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.

---

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

Technorati Tags: condotel, condo hotel, mortgage broker, loan, real estate, mortgage, florida, palm beach county, palm beach loan, south beach, pompano beach, miami, fort lauderdale, boca raton, boynton beach

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.

---

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

Technorati Tags: mortgage broker, mortgage, palm beach county, palm beach loan, palm beach mortgage, boca raton, boca raton mortgage, boca raton loan, ARM, FRM, adjustable rate mortgage, fixed rate mortgage, interest only, florida, loan, real estate

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.

---

More Real Estate News You Can Use from
David A. Podgursky, MBA
The Mortgage Go To Guy!
Your Source for Residential and Commercial Mortgage Loans in Florida

Technorati Tags: real estate, land surveying, mortgage, palm beach county, boca raton, florida, loan, zoning, themortgagegotoguy.com