two cost items are variable relative to the occupancy rate of a villa. That is water and electricity. We have assumed these costs as at 36 weeks occupancy, because that?s the minimum quoted in A Place in the Sun.

The figures came out jumbled but the bottom line is a Place in the Sun said the estimated annual running costs were $30,552 when in reality they are $45,534 and increasing.

Be very, very careful Florida is like southern Spain but with more scams!
Warm Regards