Buying a villa or vacation home in a foreign country or in a different state can be a little daunting but can be very rewarding too. It is important that you are fully aware of the ins and out, the ups and downs of ownership before you buy. The purpose of this guide is to let you know what some of the pitfalls might be. The first step really is to do your own due diligence and look onto every aspect of owning your own vacation home. For some buyers, those non-Americans, may find some things a lot different to their own countries way of doing things.
First ask existing owners how the do things and if they have any tips. They would be happy to pass on things to watch out for and the things that can be of benefit to you. Remember one thing and place it at the back of your mind, Realtors make money from selling you properties, they don’t get anything from you but they have a share in the percentage taken from the seller’s price. So, it’s in their interest for properties to sell high. I must say that not all realtors are like this but there are a few out there. They can tell you that it is easy to achieve 40+ weeks a year rentals, yes, it can be done but not without a lot of expense, hard work and a few years of repeat bookngs. The supply of villas and vacation homes has risen massively over the years and so it is now a lot harder to compete just on quality and many owners have turned to competing on price. Hence you can rent a villa now cheaper than you could 15 years ago. If you look at the rates to rent villas and vacation homes in places like Spain, The Canaries, New England, almost anywhere they are much more expensive. Villas and Condo’s on the Florida coast are more expensive than the Orlando area. All this is great news for the villa guest but not so good for you the villa owner having to cover your monthly expenses.
So, what are those monthly costs? I can give an example as a guide but they are subject to variations from county to county and community to community but it should give you something to think about and you can ask for the more accurate info later.
County & State Taxes. This is paid on top of any income tax you may earn and is paid monthly on your gross sales figure and is around 11%. You have to submit a collection form each month even if you did not make any sales that month, you submit a zero return. Failure to do this can result in a penalty.
Property taxes This works out on the value of your home and can be around $2000 – 3000+ per year. Some mortgage companies add a monthly amount and keep it in escrow for you so that you don’t have such a lump to pay at the end of the year.
Property Insurance Property insurance is also expensive and only a small amount of companies provide cover. Again, your annual premium could be in excess of $2000 and as with property taxes some mortgage companies add it to your mortgage payments and hold it in escrow. Some insurance companies add a high deductible (Excess) in the case of Hurricane damage claims too.
Utilities All of the utility companies cost more than the UK. Some communities have both Electricity and Gas. In my property, the gas was used to heat the pool and operate the tumble dryer. Gas is a more efficient way to heat swimming pools and they can work all the time despite what the outside temperature is. Electric pool heaters work fine unless the outside air temperature drops to low. These heaters work on a heat exchanger principle. I have seen a few occasions where guests have paid for pool heat and as the outside temperature is too low the heater fails to operate. Such low temperatures only occur rarely but it’s worth knowing and making a reference to it in your terms and conditions of rental. A rough costing of monthly bills depending on how occupied it has been. So, I will base it on a 4-bedroom villa with air conditioning, pool, sprinkler system for the grass and gardens, cable TV and Broadband. This is pretty much the basic must haves.
Gas (if present) $200 - $300
Electricity $100 - $150 (if not used to heat the pool) $350+ a month if used to heat pool
Water = $120 - $150 (Some communities are able to use reclaimed water which would drop the cost done some, otherwise you are using potable water for your sprinklers.
Management Company Fees =$200 -$350 Some MC include pool cleaning and pest control but you can expect to pay at least $200 and then probably $75 - $85 per post guest clean.
Cable TV & Broadband = $120
Licenses etc = $ 500 - $600 per year.
Advertising = $500 - $650 per year
Landscaping = $60 per month if not included in your HOA fee
Home Owners Association = $475 per Quarter but should include landscaping within that.
Repairs and Renewals = $120 per month. Allow that amount when you consider a pool heater is well over $3000
There is most likely something I have missed there, like having a website built to advertise your property. All of these things add up and can be seen as the ugly side of things but there are more pleasant things to be had, for example you will meet lots of new people and make lifelong friends both fellow owners and paying guests.
Other things to think about before purchasing your property. Ask yourself, what would you like to see in a villa if you were staying in one and be honest about it. Perhaps you would like to look out over conservation or a lake view perhaps? Would you want the villa pool to be bathed in sunshine for most of the day? Would you like it to be on a gated community? How about en-suite bedrooms? These are all things that help a villa rent well and sell well. Games rooms are also popular but they can easily be added later if you wished but a conservation or lake view can’t. So, take you time until the right villa for you comes along and ticks all your boxes. There is a saying to be sure you can afford to run a villa in Florida and that is “You should be able to afford to cover the expenses without any booking revenue” If you can’t then you run the risk of your American dream becoming a nightmare.
The object of this article is not to spread doom and gloom it is to show the harsh facts. Good luck in your adventure.
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