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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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

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Florida Mortgage Loans | Foreign National Homebuyers: Seasoning Funds in US Banks

Foreign National Homebuyers typically purchase properties both Second Homes and Investment Properties in Vacation and Resort areas.

With the Florida real estate market being on a downswing but still chock full of new development, Foreign Nationals are finding now to be a great time to purchase their vacation homes in Florida. The weak dollar versus the Euro and British Pound makes this a great time for Europeans!

During the purchase transaction, most lenders require funds equivalent to closing costs plus six (6) to twelve (12) months of PITI (Principle Interest Taxes and Insurance) payments to be placed in a US bank account. The lender will require verification of the deposits for loan approval.

Based on the findings of some of my Realtor partners, some small local banks have some issues accepting and translating or exchanging checks from International Accounts.

To get around this hurdle, I suggest to Foreign Nationals that they choose to start an account in their home country with a large international bank, preferably with branches in the area near where they want to purchase.

Several banks come to mind that have International branches such as:

• Deutche Bank
  
• HSBC
  
• Citibank

When the Foreign National is in the loan process, monies can easily be transferred and verified at these banks. They may even create US based accounts for automatic monthly payment options.

High Net Worth Clients can also use the Private Wealth Management departments of these three International banks to get their accounts set up and verified.

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Read more about Foreign National Mortgage Planning in my previous posts:

• Florida Mortgage Foreign National Homebuyers: How to get your Loan Started!
• Florida Mortgage Foreign National Homebuyers: Europe has come calling!

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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

Affordable Housing Initiatives in South Florida: Part 5 - The beginnings of a FIX

Legislators consider new proposals for appraising properties in Florida

Mark Hollis of the Sun Sentinel wrote an article today about the first step in changes in Affordable Housing - specifically in South Florida's hot climate...

Today, state officials made the first step in lowering property values and possibly kill an ongoing border war. They have decided that County Appraisers should be basing their appraisals on "as built" not "potential use"...

There are people with great properties that are "in the path of progress" or in "eminent domain" areas that are suffering higher tax rates because the Palm Beach County Appraiser Gary Nikolits has determined that their property value is some huge number not because of what the building as improved is worth but what it would be worth for highest and best use - despite the fact that someone might be living there for 30 years and maybe don't want to sell. In the meantime their house is being taxed to death and they're being forced to sell.

Yay!

And the story is... the Broward County Florida Appraiser's scathing comments about Mr. Nikolits were JUSTIFIED according to State Officials.

The Benefit of this is that when the Legislators do roll back taxes to help taxpayers... the value will be rolled back AND assessed values will be restated as AS IMPROVED - not HABU (Highest and Best Use)