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Orlando Real Estate Law Blog

Understanding commercial real estate loans

Florida residents who are interested in starting a business may be concerned about securing an ideal commercial location. Getting financing is an important part of obtaining commercial real estate. Prospective business owners should understand where they should go for commercial real estate loans and what to do to improve their chances of getting approved for one.

Commercial real estate loans are mortgage loans that are used to purchase commercial real estate, or commercial properties that produce business income. The loans can be used to buy retail stores, office locations or a wide range of other buildings and locations.

Assessing the likelihood of making a 20 percent down payment

Individuals in Florida who are interested in buying a home may have to spend over six years to save up for a 20 percent down payment. This is a result of both higher rents and higher home prices throughout the country. According to an analysis by HotPads, it could take some people up to 30 years to save enough money to make a 20 percent down payment on a home.

The median home price in the United States is $216,000, which would require a person to save $43,200 to reach 20 percent of the purchase price. Complicating matters is the fact that many younger first-time borrowers have student loan and other debt. To qualify for a mortgage, a lender generally requires that an applicant's total debt be at or less than 43 percent of his or her income. Lenders will consider most debts such as credit card, student loan or auto loan obligations.

Summertime tips for selling a home

Summer is a popular time to sell a home. Homeowners in Florida can take certain steps to entice buyers to give their property serious consideration. Having an open house is an effective method for giving prospective buyers an up-close look at a home. However, during the summer, it may be ideal to hold such events on days other than the weekend. For example, open houses that take place during rush hour may provide a more convenient opportunity for buyers to examine a home.

Some homeowners may want to consider advertising their open homes as a festive event. This can help make the event seem less like a sales pitch and more like a party. To improve the mood, refreshments and food can be offered.The time of day at which the event is held is also important. During the hot summer months, buyers may be more inclined to attend if the open house is held during the evening when the temperatures are typically cooler, than during the middle of the day when the temperatures tend to be at their highest.

How buyers can protect themselves when getting a home

Those who are planning on buying a home in Florida should make use of contingencies and disclosures. When a buyer goes to an open house, the seller should provide a disclosure form that lists all the potential problems with the home. If there are known issues that aren't revealed, it may be possible to ask that they be corrected prior to closing.

It may also provide an individual with the opportunity to back out of the deal itself. Furthermore, if there are no issues listed on the disclosure, this should act as a warning to a potential buyer. Generally speaking, an inspection will take place prior to the sale of the home. It should be listed as a contingency on any offer sheet given to the seller. Another common contingency is the ability to get a mortgage to purchase the home.

The tax consequences of buying a home today

Florida residents who are thinking about buying a home should not do so merely for the tax breaks. This is because recent changes to the tax code may reduce a homeowner's ability to lower his or her overall liability. For instance, it is necessary to itemize deductions on a return to write off mortgage interest and real estate taxes. Since the standard deduction went up, people may receive the same benefit whether or not they claim these expenses.

Furthermore, a taxpayer cannot deduct more than $10,000 in state or local taxes in a given year. Individuals who own a home can only deduct mortgage interest on homes valued at up to $750,000 if the mortgage was taken out after December 2017. Previously, homeowners could deduct interest on up to $1 million in mortgage debt and an extra $100,000 for home equity loan debt.

Commercial real estate market may not be as strong in 2018

For Florida investors in commercial properties, 2017 was generally a good year. However, 2018 may not be so rosy according to a report by the Mortgage Bankers Association. Slower growth with net operating income and increased interest rates are among the factors cited for the group's conclusions. Solid income returns on real estate-related commercial investments are still expected, just not as much as what has been seen in recent years. Researchers also don't think property values will increase at the same pace.

There is some good news for commercial real estate investors. Researchers believe that after-tax yields will likely get a boost because of tax reform legislation that was passed at the end of 2017. Also, occupancy and rent growth should continue as long as the economy remains strong, possibly allowing investors in commercial spaces to offset issues with interest rates and net operating income.

Home sale growth expected despite market headwinds

Home sales in Florida and throughout the country are expected to climb 3 percent in 2018, according to a projection from the May 2018 Outlook Report produced by Freddie Mac. This is despite the fact that home prices are surging, interest rates continue to rise and inventory levels remain low. By the end of 2018, the average interest rate on a 30-year fixed-rate mortgage will be 4.9 percent.

Home prices are projected to increase 7 percent in 2018 while home sales are estimated to be 6.32 million in that same time period. Economic strength is seen as a driver of demand despite a low number of homes on the market. For the first quarter of the year, GDP growth was 2.3 percent while growth for the year is expected to be 2.7 percent. Consumer spending is considered the impetus for this growth.

Non-citizens can still purchase homes

Floridians who want to purchase homes but are not U.S. citizens might not realize that they could still be eligible for mortgages. The type of mortgages for which they're eligible will depend on their immigration statuses, however.

Permanent U.S. residents qualify for the same types of mortgages as U.S. citizens, including those that are backed by the Federal Housing Administration. They might also qualify for downpayment assistance. Since applicants will need to prove that they have good credit and a continuous source of income, new permanent residents may have to establish themselves for a few years before they can get mortgages. If they immigrated to the U.S. from a country such as Canada with a similar credit system, the lenders may still be willing to give them mortgages.

Closing costs critical to a real estate transaction

When people in Florida go to purchase a new home, figuring out their potential closing costs can help them make better decisions about how much they can afford to spend overall. In many cases, closing costs can be higher than people expect, especially for first-time or inexperienced home buyers and sellers. This means that it can be particularly important for people to know what to expect before they need to put down the money to cover these costs and finalize their transaction.

"Closing costs" is a general term used to describe all of the fees, charges and expenses relating to the settlement of a residential real estate purchase. How closing costs will be handled and who will bear their weight is often a subject of negotiations between the buyer and the seller. In addition, an agreement on closing costs can have an impact on the overall agreed sale price of the home.

Preparing to buy a home?

Prospective home buyers are normally encouraged to save up to 20 percent of the anticipated purchase price for their residential property. However, not having the 20 percent saved doesn't necessarily preclude anyone from being able to move forward with homeownership in Florida.

It's important to assess the personal finance situation. Weighing the difference between monthly mortgage payments with the 20 percent down payment available versus applying a lower down payment is strongly recommended. Realistically, if putting 20 percent down, mortgage insurance is required, and that increases the monthly mortgage. It's important to understand just how much can be allocated monthly toward household expenses. Homeownership might not be a possibility if one is having a difficult time managing current household expenses. It may be necessary to consider how other aspects of one's financial life such as education or retirement savings plans would be affected.


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