Florida Mortgage Loans | Condo-Hotel/Condotel Rental Income Rules

Condo Hotels or Condotels continue to grow in popularity in Florida, especially in hot tourist areas like West Palm Beach, Fort Lauderdale, Orlando, Tampa, Bonita Springs and Miami.  Because of this, it is important to keep in mind what Lenders are requiring in their lending guidelines concerning this unique property type.

One major issue that comes up with Condo Hotels is the rental pool.  Part of the allure of the property is the ability to allow the hotel to rent the room out to guests while it is not being used by the owner.

Unfortunately, Lenders require that the rental pool be voluntary.  Involuntary rental pools are to be classified as Timeshares. 

What this means is that when the owner of the Condotel unit wants to rent out their unit, they must make sure they put the unit into the rental pool... it isn't automatically rented without their say so. 

Considering issues like seasonality, major local events, and discount room rates/sales, there is no valid way to forecast the actual income that will be shared by the hotel and the room owner. 

An owner that does not want to rent their Condo Hotel room at all has that option under a voluntary rental pool.   While this might bother some hotel operations that want the room to rent, this is the only way that financing can be obtained.

The voluntary rental pool also affects the potential net income.  A buyer cannot be promised $10,000 a year return on a property if they are only going to make it available for 6 months out of the years or only on weekdays.

Realtors (listing agents) and Developers are therefore strictly prohibited from advertising rates of return, cap rates or even offering investment advice concerning Condotels.  Any potential rate of return could only be hypothetically based on an assumed usage rate that may never be reached.

Because of this, any rental income will not be counted as part of the qualification income for the Condo Hotel Loan.  To the borrower, this means that their debt to income ratios will not benefit from any potential cash flows from the property. 

Given this information, it is prudent that Realtors and Mortgage Brokers advise their clients who are interested in purchasing Condo Hotel properties that they will need to be able to qualify for this purchase on its own with all their other current debt. 

If they are unable to meet the Lenders' Debt to Income Ratios with their current debts and current primary residence, then they will likely not qualify for a Condo Hotel Loan.

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David A. Podgursky, MBA
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Florida Mortgage | Fixed Rate or ARM ~ the decision depends on YOU

Fixed Rate Mortgages (FRM) versus Adjustable Rate Mortgages (ARMs) is a hot topic of debate right now. There is a camp of Fixed Rate evangelists that want to force-convert all mortgagors into their fold... all-the-while the ARM holders are scared by the news of impending doom sung from the rafters by Journalists and FRM propaganda.

So now YOU want to buy a house or refinance your loan and you're getting drawn and quartered by your "trusted advisors" about whether you should get a Fixed Rate Mortgage or an Adjustable Rate Mortgage (ARM).

Different people swear by different financial philosophies... the problem is they are DIFFERENT FROM YOU. The only person that knows your financial situation is YOU. The only other person who can help you decide which loan program fits you best is your Mortgage Broker.

Your Mortgage Broker will understand the nuances of your unique financial situation and will help you decide on a loan program based on your needs and preferences TODAY as well as help you plan for the future.

The information you give to your Mortgage Broker will all filter down through his/her consultative funnel and allow them to offer you two to three loan programs to choose from as well as the features and benefits of each program for you.

There are several criteria that are weighed to make the decision. A few of them are as follows:

• Your life stage
• Your career stage
• Your income and future potential
• Your family stage
• Your stability
• Your property needs

A good way to show how the decision process works is via the table below.

	Fresh out of college Just got first great job Family recommends buying not renting Single 600sq ft - 1br - Condo Down Payment Assistance from Parents
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage Likely won't be in small condo long New job = money is tight Interest Only option helps reduce Monthly expenses No real need to "build" Equity Low cost of property means low appreciation Really this is just a step above renting
	3 years later Promotion at work Engaged - two incomes Need more space 1000 sq - 3br - Townhouse
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage Double Income but increase in expenses Nice but small profit on other property Further from work means cost of commute Interest Only option frees up monies to repay fiance's student loans Interest Only frees up monies to pay off credit cards
	Married Husband gets promotion New Baby Refinance for Renovation of Nursery
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage More babies in the future Space is already tight Cash is tighter Cash out with Interest Only Exit Strategy - 2 yrs Max
	Dad now Middle Management Second child First child in private school New Dog - Need a Yard Need a 5 bedroom
Fixed Rate Mortgage Secure - Rate is good for 30yrs Longer period in Home "Family Home" Salary plus investments makes comfort 30yr Hybrid with 10yrs Interest Only	Adjustable Rate Mortgage Expenses are manageable 10 year timeline unsure (max ARM length) Interest Only nice option
	Son headed away to College Daughter in Private School Mom going back to work Refinance to renovate home office Some of Cash Out used to buy 4-plex on campus for son and friends
Fixed Rate Mortgage 10yr Interest Only expires soon Double Income Investments Up Salary plus investments makes comfort 30yr Hybrid with 10yrs Interest Only Primary Residence	Adjustable Rate Mortgage Expenses are manageable 10 year timeline unsure (max ARM length) Interest Only nice option 4-plex purchased with Cash Flow ARM... increased monthly returns Investment
	Both Kids in college / Empty Nest Mom's career is taking off Dad has promotion Buying Vacation home in South Florida Buying Investment Property as well
Fixed Rate Mortgage Secure - Rate is good for 30yrs Appreciation = good equity position Investments well stocked Not sure if/when full time move to Florida Cash out of this property to buy 2nd Home another 30yr w/10 IO? - could go either way Primary Residence	Adjustable Rate Mortgage Likely won't be in House for 10 years Wintering in South Florida is great! Many friends already full time Florida residents 4plex in 1031 for 20plex Retail Strip Center Purchased where Mom's office resides 20plex bought with OptionARM Strip Center 5/1 ARM Investments
	Retirement Full time residents in Boca Raton Living on investments Sold home Up East Enjoying grandkids' visits
Fixed Rate Mortgage Timeline unknown on Primary Using monies from sale of other home to add on to retirement funds Great Ranch House in Gated Community Ability to travel Can always refinance if need for equity HELOC in place for emergencies Another 30yr Fixed with 10yr Interest Only Primary Residence	Adjustable Rate Mortgage Investment Properties 1031 Exchanged for more Properties Large Portfolio of investment properties growing Future Cash Out Refis fund purchases Cash flow establishing further income for retirement Investments restructured into LLCs to put in trust for kids/grandkids Investments

___________________________________________________

As you can see, the borrowers' unique needs changed throughout the different lifecycles that they experienced. From just starting out in a job to getting engaged and needing to pay down accumulated debt to having kids that eventually went off to school to retirement...

Even investing in rental properties posed a dilemma about which way to go - Fixed Rate or ARM.

The consensus wants to say that since there are so many Winner icons in the Fixed Rate column, that it is obviously the winner by majority rules. The problem with that philosophy is that in any case shown above, if the timeline varied just slightly, the ARM might have come back in favor.

If an ARM had been chosen over a Fixed Rate Mortgage then the timeline had run longer than expected then Mr and Mrs. Borrower would have had to refinance ahead of schedule. Although, this isn't the worst problem they could have - it could speed up their timetable for investing in other properties or other investment vehicles.

The truth is that it is hard to predict change. The best that can be done for these borrowers is to sit down and consult on:

• Where they are
• Where they are going
• What is their entry strategy for the property
• What is their exit strategy

The best mortgage vehicle is whichever plan that will give them some security to make sure that their personal and financial lives are not burdened - but instead enhanced by their Mortgage.

When this occurs, their mortgage actually becomes a tool for their:

• wealth accumulation
• debt elimination
• college planning
• Investment strategy
• future retirement incomes

The choice between the Fixed Rate Mortgage and the Adjustable Rate Mortgage is ultimately up to the borrower. The Mortgage Broker can only advise... but a good mortgage broker can show that there are definite advantages to both programs for all borrowers.

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Florida Mortgage | Land Surveying Primer ~ Why you should order a survey every time!

ARE YOU BUYING A HOME OR AN ENCROACHMENT??

A Land Surveying Primer

Ok... I am a little biased right now. I grew up in a Real Estate Industry Family...specifically my parents own a Land Surveying Company.

• I remember at 11-12 years old going in and doing tax book research and answering phones...yes I was a master of microfiche then!
• I remember at 14-15 going to the courthouse and looking up deeds and plat maps.
• I remember at 16-17 following the field crew around and watching and helping them spot houses
• I remember at 17-18 after drafting and architecture classes at High School drawing the mortgage inspections (the simpler ones)...

I remember driving out and doing Mortgage Inspections... spotting boundaries, driveways, decks... anything that may have been added either after construction or since the last sale.

Why am I relating this to you??

Because... the mortgage industry has become cheap!

Everyone is worried about closing costs and interior inspections... but who is making sure that you are not buying a property with an encroachment?

Who is making sure that you're buying a home without a huge easement?

No one!!!

Why?? Because lenders are not requiring mortgage inspections... much less full surveys, or pins.

• Mortgage Inspections are rudimentary checks of the house to make sure that whoever built on the land colored within the lines.
• Surveys actually find benchmarks, setbacks, landmarks, centerlines and easements and detail them on paper...they are of legal record if recorded.
• A Staked Survey is when the crew marks the corners with wooden stakes or flags. They are temporary but are important for construction.
• Pins is when the surveying crew does a survey and then puts iron rods, usually capped with an orange plastic cap with the surveyor's initials and license number. These are "permanent".
• Plat... the drawing to the left is a "plat map" ... it shows all the dimensions and directions of a property including where the house sits. Note the dotted lines, those are set backs. Transits, GPS and Triangulation are used to find these dimensions and their latitudes and longitudes.

The biggest issue that arises from not ordering at least a mortgage inspection is border disputes!

What a survey or mortgage inspection helps to prove is whether your neighbor has a deck or driveway on your property and whether the area you wish to expand upon is buildable land!

If you purchase a piece of property and the neighbor has his driveway over the lot line, you can request that he move it.

If he cannot, you have to do a "sell-off" of that portion of the land to the neighbor - which leaves you with an irregular lot and some deed restrictions will not allow you to have a smaller lot than you already have ... this requires rezoning!

You can also create an easement... a legal pass-through allowing your neighbor to use that part of your property. The easement will be written for a number of years and for one specific use.

My community is Zero-Lot-Line... because of this, the Eastern boundary of my lot abuts my neighbor's house. Well... the roof line hangs over my lot so there is a legal "Overhang Easement" drawn onto my property allowing the neighbor to have his roof and a satellite dish overhanging but not attached to my property.

An easement can also be created to provide access to a lot behind another parcel that has no direct road access... and the driveway created would be the responsibility of the property owner to maintain not the person behind them.

Easements can also be for Utilities, Sewers, Phone, Roadways, access, etc...

Because of the complicated nature of land - raw or unimproved - it is up to us - the Real Estate professionals - to encourage the use of Land Surveying techniques. It is up to us to step forward and head off the purchase of land without an inspection of the parcel because then we can ensure a smoother transaction and a peaceful existence for our clients on their properties for the entire term of ownership.

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David A. Podgursky, MBA
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Your Source for Residential and Commercial Mortgage Loans in Florida

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Florida Mortgage | Foreign National Homebuyers: How to get your Loan Started!

Florida is a HOT market for Foreign National's to purchase both Second Homes and Investment Properties. This is a great time and a great market for their purchases. With the weak dollar and the strong Euro and British Sterling, European investment in Florida is at an all time high!

A Foreign National Loan is a very simple process if you have your documentation in place. Here is a great checklist to use when you want to get the ball rolling on that process.

Documents needed for a Foreign National Loan Program:

1) Three Personal Reference Letters from Country of Origin. Letter must be from a lending institution and include the following:

• Credit was extended to the Borrower
• Borrower is in Good Standing
• High Balance
• Current Balance
• Payment Amount
• Payment History

2) Two Months' Bank Statements from a US Based Bank.

3) Employment Verification Must Include the Following:

• Must be on company letterhead from Country of Origin.
• Must state Income for for prior 2 years and current income.
• Length of Employment
• Position of Borrower
• Type of Business

For Self Employed Borrowers, please include:

• Percentage of Ownership in company
• Address of business for the past 2 years.

4) Copy of Visa (if applicable)

5) Copy of Passport

All letters must be translated into English by a certified translator.

For more information about Foreign National Loans, please check the following links:

• Florida Mortgage | Foreign National Homebuyers - Visa Waiver Program
• Florida Mortgage | Foreign National Homebuyers - "Dollar weakens on Subprime Woes" is good news for you!
• Florida Mortgage Loans | Foreign National Homebuyers: Seasoning Funds in US Banks
• Florida Mortgage | Foreign National Homebuyers: Europe has come calling!

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David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

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Florida Mortgage Loans | Reverse Mortgages - are they all hype??

There have been many new commercials on TV with trusted actors/spokespeople who are adamant that the Senior Citizen public needs access to the equity in their homes via a Reverse Mortgage.  The commercials discuss Peace of Mind, Security, and Quality of Life.  What they do not discuss is the downsides to such a program in the short and long terms.

Note: This post is meant for debate as much as for informative purposes and I am sure it will ruffle some feathers... but it is better to ruffle those feathers now before more people choose to go down a path that they were sold on despite the fact that it may not fit their true needs.

There are very pronounced limits to the Reverse Mortgage that are not always outlined in advertisements or even by the Loan Originators that pitch these loans. 

I will start with the positives of this loan to show how it can help.

1. There is no problem with credit histories.  In fact, this is a good program to use in the situation when the homeowner has bad credit as opposed to using a hard money loan. 
   
   
2. Not determined by ability to repay
   
   
3. The borrower can stay in the property indefinitely.
   
   
4. This is a negative amortization loan but the borrower will never owe more than fair market value on the property if all the equity is lost to negative amortization.
   
   
5. Funds can be used in any way
   
   
6. Manufactured homes do qualify
   
   
7. Three options to receive funds: Annuity, Line of Credit or Lump Sum. 
   

Here are some of the negatives to ponder:

1. HIGH Interest Rates.   While the "Interest Rate" itself seems in line, the true accumulation of Negative Amortization is based on the TALC - Total Accumulated Loan Costs.  These costs can create an effective interest rate of 9.5% or more.  When appreciation in the property is low, the 9.5% negative amortization eats equity at a very fast rate.
   
   
2. The minimum age for qualifying for a Reverse Mortgage is 62 in the State of Florida.
   
   
3. At age 62, a borrower can only access roughly 40% of the value of the home.
   
   
4. The loan to value of this program is calculated based on a determination of approximately how long the borrower will remain in the property... i.e. a mortality calculation
   
   
5. Once a borrower takes out a Reverse Mortgage, they can never do it again.  The Reverse Mortgage cannot be refinanced.  If a need for more money arises, there is no way to get additional funds from the mortgage.
   
   
6. Having more than $2,000 in a savings account for an individual or $3,000 for a couple prohibits the borrowers from qualifying for Medicaid in the event of a medical emergency or catastrophic illness.
   
   
7. Residency is required.  The Reverse Mortgage requires that the borrower stay in the property.  An absence of more than 30 days will allow the lender to seek foreclosure. 
   
   This is especially important in Florida.  This means that snowbirds will have to make the reverse mortgaged home their primary/homestead and stay here full time.  This also means that a prolonged stay out of the property - i.e. to help with taking care of a new grandchild, to help in rehabilitation of a loved one, to seek treatment of the borrowers themselves, to travel - are all absences that can trigger default.
   
   
8. The Negative Amortization of this loan means that the house that Mom and Dad spent so much time and money building and paying off may belong 100% to the bank instead of having any value that can be left to their heirs.  In the case that the loan amount is 100% of the value of the property, the heirs still must dispose of the property or refinance it or they or the estate could be liable for the foreclosure. 

Now, while AARP and HUD both endorse this program for Seniors, AARP recommends and HUD requires at least two counseling sessions to make sure the borrowers know the positives AND the negatives of this program.  Both groups understand the potential damage that this loan program could cause and want to be sure that Seniors receive full disclosure.

My personal and professional opinion is that there are situations where the reverse mortgages do fit.  I think that some homeowners have certain goals which can be achieved through a reverse mortgage.  I think that it definitely fits a niche market.

That being said, I do not believe it is meant to work for the masses.  I believe it truthfully does not fit MOST potential borrowers.

If a borrower has:

• good credit,
• some income by which they can repay a mortgage,
• adequate equity,
• minimal debt,
• controlled expenses,
• affordable lifestyle,
• the need to continue growing wealth during retirement,
• the desire to leave an inheritance to their family/friends,

then I believe that a Conventional Mortgage - a "Forward" mortgage - and proper use of secure, liquid investments can offer the borrower more security and definitely more money over a longer period of time than a Reverse Mortgage.

With a cash out refinance and funding an annuity that can not-only pay or help pay the mortgage payments but can accrue interest to allow the borrowers to have a documented income, a Conventional Mortgage can create a better financial plan for future needs and emergency funds.

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David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update: Investor and Commercial Worries

The release of the newest version of the proposed Florida Property Tax Reform should worry a large portion of property owners in the State.

While Florida House Speaker Mark Rubio and Governor Charlie Crist have done a reasonable job accommodating homestead property owners, i.e. full time residents, especially those with property values under $500,000, I feel that there was a failure in this newest revision of the property tax reform to adequately address the issues facing investors and commercial property owners.

Many feel that these people don't need as much attention but I think that the ripple effect of not helping with their tax woes will be felt more directly than Florida Legislators might realize.

Apartment Investors

These investors will have the ugly job of informing their tenants that all this news about how tax savings will pass to them is just not the case.  As property taxes will only lower slightly, and not at all in some cases, Rents will have to remain high to ensure that the properties cash-flow for the investor. The onus of the currently high tax rates on commercial properties will still fall on the pocketbooks of the renters. 

Strip Center & Industrial Park Owners

These Investors are usually using Triple-Net (NNN) Leases which involve CAM (Common Area Maintenance) charges.  The CAM usually includes Maintenance, Taxes, Insurance and other common fees.  This benefits the investor in that they know they are collecting these fees from their tenants...but high inventory and vacancy rates will suffer as CAMs will not be able to be lowered without a true overhaul of the tax codes.

Condo Owners

This is a broad range of property owners but mainly consisting of small and medium businesses.  These businesses are suffering from a double dose of the tax reform blues as they see a much less aggressive tax plan on their homes AND their work places.

Shopping Center Owners

Malls and shopping centers have very high per square foot rents right now plus CAM and sometimes Gross Leases to factor in.  Due to high taxes, some small businesses are settling for lesser centers because of the high cost of doing business in newer Shopping Centers.  Therefore large shopping center owners are seeing higher turnover rates and are now having to offer more incentives to potential tenants. 

Land Owners

Some property owners lease their land instead of selling it or constructing on it themselves.  Fast Food Chains are a popular target for this type of property owner.  They buy the land and lease it to the franchisee who erects the building on it and stays for a certain period.   With high taxes, this is creating a burden on property owners in higher traffic areas as they are the most affected due to higher property values.

A potential fix...

Some of these problems could be addressed by a proposition which was not offered up in the most recent coverage was a change in Assessment practices.  If properties were consistently assessed with the same method and with an As-Used mentality rather than with a Potential Usage mentality, a small commercial property owner would not have as much to fear when the property appraiser comes to reassess after a new record was set for a price of another property down the street. 

Comparables of properties of different Zonings, Usages, and Types should not be weighed in the judgment of an entirely different property.  This is the problem with the Palm Beach County Property Appraiser who prefers to base assessments on Potential use regardless of the fact that a property might have been used in the same way for fifty years and has no reason to believe it will change.

The worst part...

There are definitely more property owners that will not feel the overdue relief promised by Legislators... but what these lawmakers are not seeing is that the indirect effect of high taxes on commercial properties on the middle and lower class is felt when employers cannot afford to create more jobs or offer higher wages... when apartment owners cannot afford to reduce rents... and when small businesses just cannot expand due to ultra high costs making financing property impossible.

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Mortgage | Foreign National Homebuyers: Europe has come calling!

Wow... the Sun Sentinel has finally caught wind of the Europeans that are buying en masse in South and Central Florida these days!

The article speaks of why Western and Northern Europeans are growing fonder of the area for both the lifestyle and climate.

They printed this map showing that most of the European Buyers are from the UK.

There are also many from Denmark and Holland.

Right now, Mortgages for Foreign Nationals are at an all time high. It is easier now than it has been in years to get financing at attractive rates.

That was actually a point missed by the journalists. Loan Programs are available from far more banks and lenders. Also there are new options in foreign exchange that are making the conversion of funds that much quicker and easier.

Some of the other factors that are influencing the current investment boom is the strong Euro. Based on the Dollar, the Euro is dominant... and the British Sterling is even stronger.

So what does this mean to Europeans? It means they're making much more on their investments than US citizens.

How? Foreign Exchange Rate Hedging...

The Dollar has long been an international standard in currency. Even people with stronger currency have a tendency to sock some away in US currency. It was actually causing a panic a few years ago when the US believed that so many bills were out of circulation and sitting in foreign floorboards and safes that we would eventually run out ourselves.

• The Dollar has also been volatile - as volatile as our politics and financial markets.



• As the dollar has dipped - much like a stock, foreign investors have bought the dollar.



• As the dollar has recovered - the investors would sell the dollar back and take the profits.



• So... while the dollar is LOW, investors are buying up Dollars with their Euros.

Then they buy a property here in the US.

Over time, the property itself increases in value. The dollar also becomes stronger over time as we recover economically.

Then when the foreign investor sells the property, they make a profit in appreciation. They then take the Dollars and exchange them for Euros and make a profit on the appreciated Dollar!

So if they buy the US Dollar and the House.

• They put $100,000 down on a $500,000 house (20%).



• The House appreciates 15% over 5 years to $575,000.



• and the Dollar gains 5%, to $105,000 (equity CAN appreciate in this instance).



• The combined profit is $80,000 on $100,000 invested or 80% in 5 years!



• subtract out the debt service and depreciation to get a true IRR

How's that for some fancy European Math!

So... who wants to start marketing overseas with me??

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update - How the Retiree Community may get helped and hurt

Florida has long had a reputation for Shuffleboard and the Early Bird Special to contrast the month of March when the state is riddled with High School and College Co-ed Debauchery, namely Spring Break.

The State has grown up a lot in the past 50 odd years though... and growing pains have left us where we are now - in the middle of a huge tax dilemma.

One demographic that has been brought to the forefront of this debate is that retirement community that the State may be neglecting in their planning as thus far nothing in the news has touched on how they will benefit directly.

Sure, they'll get a tax break with possible double homestead exemptions and rolling back taxes to their assessed levels of 4-5 years ago... but some of these people have been in their houses for 20+ years and the caps on their taxes have certainly been broken a few times...

Think about it... if you get a 3% maximum increase yearly over 20 years, you're talking some major compounding!

So now with Grandma and Grandpa as Art Blanchet and Bill Quigley refer to them well past the days when their pensions ran out and living on a VERY fixed income are watching their taxes go up and their crown molding fall down... how do they deal with the idea of higher taxes on their everyday shopping AND the fact that maybe their kids who are about to retire may not be in a place to join them in Del Boca Vista (Seinfeld-ism)?

The fact is... they ARE paying more than their fair share right now. They are not making an active income yet they are getting taxed on their properties in lieu of income tax.

Then with the measure to raise sales tax, their cost of living will be somewhat contained but their fixed income is still getting taxed despite the fact that it isn't taxed directly.

Many Florida homeowners simply have it easy. WHAT?!? Blasphemy!

NO... listen up... Florida has no State Income Tax so many people come here because Property Taxes are much lower than they'd pay if they stayed in their home-state or even home-country! I said it! YOU HEARD IT! Millionaires and Foreign Investors!

For instance... American Express was the subject of a news story specifically regarding the Centurion Card. No...99% of the people in the world have NO clue what I'm talking about. Some people have heard of it but think it is an urban myth... I know it exists. Why? Because I've held them in my hand. Yes - I've touched several REAL Black Amex Cards. There are only 1500 in the world... why do I bring them up? The highest concentration of Black Amex Holders in the world live in Palm Beach County, Florida.

What in the world does that have to do with nothing whatsoever?

well... Grandma and Grandpa live in a $125,000 condo that they paid $30,000 for 20 years ago. They're paying $2500 in Income cum Property Taxes to live there...

But... Millionaires with great credit - because that's what you have to be to get an invitation to apply for a Black AMEX after 5 years of spending $5-10K minimum PER MONTH on a Platinum AMEX - don't pay income tax on their passive and active incomes. And they live in $12.5Million Condos on the Beach... 100 times the pricetag but making FAR more than 100 times the income in MANY instances.

Oh... that's just a drop in the bucket sayeth Lawmakers.... yeah... they're right... THEIR BUCKETS.

(Ironically while this is up for debate, Former Congressman Mark Foley is paying for his defense with the millions of dollars in leftover campaign monies... why aren't those going back into the state since he's NOT campaigning?!)

Let's say ONE Black Amex holder at $5000/mo spending has to pay 2% more sales tax... Write it on paper with me people!... yes... that's $100 more per month. Oh... yeah.. .they'll feel that.... but $100/month times 12 for a year is $1200/year or Half of What Grandma and Grandpa pay in taxes! Oh yeah... and the IRS lets you deduct State Sales Tax if your State has no Income Tax!!

These people are SPENDING more in two weeks than Grandma and Grandpa are being Taxed!

So it is boiling down again to the Haves vs the Have Nots.

Grandma and Grandpa HAVE NOT so they're Taxed in their Retirement...

The HAVES are still going to get tax breaks regardless... and the net effect of their increased spending being taxed will really not amount to much at all.

So why go that route?

Because there is no State Income Tax to identify where monies are really coming from.... what?!

The Millionaire demographic is harder to identify than Grandma AT THE STATE LEVEL.

No... I'm not pretending to be Robin Hood... I don't wear tights. What I'm saying is that the issue isn't property tax, nor is it sales tax....

it isn't about EQUAL treatment of all citizens... it is about EQUITABLE treatment...something far different and far harder to create except in Utopia... an island off of Never Never Land.

That's where lawmakers just can't seem to dig in this... how do you identify taxpayers that should be paying more or less?

Income Tax

Believe me... I don't want to pay it either... but it is definitely a place where a RETIREE EXEMPTION Could be enforced!

Your Mortgage Advisor is WHO???

Today's Mortgage Industry is a vast, complicated landscape of amortization, interest calculations, equity lines and bond prices.

People are clamoring to get in on the profession but soon find that it is far more education intensive than they ever would imagine.

Just keeping up with the ever changing progams offered by the major lenders is a challenge, but to keep up with a whole slew of smaller, more diverse and cutting edge lenders and the effect the mortgage backed securities market has on their rates is something better left for a pro.

My main concern as a Mortgage Broker is... who are borrowers going to for their mortgage advice?? and why aren't they mortgage brokers?!

They say you can't spend 10 minutes in a restaurant in Boca Raton, Florida or any other volatile real estate market without hearing some conversation start up about real estate. From the first time homebuyer to the retiree living on rental incomes from an industrial park complex, everyone wants to talk about it.

The thing is... that's GREAT for me... it means that there are people thinking about transacting and I want to know them!

The problem is... when everyone is talking about it - no one is LISTENING about it!

Far too often I'm hearing someone call me to tell me what loan fits their needs rather than going through a brief but thorough fact finding mission to determine which of the THOUSANDS of loan products out there fits their needs best.

• All I want is a 30 year fixed, no points, 5.5% on a Mobile Home
• Don't even bother me with that talk about Interest Only
• Option ARMs are only talked about by Thieves
• I don't want any of that Negative Amortization stuff
• My friends went bankrupt because of their ARM

WHOA... hold the bus!

It is GREAT to know what you want... and to do some research into different loan programs... but I don't operate like that. Why? because you are UNIQUE and my goal is to take your unique financial situation and pair it with a specific loan program that will effectively and efficiently meet or exceed your needs for the entire life of the PROPERTY - NOT the just Loan!

HOGWASH!? NO... and don't listen to anyone that tells you otherwise! I MEAN IT!

Look... here's the skinny.

• Who are you?
• How old are you?
• What stage are you in your life?
• What stage are you in your family?
• What stage are you in your career?
• What is your salary like today... and next year?

Those are all things that all your research can't help you distill with the help of a Banklate or SpendingTree. They are questions that I, your friendly neighborhood Mortgage Guy will ask you.

Wikipedia, MSN Money, Mortgage-X... none of them can help you sort through who YOU are to arrive at the right program for you... instead they let you bring your biases and those of your trusty advisors with you.

You know... Mom and Dad, Your friend the family attorney, Your grandfather's accountant, your rich older (much older) sibling, your family's stockbroker, your Realtor... all the people that would answer all the questions above VERY differently than you.

So why are THEY telling you which loan to get? How are they, all of a sudden, masters of the information that will help you get the program that fits YOUR needs properly?

Well...sorry to say... I'm BLUNT so I'll say it anyway... THEY ARE NOT the people you should be listening to for Mortgage Advice. Most of the time they aren't even the ones you'll tell about your credit and salary issues when you're NOT buying a house!

Let's look at the facts.

• Mom and Dad are 50-60s, settled down, may have one more house in their future and it is likely smaller than this one, they have savings, pension, security and retirement planned. Even better, they have YOU out of the house so you're not draining their disposable income away from their leisure. So how are they poised to help someone starting out? much less understand one in this economic time/market?
• Your family attorney, in his 60's in his prime earning years, has a huge house on the affluent side of town, a condo by the beach, and a timeshare in Ireland for when he really needs a Guiness and a Sweater. He's got a few million in assets, partially liquid and his house is long paid off. How does HE know what you, the newly hired salesperson is going to need to get into the house and afford to stay in it??
• Grandfather's accountant... When I was your age, I paid $1,200 for my first house and I paid CASH because that's the way we did it! - do I need to continue??
• Your much older sibling, mid 30's, two cars, two incomes, two kids, too many credit cards...too condescending... you don't really talk to him about anything anyway!
• Your family stockbroker/financial planner... PLEASE... this is your home, there is no return on the equity in a home so leave it alone! We haven't covered that yet, sorry... Every dollar you put in that house is a dollar you're not putting in a mutual fund with him....move along.
• Your Realtor... well... they should at least be versed in mortgages to some extent, but the best Realtors won't talk loans with you because it is illegal and unethical for them to do so because of license laws!

What have I just illustrated?? There is an impartial person who has good advice, who knows the markets, who knows the products, who is just waiting for you to call and let him do his job... but... and this is a BIG BUT

But you've got all the advice you can handle in what is already an overwhelming and stressful life cycle event!

So... who do you listen to? Do you consider the scrutiny you'll endure if you pick something outside of what everyone else thinks is right for you?

DO YOU CARE?

Remember... everyone says, "Buying a home is the single, biggest investment you'll ever make..."

So why are you buying with other people's own needs and experiences when they probably do not reflect what YOU need??

Look... it is simple. I'm not telling you to tune them out and only talk to me. That's unreasonable. What is reasonable is to tune everyone out for a little while. Let them know you'll get to them. Then take the evidence to them that your Friendly Neighborhood Mortgage Go To Guy (or Girl) has to offer.

Relate to them the reasoning behind why you may want to consider an ARM, or the benefits to YOU of Interest Only, or the easy to afford minimum payment on the Option ARM, or the versatility of the Hybrid that is a combination of two or three loan programs.

Better yet, show them that there is someone else out there with your best interests in mind that is an expert in that field... nay a guru that you're willing to trust and so should they.

I'm not saying they'll trust me too... but with proof and logic, we can at least make them understand why the program I offer fits you better than the program they think you should have.

And isn't compromise what good, lifelong relationships are about?

So when the time comes that you're thinking of buying your first home, relocating to Florida, buying a Second Home with a Beach View, buying an investment property, buying a property to grow your business... call me...

We'll sit down and have a coffee... and I'll LISTEN...

After that, we'll know your entry strategy, exit strategy and have a good idea of what you want life to be like in your new loan. Then I'll get you pre-approved so you can call your favorite big sister/new realtor and let her drive you all around town to find you a new property!

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update - HOUSE BILL REJECTED!

Breaking News from the SunSentinel.com regarding the Florida Property Tax: This didn't take long at all. Instead of waiting until this morning to make a resolution on the Florida House's property tax reform bills, the Senate rejected them all yesterday morning as their first order of business!

I guess the State Senate read my post yesterday about how I felt the House did not understand the "Time is of the Essense" clause of Real Estate!

The Florida State Senate has decided that perhaps the House plan is a little too radical and offsets the property tax with too high a state sales tax.

So the Senate's bill would work like this:

1. Roll back taxes to the 2003-2004 level (sound familiar) instead of 2000-2001
2. First time homebuyers that have been left in the lurch for so long would get a double Homestead exemption for a total of $50,000
3. Businesses (woo hoo!) would get a $25,000 Tangible Property Exemption which definitely helps the small business owner and since 90% of jobs are created by small businesses i.e. middle income business owners, this should offset the burden that was going to plague small businesses
4. Portability! Biggest YAY of all. Meaning that people can carry their tax basis with them. If someone is in a $200,000 start home and moves to a $500,000 family home, then they will not have a 250% higher tax basis any longer! This especially helps the struggling middle class! This will also help people that have been in their homes for a long time to move without taking the burden of today's property assessments with them which also benefits the retirees.

Now the House and Senate will be sitting down to try to work out a compromise between their plans. Their goal is to complete their unified plan by May 4th when they are supposed to Adjourn for the summer.

The issues on the table that I believe will be most likely to carry through from this plan will be

• Double Homestead
• Compromised Roll back
• Portability
• Maybe the business tangible tax exemption

The bills from the House that will likely carry through are

• Sales Tax Hike - but likely compromised
• Assessment practices is definite
• Cap on Local government add-ons

In other news that could benefit a more aggressive plan, in a former post I noted Gov. Crist was signing a pact with the Seminole Nation to secure more slot machines with them in return for tax monies from them... a first for the Seminole Tribe in Florida. Now it appears that the State and Gov Crist are looking to expand gambling in the state, further expanding the taxable revenues from these casinos! This should definitely help with the revenue crisis that these tax bills are sure to create by providing more money to schools.

Still what is really interesting is that Republican Governor Charlie Crist has not weighed in officially...

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update - Republican Bill Passes in the House

Breaking News from the SunSentinel.com regarding the Florida Property Tax resolutions are still not addressing the immediate needs of those hardest hurt by the high cost of property taxes throughout the state.

 

 

As the Republicans control the Florida House, there was little doubt that their bill would get the majority.

Unfortunately, the "Time is of the Essense" clause of Real Estate did not seem to compel these Florida Law Makers to affect a change any sooner than 2009 if this becomes a true Amendment to the Florida Constitution. 

The Florida House, in its infinite wisdom has proposed the Florida Tax Bill go on the ballot in the 2008 elections if it gets passed by the State Senate... which it probably will as they're a Republican Majority as well.

The Republican Bill centers around the now notorious Property Tax for Sales Tax Swap that Art Blanchet focused a post on... the actual impact of this PHASE of the Tax bills in session would cut $25 to $35 Billion from the State revenues over the first five years.... and this is even with the proposed sales tax increase!

The article in the SunSentinel.com noted that this Amendment would officially make Florida the ONLY State with no Property Tax AND no State Income Tax!.... but it would also be the State with the highest Sales Tax!

The other bills in session? (HB=House Bill)

• HB7001 - would roll back property taxes to their 2000-2001 levels and cap them.  This bill passed unanimously.
  This would have a dramatic effect on the ability of people to upgrade from a starter home to a family home.
• HB261 - this one affects Nick M The Appraiser ... it modifies assessment practices. 
  In a prior post I mentioned the feud between the Palm Beach County and Broward County appraisors over assessing property "As Developed" the Broward County Stand vs "Potential Use" or Highest and Best Use as the Palm Beach County Stand.  Obviously assessing a house for its current usage rather than future (potential) usage will mean that the property is valued more fairly.  The problem really lies with lower income areas where eminent domain is an issue.  A property that houses Section 8 might be in the Path of Progress and all of a sudden the people can't afford to hold the property and rent it out because taxes are too high.  The property is still worth what it is worth but all of a sudden the land is worth a fortune.
• HB1483 - this limits local governments abilities to increase taxes.  This is in reaction to several municipalities with add-ons to the main city or county taxes. 
  There are several municipalities (like Greenacres) which are more highly taxed than areas just 1-2 blocks away!  This is an unfair practice and creates undue financial strain on property owners in those areas.

All four of these measures go to the State Senate next...

But that's not the end of it!

The State Senate is voting on Friday on its own plan.  It would not be as sweeping as the House bill as it would only save $12.3 Billion in its first five years.  The plan would roll back taxes to their 2003-2004 levels instead of all the way to 2000-2001.

Now... here's where it gets really interesting. 

Bills are passed - Amendments are elected....

HB7001 could be immediate... but if voters in 2008 decide they like the forthcoming Amendment better than the bill, they can vote the Amendment in, which would immediately supercede the bill!  So if the Senate Plan passes as an Amendment, then the tax roll back would be defeated.

Getting back to Sales Tax... The immediate Sales Tax hike would be 1% going towards schools.  Then local governments would have the option of raising it another 1-1.5% depending on their needs.  The highest Sales Tax would be is 8.5%.

Now... I wonder how this will play out in the Senate on Friday!

The really interesting part is that the Democrats have the more sweeping ideas and favor a larger cut in taxes... The Republicans a smaller... but Republican Governor Charlie Crist has not weighed in officially... but sources have quoted him as saying "The Bigger the Better" (paraphrase)

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Second Homes - What are they??: Lending Information from The Mortgage Go To Guy!

What makes a Second home a 2nd Home?

• That it came in 2nd Chronologically in the purchasing order?
  Well... semantically YES... technically NO
• That it isn't where you live??
  Well... technically YES ... Semantically NO

So we're fighting Technicalities and Semantics now, eh?

Why do I ask these tough questions?? Because - we Real Estate Professionals in South Florida are surrounded by Second Homes and sometimes the people that own them! Why sometimes? Well... they're called Seasonal because they're here for "Season"... Get it?

No?? People have different measures of season depending on the demographic... suffice it to say, Season here in South Florida is roughly September to April....sometimes more sometimes less - depending on the weather.

We call these people Seasonals or SNOWBIRDS.

In Charlevoix, Michigan, they call people with 2nd homes there FUDGIES. They claim that the out of towners only come for the fudge. Let me tell you this about Charlevoix's TOWNIES... they overestimate their fudge producers and underestimate the beauty of their Lakes, Sunsets and Stargazing places!

What are other names for 2nd Homes?

• Weekend Homes
• Weekend Retreats
• Summer Cabin
• Winter Getaway
• House in the Hamptons
• House on the Shore
• Cottage in Maine
• Ski Lodge in Aspen
• Beach House

From a Lending standpoint - these names all have some commonalities that help us classify them as Second Homes and NOT Primary Homes or Investment Properties. Can you pick them out?

1. First of all... notice LOCATION LOCATION LOCATION. Typically a Second Home is considered to be Fifty (50) Miles or further from your Primary Residence. So the person in Long Island that buys a Condo in Boynton Beach is further than 50 miles from their Primary during Season eh?
2. Second of all... Notice Ski Lodge, Hamptons, Getaway, Beach... Those are descriptives that help qualify the property as SIGNIFICANTLY SUPERIOR. What? That 700 square foot hotel room that we bought in South Beach Miami is superior to our 5000 square foot Highland Park, IL house on Vine?... well...Superior means something different... it means BEACH. It means Room Service... it means maid service. Sure, you may have a chef and maid on the payroll but BEACH is locationally superior to Suburb! It doesn't even matter that the square footage or even amenities are less if it if a VACATION home the location makes it Superior.
3. Third of all... and this is the tricky one... it isn't an investment property!!! What?! I can't Rent it? well... that's where things get grey. Can you rent it is what plagues the equation. The answer is technically NO. Could you let people pay you for staying there for a week or so at a time... well... that really depends on the deed restrictions and how many weeks you actually live there versus rent it out. Technically renting it makes it an investment property.
4. Fourth... you're really committed to the property being a place that you will use for part of the year and set it up to use it like a second residence. If you buy it and someone else furnishes it for their use - not yours then it isn't right. Now, Condotels come furnished all the time... and some houses do and that's OK. Condotels are pretty much known to be partial year rentals anyway. This is hard to qualify but intent is intent.

What kind of snake oil and I selling?? Well... the type that will hopefully shed some light on this property type for Realtors and mortgage brokers and consumers!! Why? Because it is a

GREAT TIME TO BUY SECOND HOMES IN SOUTH FLORIDA!

Eh?? What's that??

• Rates are LOW!
• Market is DOWN!
• Plenty of Inventory to Choose from!
• Your Baby Boomer friends are already looking! (gotta keep up with the Joneses)
• Hurricanes are a figment of your imagination (riiiiight)
• You've got that money sitting in your house as equity and it isn't doing ANYTHING for you. (and won't do anything for you stuck in the house!)
• The dollar $$ is still weak to the British Pound and Euro (i.e. buy now, enjoy, when the dollar comes up and the market does your dollars appreciate as does your property!)
• Latin American investors are looking HARD at South Florida again!
• UPDATE: I forgot to mention - check with your CPA - most of them claim that you can deduct the Mortgage interest on a 2nd home - so long as you finance it within 90 days of purchase!
  

Look No Further than South Florida for a great 2nd Home Value!

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David A. Podgursky, MBA

The Mortgage Go To Guy!

Your Source for Residential and Commercial Mortgage Loans in Florida