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Buy for Investment - Where it can work and where it can go wrong! For many years the right type of property in appropriate locations has been both one of the safest and strongest forms of investment. This has been increasingly apparent with concern regarding the ups and downs of stocks and shares in the past few years and the low returns on bank deposits and savings accounts, due to modest levels of inflation.  Our British investment clients have been increasingly concerned about their share portfolio as well as the trend towards companies abolishing final salary pensions. Our American clients have been equally concerned about the value of their share portfolio, which has had a detrimental affect on their 401(K) pension schemes. Property is increasingly being considered as the ultimate asset - although one needs to take with a pinch of salt many of the books written advocating get rich quick schemes built around property investment with minimal personal funding.  Indeed we are particularly concerned about courses offered in the UK, which sometimes combine a significant fee for their education programme and then offer particular properties which are wholly inappropriate at the present time from an investment perspective. A recent article in the Guardian highlighted some case studies from investors who followed the recommendations given at some of these courses and bought a number of off plan properties. This can be a huge mistake in certain areas of Florida and it vital to seek truly independent advice, before going down that path and investing hundreds of thousands in a property that may become a dwindling asset in the short term and leave you footing large mortgage payments. There are some very good investments to be made in Florida at the present time but they are often not the ones paying out huge commission and bonus payments to developers, agents, some course organizers etc or indeed those aimed and marketed at investors! They are more likely to be the ones poorly marketed, not offering an above average commission rate and require a knowledgeable expert to seek out from the MLS before other knowledgable investors home in. They are also very hard to identify for the go it alone investor as the Florida property market works very differently from the its UK counterpart. If you would like further impartial advice on the current scenario with the Florida property market please click here.  Considered rationally, the right type of property does have intrinsic advantages over the traditional methods of wealth creation such as pensions, stock markets and savings- Strong capital growth if buying in the right location at the right time Unlike other assets you can purchase with relatively low equity input. Rental income can make the purchase self - financing. Property is actually a versatile asset, you do not have to sell property to extract cash - you can refinance subject to market growth. Professionally managed, property portfolios can offer substantial tax advantages in Florida. Florida trends. There are sound demographic reasons for investing in property in Florida. The population of North America is approximately 290 million people. Many Americans particularly those in the Northern States have enjoyed holidays in Florida and look forward to eventual retirement in Florida. Many Europeans similarly enjoy an annual holiday in Florida and have in recent years considered a second home in Florida. A major factor over the next 15 years will be the unprecedented number of post war baby boomers who will be retiring and again many will be attracted to Florida. Apart from year round sunshine Florida is one of the few States with no State Income tax, and properties have been traditionally very good value. Certainly the quality and value for money of the property you can buy compared to Britain, France, Spain, California or the American Northern States is significant. The Florida Gulf Coast. When considering Florida The Gulf (West) coast of compares very favourably with the main alternative choices of Orlando and the Atlantic (East) Coast. The continued supply of new developments in Orlando and huge availability of land means prices are kept in check, an additional problem arises if you wish to sell your Orlando property as not only are you in competition with lots of other properties on the market but all the money you paid out to furnish your property to allow for short term rentals will not be recouped. The Atlantic coast had been a popular choice but certain areas are comparatively expensive and very developed particularly around Miami and Fort Lauderdale. There are a number of alternatives in the Gulf, Naples although a very attractive and desirable City is increasingly proving expensive for many investors, although there are still areas representing very good value. New Port Richey has been heavily sold in Britain, particularly for short-term rentals; however there are somewhat limited facilities and a large supply of short term rental properties. There have been comments from people on holiday in the area about the lack of facilities and the appearance of the area along US19.  Another popular form of investment is to purchase a builder’s show home and then lease it back to the builder for a monthly rental payment. The monthly payment is usually at the level you would obtain from a tenant and at the end of the lease the builder completely redecorates the property and you are in the position of selling a model home, which often command a significant premium. Terms of the lease usually range from one to three years. Again it is important to be aware of all the price trends in the area you are looking at before undertaking this option and finding such properties requires extensive knowledge of the local housing market. Obviously long term rentals and show house lease backs are not the arrangements for you if you wish to use the property yourself on a regular basis, but if you wish to secure a long term dollar investment or until you are ready to holiday regularly or live in the States they may be of interest. For the information of British clients the maximum stay in America at the present time is 6 months a year, unless one has a business visa or green card. Waterfront Properties Due to the limited supply of waterfront and key (island) properties and the unlimited demand prices have increased dramatically in recent years. In the Sarasota area as an example there are very few properties overlooking the Gulf of Mexico under $1,000,000 and prices continue to escalate. Many investors have bought property in this area which they make use for only a few weeks a year but which they use primarily as an investment for capital gains purposes. This type of investment can provide the highest return for capital gains but it will require significant capital input. To maximise the investment dollar, waterfront is very hard to beat - everyone wants waterfront - the supply is limited and the demand will mean value increases exponentially. Multi Unit Property Investment A multi use property has some very attractive benefits. This is a property usually purpose built as two, three, four apartments upwards. It allows you the opportunity to rent the apartments but to hold back one at certain times of the year to allow for your own use. Siesta Key, which has some of Sarasota’s best beaches is a good area to find these units, seasonal rentals are excellent as is the rate of appreciation.  It is important that if you are considering one of these types of properties that you are given individual computations based on a realistic appraisal of past performance rather than overtly optimistic figures based on general calculations. If you are interested in this type of investment I will provide you with a detailed analysis of latest availability. Property Portfolios. A number of our customers have developed substantial property portfolios in Florida - we recommend a diverse range of property types encompassing rental properties, certain off plan new build properties that require 20% deposits but have a slow build time if the market is appreciating , etc. Our clients have diverse portfolios to cater for market fluctuations ranging from minimal personal investment of $50000, to $5,000,000 portfolios. Client case study From We Did It section  When we were planning our permanent move to Florida two years ago, our Tax consultant advised selling all of our Unit Trusts, Peps, Isa’s, Premium Bonds, etc., as these are relatively unheard of by the average American Tax Accountant and it would cause great confusion and big fees if we had to employ an International Tax adviser. Also some of these investments are only available to UK domiciled tax payers.   So we did as advised and arrived in sunny Sarasota Florida with nowhere to live, but a healthy bank balance. It soon became apparent that the Banks were offering a derisory interest rate and even the long term (5 year) Certificates of Deposit were a bit of a joke. There is not the competition of the Building Society system to make any effect on bank interest rates, so what does a fellow do? You could of course venture into Stocks and Shares, but personally, having lived through the ups and downs of the last fifteen years or so of the Stock Exchange, particularly the downs just before I had to cash in, I was reluctant to dive in to the melting pot of Wall Street. I notice today that the Dow Jones suffered another big loss and is lower than last October. So I am feeling pretty smug about my decision not to dive in.  I know that all the gurus will say that over the years you will win on Stocks and Shares, but it is not their cash and have you got enough time and nerve to sit and wait? If you are retired – no.                                                  We looked at Annuities but even the one that “guaranteed” a no loss situation would have taken 17 years to have paid out for their Fund Managers disasters – no thank you. So, here we were with this pile of money and our familiar tax efficient, decent rates of return investments, no longer available to us, or should I say, we were not comfortable with. We needed a place to live for a year whilst our “new build” house was being built, so instead of renting a two bedroom flat and storing our furniture at a cost of $1500 a month, we decided to buy a house for the short term.  This was done remarkably easily and because we could complete within a month the builder gave us a discount – good start. Meanwhile, whilst our “new build” house was being built, we saw a better option for us, so we made the decision to buy the “better option” and sell the one we were having built, later on – still with me? We moved in to the “better option” and put our “short term” house on the market. It sold without a lot of hassle for a decent profit. A couple of points to mention here – we had a buyer who put down a deposit and then changed his mind for no reason other than he changed his mind. Hard luck on him because we got to keep his deposit. Secondly, the seller pays all the sales commission to the Real estate agent and this can be up to 6%, yes 6%! You can sell without an agent but there are many pitfalls – we did try it with no success, you have to know Real Estate law pretty well to go it alone. Plus most houses are sold through the Multiple Listing System and “For Sale by Owners” don’t get onto the MLS, so anyone looking for a house would not see yours on the MLS. So, to recap, we sold our “short term” house and made a 10% profit after tax and selling costs - not bad for 9 months. Buoyed with our success, we put our “new build” house on the market as soon as it was finished – and it sold within two months for a 25% profit after tax and selling costs – Yippee The only reason we can do this is of course because the housing market in our area is completely crazy – developers can’t build houses and condominiums fast enough. The weather, lifestyle and general ambience of the place attracts a lot of retirees and of course the baby boomers are adding fuel to the fire. It is best to choose an area that has the right feel – good schools, close to amenities, good communications, and the Subdivision (Estate in English) should ideally be nearly sold out, so that you have a product which is in short supply and you can’t be undercut by the builder / developer. The small downside is that with this type of investment you have to make stage payments to the builder / developer as the project moves on, so in fact they are using your money to fund the building. Another really good investment here is buying a Condo / apartment early in the development stage. You buy at pre - construction prices. If the development is multi story, it will take eighteen months to two years to complete. The deal could be that you pay 10 % at contract signing, 10% when they start construction and nothing more until your condo is complete, then you have to pay the remaining 80%.   So, you have paid 20% down, and the 100% value of the property is increasing by 10% - 30% per annum. You sell or move in on completion.  Some contracts, but not all, are assignable, so you may be able to sell on to a third party before completion.  Well, I guess it beats working for a living. For more information click here ___________________________________________________________________ Thinking about buying a property in Florida - click here   Thinking about selling a property in Florida - click here   Thinking about emigrating to Florida - click here    Just want to be sent details of suitable agents with excellent testimonials and a proven track record of working with British buyers – click here   Andrew Bartlett an acknowledged expert on property trends and relocation in Florida, writes articles and answers readers’ questions for several British publications including Florida Magazine, Escape Magazine, Place in the Sun, Sunday Times, America, and The Red guide to buying Property in America and is regularly consulted by journalists and broadcasters. His consumer web guides have received numerous accolades.   Andrew was a Senior Government Official for 20 years before relocating to Florida several years ago where he was headhunted to set up specialist British property and relocation teams for Coldwell Banker and Remax - America’s largest estate agents. He then established a uniquely impartial and independent relocation and property briefing company working between Britain and Florida. He has written a number of watchdog style articles warning about  overseas property and emigration selling techniques.