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
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages 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 | Foreign National Homebuyers - Visa Waiver Program

When applying for a Foreign National Loan in the United States, a Foreign National Borrower must provide a copy of a valid passport and Visitor Visa for the lender to verify the eligibility of the borrower.

The Visa Waiver Program is available to residents of certain countries to come to the United States and stay for a period of no longer than 90 days without obtaining a visa.  These Foreign Nationals can come for either Tourism or Business reasons... Business or Pleasure.

Currently there are twenty seven (27) countries who qualify for the Visa Waiver Program.  They are:

Andorra	Iceland	Norway
Australia	Ireland	Portugal
Austria	Italy	San Marino
Belgium	Japan	Singapore
Brunei	Liechtenstein	Slovenia
Denmark	Luxembourg	Spain
Finland	Monaco	Sweden
France	the Netherlands	Switzerland
Germany	New Zealand	United Kingdom

In order for a Foreign National that qualifies for the Visa Waiver Program to obtain a Mortgage on a Second Home or Investment Real Estate, the Foreign National Borrower will need to obtain a letter certifying their Visa Waiver Program status from the nearest US Embassy or Consulate.

Foreign Nationals using the Visa Waiver Program as opposed to obtaining a full Visitor Visa will likely have trouble qualifying for a property as a primary residence, therefore only a Second Home or Investment Property mortgage program will work for these borrowers.

For more information on the Visa Waiver Program choose one of the links below:

• Department of Homeland Security   Customs & Border Protection   website.
• Visa Waiver Program Traveler Guide

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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 | Condo-Hotel/Condotel Financing Explained

Condo Hotels or Condotels are a popular property type in Florida, especially in hot tourist areas like West Palm Beach, Fort Lauderdale, Orlando, Tampa and Miami. With access to beaches, golf and other tourist attractions, Condo Hotel properties are a great way to purchase a vacation home with the benefits of ownership and the conveniences and amenities of a hotel room.

Condo Hotels have recently become more accepted by lenders who are now offering loans with as little as 10% down. Residency in these units is typically taken as either a Second/Vacation Home or an Investment for loan purposes. Some Lenders allow limited Primary Residence loans on these properties.

Foreign Nationals are common investors into these units in Florida as they typically purchase in vacation/resort areas.

A favorite feature of Condo Hotels for their owners is the rental pool and built in management. While not in use, the hotel can rent the units out and maintain them with housekeeping services on a nightly, weekly or monthly rental. While the rents will not count towards mortgage qualifications, this is a perk of ownership that most people do not overlook.

Lenders often look for specific criteria to be met such as:

• Minimum of 600 square feet
• In proximity to vacation/resort area
• Separate Kitchen Space, Bathroom and Living Area/Bedroom
• Kitchen to be equipped for food preparation
• Voluntary rental pools

Some Examples of some great South Florida Condo Hotels are:

The Brazilian Court in Palm Beach Florida just off world renown Worth Avenue shopping. This is a quaint historic building complete with the five-star hotel amenities you would expect to find on Palm Beach Island including an amazing spa and a gourmet restaurant owned by five-star Chef Daniel Boulud.

Trump Las Olas Beach Resort - a 12 story Condo Hotel Project with 95 residences in a boutique setting set in the exciting Las Olas area of downtown Fort Lauderdale Florida. Located on a barrier island, on Sea Breeze Blvd between the Atlantic Ocean and the Intracoastal Waterways.

Trump International Sonesta Beach Resort - Part of the Trump Grande project in Sunny Isles Beach, Florida, this project is a three phase project includes the condo hotel project designed by renowned Sieger Suarez Architectural Partnership.

Ocean Sands Resort and Spa - In Pompano Beach Florida, just South of Boca Raton, Florida. A great location with over 852 feet of beach frontage.

The Ritz-Carlton Golf Club & Spa - Located in Jupiter Florida, in the North part of Palm Beach County Florida, this property offers a members-only spa and a Jack Nicklaus Signature Golf Course. The floorplans offered are 2 & 4 bedroom Mediterranean Styled Club Homes.

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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 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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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