Over the past couple of years, thousands of buyers from “up north” have purchased houses and condos in Florida with various ideas about how to use the property.
Some intend to relocate here full-time, some want to be seasonal residents until they eventually become full-time residents, and some want to own property they can offer visitors and snowbirds for short-term rental.
Property owners must have accurate information about the difference between second homes and investment properties.
Many potential buyers and new owners are asking for clarification on various occupancy categories, and the answer depends on whether you’re looking at mortgage lenders’ guidelines, IRS interpretation, or Condo/Homeowners Association rules.
– Mortgage lenders focus on risk management
– The IRS is concerned with taxation and deductibility of costs
– Condominiums and HOAs want to preserve property values by controlling non-owner occupancies
Mortgage lenders identify three separate levels of residential occupancy in their borrower qualifying standards: 1. primary residence; 2. second home; 3. investment property (non-owner occupied).
Within the same mortgage loan program (30-year fixed, for example) and for the same borrower, a primary residence mortgage will have a lower interest rate than a second home, and a second home will have a lower rate than an investment property.
When applying for a mortgage, buyers sign a statement declaring their intended property occupancy.
Lenders’ maximum Loan-To-Value ratios (LTVs) are higher for primary, lower for second homes, and lower still for investment properties. This means that a higher down payment is needed for second homes and investment properties. This is part of all lenders’ risk management.
A primary residence is defined similarly by most all interpretations. It refers to where a person lives for most of the calendar year, based on things like:
– Address on driver’s license and vehicle registration
– Utility usage
– Address on Federal income tax returns
– Voter registration
(The rumored “6 months and a day” standard for occupancy, residency and Homestead status is just that – a rumor. Occupancy and residency are determined and verified through valid documentation.)
When discussing second homes, things get a little blurry depending on whether you’re applying for a mortgage or filing tax returns.
IRS Publication 936 (Home Mortgage Interest Deduction), addresses how mortgage interest is treated on primary and second homes. Here is a direct link: Publication 936 (irs.gov).
IRS guidance explains that if a second home is not rented to others, it is automatically considered a “qualified home” for tax purposes, even if the owner doesn’t use it during a given calendar year. As such, any mortgage interest paid during the year on a qualified second home is tax deductible when itemizing deductions on personal income tax returns, the same as for a primary residence.
When a second home is rented to someone for part of the year, the IRS says the owner must live in the home for a certain period during that same year in order to deduct mortgage interest.
If an owner does not live in their second home for at least that period of time, the IRS calls it a rental property, which requires different tax accounting. See IRS Publication 527 (Residential Rental Property) for details. Here’s the direct link: Publication 527 (irs.gov).
Just because the IRS says something is OK for tax purposes, that doesn’t mean mortgage lenders look at things the same way regarding their risk management.
For this article, we use Federal National Mortgage Association, or “Fannie Mae,” guidelines, which are considered the benchmark for conventional (non-government insured) mortgage qualifying standards.
Government-insured mortgage financing (FHA, VA, USDA) is only for primary residences. Second homes and investment properties are not eligible for FHA, VA, or USDA mortgage financing programs.
Fannie Mae’s current second-home guidelines include:
– Reasonable distance from primary residence
– Occupied by a borrower some portion of the year
– Single-family home or individual condominium unit
– Suitable for year-round occupancy
– Borrower has exclusive control over occupancy (no third party approving or declining rentals and tenants)
– No rentals for a certain period after purchase
Under either IRS or lender guidelines, if a property’s use doesn’t conform to all second-home guidelines and requirements, it defaults to investment property status, which is property purchased with the intent of producing cash flow and/or price appreciation.
Remember, loans for investment properties carry higher interest rates and require higher down payments than loans for second homes, and second-home mortgages have higher interest rates and down payments than those for primary residences.
For years, occupancy misrepresentation to receive better rates and terms has been one of the most committed types of mortgage fraud in Florida.
Another major difference between primary, second home, and investment properties comes into play with properties governed by condominium and homeowners associations.
Many HOAs limit investment occupancies. When there are too many investment properties in a building or community (think short-term rentals), lenders are unlikely to approve purchase financing for individual properties in it. Study your Association’s Governing Documents for details and restrictions related to owner, guest, and tenant occupancies.
Remember that for all of the occupancies mentioned in this article, non-immediate family and friends/guests/acquaintances are not owner occupancy if the property owner is not there simultaneously.
There is still another major occupancy issue for buyers to consider – Florida’s very attractive Homestead protection for permanent residents.
Depending on how long owners themselves plan to live here each year, they may qualify for Homestead status on their Florida properties. Those who have already established Homesteads and rent out their properties for too long or too frequently (treating it like a second home or investment property) can be considered abandoning their Homesteads, losing the benefits that go along with it.
Whether you are a potential buyer or a current owner of a Florida house or condo, it is very important to understand the various rules that apply to the use and occupancy of your property.
This report was first published in The Florida Real Estate Blog by Chris Carter, a real estate Broker Associate and former Key Biscayne resident. For more, visit thefloridarealestateblog.com
MIAMI – Anson Jean-Pierre promised fellow Haitian-Americans that they would not only be “millionaires” if they invested with him, but that the hundreds of thousands of dollars they would eventually put into his company would develop business in Haiti, authorities allege.
But none of it was true, according to investigators.
Instead, they say Jean-Pierre spent a portion of the money on things like Caribbean vacations, hotels, restaurants, plane tickets and groceries — for himself. Authorities allege he didn’t spend a cent on any promised projects.
The 61-year-old, who was already the focus in litigation by the U.S. Securities and Exchange Commission for “affinity fraud” targeting fellow Haitian-Americans, is now facing state criminal charges.
Authorities booked Jean-Pierre into Miami-Dade County’s Turner Guilford Knight Correctional Center Tuesday on a litany of racketeering, money laundering, organized fraud and securities fraud charges. He’s being charged alongside 50-year-old Edy Durosier.
Investigators with the Florida Department of Financial Regulation allege in a warrant that Jean-Pierre scammed investors to the tune of nearly $700,000 from 2017 to 2019.
They say he ran a company called Brothers Investment Group International, LLC in North Miami Beach, a city with a large Haitian-American population.
Durosier is accused of running Fort Lauderdale-based Advantage Realty & Investment Group. Authorities said he falsely claimed to be an attorney and law professor at St. Thomas University.
The pair held meetings in South Florida promising investments in real estate and agriculture in Haiti, an arrest warrant states. Durosier is accused of telling investors that he had developed a “renewable energy device” that would provide solar power and Internet services to the impoverished Caribbean nation.
Brothers International, authorities said, also sold fake “foreign diplomatic classes” for $600, promising investors that after paying and completing the course, they would be “recognized as highly-ranked representatives of (the company) with special privileges when they traveled internationally.”
Durosier told investors in Brothers’ “Real Estate Group” that he would apply for credit cards on their behalf and obtain cash advances, which would then be used to “buy and flip” homes in Miami-Dade County, authorities said.
The warrant states Jean-Pierre didn’t “invest in a single revenue-generating project, but continuously told investors that their money was in the bank when, in fact, he had already spent it.”
The only thing resembling an investment by Brothers was $60,000 wired to BurgerIM Group USA, Inc. as a down payment for a burger franchise, authorities allege, but “(n)one of the investors gave money for investment in a burger franchise.”
That money was later returned to Brothers. In addition to money spent on Jean-Pierre’s personal expenses, authorities allege Brothers spent $200,000 in “consulting fees” for projects without informing investors.
Authorities said Jean-Pierre did pay some investors about $21,000 — to quell complaints about Brothers Investment.
According to jail records, Jean-Pierre, who’s facing more than 40 felonies, was being held in Miami-Dade’s Turner Guilford Knight Correctional Center on a $730,000 bond as of Wednesday afternoon.
Durosier, despite facing similar charges, is not yet listed in Miami-Dade or Broward court or jail records. It’s not yet clear if he’s been located.
Read the warrant:
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With its year-round warm weather, an abundance of beaches and outdoor activities, and vibrant nightlife scene, Miami is a great place to call home. That said, it won’t be the right city for everyone.
Luckily, there are many great places to live near Miami that don’t have the same heavy traffic, high cost of living, nightlife, and hustle and bustle – but are still close enough to the city to benefit from everything it has to offer. To help you find the right place to buy or rent in, Redfin has gathered a list of 11 great cities near Miami to consider instead.
#1: Coral Gables, FL
Miles from Miami: 6
Population: 50,000
Median home sale price: $854,990
Average 1-bed rent: $3,098
Walk Score: 56
Bike Score: 38
Transit Score: 56
Coral Gables, FL, also known as “The City Beautiful,” is a small city with a population of around 50,000. It is situated a few miles southwest of Downtown Miami and is filled with wide, tree-lined avenues named after Spanish and Italian towns. If you live in Coral Gables, you will have access to well-known shops and cafes along Miracle Mile, as well as outdoor wonders such as the Venetian Pool and Fairchild Tropical Botanic Garden, and an 83-acre paradise of tropical plants and trees near Biscayne Bay.
There is also a ton to do if you move to Coral Gables, especially since it’s so close to Miami. You can visit the University of Miami, shop at the Miracle Mile, dine at one of the many restaurants, or enjoy the nightlife. You can also visit the Venetian Pool, the Fairchild Tropical Botanic Garden, and or take a walk through the Miami Zoo.
Homes for sale in Coral Gables, FL
Apartments for rent in Coral Gables, FL
#2: Hollywood, FL
Miles from Miami: 22
Population: 154,000
Median home sale price: $467,000
Average 1-bed rent: $2,525
Walk Score: 52
Bike Score: 35
Transit Score: 53
Hollywood, Florida s known for its beaches, art deco architecture, and its status as a major cruise ship port. The city features a one-of-a-kind oceanfront promenade called the Hollywood Beach Broadwalk that stretches nearly two and a half miles along the Atlantic. Hollywood Beach is also designated a Blue Wave Beach, a distinction that places it among the nation’s cleanest, safest, and most user-friendly beaches.
There are several things to do for those living in Hollywood. You can visit the Hollywood Boardwalk, take a walk or jog along Hollywood Beach, or visit one of the many shops and restaurants in the area. There is also the Anne Kolb Nature Center, which has several hiking and biking trails, and an educational center.
Homes for sale in Hollywood, FL
Apartments for rent in Hollywood, FL
#3: Pembroke Pines, FL
Miles from Miami: 24
Population: 172,000
Median home sale price: $487,500
Average 1-bed rent: $2,197
Walk Score: 32
Bike Score: 25
Transit Score: 41
Pembroke Pines is a diverse city with a wide range of housing options, a friendly community, and plenty of activities and amenities nearby. If you decide to live in the area, there’s plenty to keep you busy. Here are just a few ideas: Visit the Pembroke Pines Museum of Art, check out the Pembroke Pines Nature Preserve, explore the old-fashioned charm of Downtown Pembroke Pines, spend a day at the Pembroke Pines Aquatic Complex, play a round of golf at one of the city’s many golf courses, or shop till you drop at the Pembroke Lakes Mall.
Homes for sale in Pembroke Pines, FL
Apartments for rent in Pembroke Pines, FL
#4: Davie, FL
Miles from Miami: 27
Population: 106,000
Median home sale price: $420,000
Average 1-bed rent: $2,148
Walk Score: 27
Bike Score: 17
Transit Score: 43
Davie is located in the southeastern part of the state, about 20 miles from Fort Lauderdale. The area is known for its Western-themed town center, which includes a rodeo arena, and for its large population of horses. Davie is also home to Nova Southeastern University, a private research university.
If you decide to live in Davie, some popular things you can do include visiting the Young At Art Museum, taking a nature walk at the Long Key Natural Area and Preserve, playing golf at one of the many championship golf courses, and enjoying the many shops and restaurants in the area.
Homes for sale in Davie, FL
Apartments for rent in Davie, FL
#5: Fort Lauderdale, FL
Miles from Miami: 30
Population: 182,000
Median home sale price: $497,500
Average 1-bed rent: $2,400
Walk Score: 56
Bike Score: 38
Transit Score: 56
Fort Lauderdale is a coastal city about 30 miles north of Miami. It’s known for its beaches, boating, and as a popular vacation city. If you decide to move to Fort Lauderdale, there is plenty to do to keep you busy. Some popular attractions include Fort Lauderdale Beach, Las Olas Boulevard, the Everglades, and the Museum of Discovery and Science. There are also many parks, such as Hugh Taylor Birch State Park, Esplanade Park, and Holiday Park. For a quick taste of the town, stop by Kaluz Restaurant, J. Alexander’s Restaurant, and or Southport Raw Bar & Restaurant.
Homes for sale in Fort Lauderdale, FL
Apartments for rent in Fort Lauderdale, FL
#6: Plantation, FL
Miles from Miami: 31
Population: 95,000
Median home sale price: $585,000
Average 1-bed rent: $2,384
Walk Score: 29
Bike Score: 34
Transit Score: 42
The city of Plantation is located in central Broward County, west of Fort Lauderdale. The city’s boundaries stretch from the Everglades to the west and include parts of the Seminole reservation and the unincorporated community of Lauderhill.
There are several things to do for those living in Plantation. You can visit the Plantation Heritage Park, which is a history museum that tells the story of the city’s founding. You can also go to the Plantation Preserve, which is a nature preserve that is home to a variety of wildlife. Finally, you can take a walk or bike ride through the Plantation Historic District, which is a National Historic Landmark District.
Homes for sale in Plantation, FL
Apartments for rent in Plantation, FL
#7: Sunrise, FL
Miles from Miami: 34
Population: 95,000
Median home sale price: $340,000
Average 1-bed rent: $1,525
Walk Score: 37
Bike Score: 34
Transit Score: 44
Sunrise is situated in the heart of the tri-county region (Miami-Dade, Broward, and Palm Beach) and is a gateway to many residential, business, entertainment, and cultural sites. The city is known for its spectacular and colorful sunsets and natural beauty.
Sunrise is a great place to enjoy local art, dine at some of the best restaurants, or spend time at a park. Some of the city’s top attractions include Sawgrass Mills, the Fort Lauderdale Swap Shop, and the Museum of Discovery and Science.
Homes for sale in Sunrise, FL
Apartments for rent in Sunrise, FL
#8: Coconut Creek, FL
Miles from Miami: 39
Population: 61,000
Median home sale price: $300,000
Average 1-bed rent: $2,082
Walk Score: 25
Bike Score: 30
Transit Score: 41
Coconut Creek is a city located in Broward County and is known for its butterfly gardens, which are home to over 3,000 butterflies. If you decide to call Coconut Creek home, know there are plenty of activities and attractions to keep you occupied. For starters, you can visit the Butterfly World, the Coconut Creek Family Fun Park, or the Seminole Casino Coconut Creek. You can also go shopping at the Coconut Creek Promenade or the Sawgrass Mills Mall.
Homes for sale in Coconut Creek, FL
Apartments for rent in Coconut Creek, FL
#9: Deerfield Beach, FL
Miles from Miami: 44
Population: 81,000
Median home sale price: $275,000
Average 1-bed rent: $1,456
Walk Score: 39
Bike Score: 27
Transit Score: 50
Deerfield Beach is one of the most beautiful coastal communities in Florida. Its stunning waters and tranquil atmosphere make it easy to see why so many people are drawn to this city.
Located on the east coast of Florida, Deerfield Beach has a lot to offer its residents. You can enjoy the beautiful beaches, go fishing, kayaking, canoeing, or take a nature hike. Performing arts venues like McCurdy’s Theatre & Comedy Institute and Young Americans Theatre are top spots amongst locals. The city is also known for its parks and green spaces like Quiet Waters Park, Villages of Hillsboro Park, and Deerfield Island Park, just to name a few. You’ll also find plenty of restaurants and charming cafes throughout the city.
Homes for sale in Deerfield Beach, FL
Apartments for rent in Deerfield Beach, FL
#10: Boca Raton, FL
Miles from Miami: 47
Population: 99,000
Median home sale price: $580,000
Average 1-bed rent: $2,184
Walk Score: 38
Transit Score: 56
Boca Raton is located in the southeastern part of the state and is known for its luxury homes, golf courses, and country clubs – it’s also an excellent place to put down roots.
The city has many popular museums, including the Boca Raton Museum of Art, the Children’s Museum, and the Boca Express Train Museum. Mizner Park Amphitheater and Sunset Cove Amphitheater are just a few of the performing arts venues that contribute to the city’s unique arts and culture scene. The city is also known for its parks and green spaces, like Sugar Sand Park, South County Regional Park, and Patch Reef Park. There’s something for everyone living in Boca Raton.
Homes for sale in Boca Raton, FL
Apartments for rent in Boca Raton, FL
#11: Coral Springs, FL
Miles from Miami: 48
Population: 133,500
Median home sale price: $571,550
Average 1-bed rent: $2,177
Walk Score: 38
Bike Score: 30
Transit Score: 45
Coral Springs is a city place to call home. The schools are top-notch, there are plenty of parks, and the residents are welcoming and diverse. You’ll love the peaceful atmosphere. There are also many activities to do in Coral Springs, including – visiting the Sawgrass Nature Center and Wildlife Hospital, hiking and biking through the Trails of Coral Springs, playing tennis at the Tennis Center, visiting the Coral Springs Museum of Art, and much more.
Homes for sale in Coral Springs, FL
Apartments for rent in Coral Springs, FL
Methodology: All cities must have a population of more than 50,000 and be less than 50 miles away from Miami. Median home sale price data from the Redfin Data Center during August 2022. Average rental data from Rent.com during August 2022. Walk Score, Bike Score, and Transit Score from Walkscore.com during August 2022. Population data sourced from the United States Census Bureau.