Good advice, absolute transparency, competent document review and clear answers from experienced property experts: these are all mandatory conditions for a successful property purchase in Miami. In the following document, we have listed the most important steps that need to be kept in mind during the purchase of a property in Miami.
Initial contact: Through conversation we will develop a detailed search profile that corresponds to your wishes. Alongside location, property type and budget, fiscal aspects are also decisive factors here. At this stage, we will keep you fully informed about the desired location and its development.
Property selection: We will prepare a customised selection of properties according to your search profile. You will receive detailed property information in the form of an exposé.
Viewing: Once you have made your initial selection, we will arrange local viewings. If required, we can pick you up from the airport or hotel to make your viewing as convenient as possible.
Reservation: As soon as you have found your ideal property, you should sign a contract for sale and purchase with the seller. We are happy to support you through this process. This sets out the purchase price, financing method and other conditions. You should make sure that the agreement includes a so-called finance contingency. This gives you the option of cancelling the contract if you are unable to arrange the financing for the purchase, at which point your deposit will be returned.
Mortgage: When buying a property in the USA you generally need to provide 30 % of the total value of the property from your own funds. American banks do not normally finance more than 70 %. Usually the bank requests a payslip, an employment contract in the case of employed persons, and a credit statement from your principal bank. It then sends you a so-called pre-qualification letter, which you can use to apply for a mortgage.
In Florida, the process tends to operate as follows:
Notary: As soon as the financing has been secured, a notary (or title company) can be employed to run an initial check on the purchasing terms and conditions. This includes checking with the public records office to see whether any third party may have a legal claim on the property, or if any mortgage payoff is still due. After that the buyer gets a title policy or title insurance, which defines whether and what claims exist. This avoids any unwelcome surprises once the contract has been signed. When the notary has finished the checks, an appointment is made with the notary. At this point, the buyer makes the payment from his or her own funds. Where financing is in place, the bank transfers the relevant amount to the notary. Both buyer and seller should ideally be present in person to sign the contract. In the case of overseas buyers, this can be done by post. However, in this case some delay must be factored into the process.
Closing: Once both parties have signed the agreement, ownership is transferred from the seller to the buyer in a process known as closing, which is immediately entered into the land registry and sealed with a handover of the keys. From now on, all costs are borne by the new owner. Any costs arising in retrospect are settled through a process called proration.
Lettings agency: If, as a buyer, you wish to rent out your new property, you can look for a reliable lettings agency. It will ensure that your property is well maintained and any necessary work carried out in your absence.
Taxes and costs:
Taxes: As a non-resident foreigner, you will only be taxed in the USA on any income earned there. This includes rental income from property ownership in the USA. The double taxation agreement (DBA-USA) also applies to a German investor as owner of a property in the USA, with all income from this property subject to US income tax.
Withholding tax: If you decide to sell your US property, 10 % of the sale price will automatically be withheld in an escrow account of the title company/notary involved and paid to the US tax authorities. This is a withholding tax, which is paid in advance. The gain will be offset against the prepaid withholding tax via the income tax. Any excess taxes paid will be reimbursed, and if not enough tax has been paid this will need to be settled in retrospect.
Tax number: Since 2003 it has been a legal requirement that every property buyer and seller should have a tax number. Only then can the tax authorities (IRS) approve the release of the withholding tax. Since it can take several weeks for a tax number to be issued, it should be applied for in good time before signing the purchase contract. The tax number must be submitted to the authorities within 20 days of the sale.
Income tax: Miami belongs to the state of Florida, which does not levy income tax on private individuals. Rental income, for example, is only subject to federal income tax.
Property tax: The property tax is levied on properties and replaces income tax to a certain extent. The amount of tax due is calculated according to the assessed value of the property, and is collected by the county or the city tax appraiser. The assessment is usually based on market value, location and size, or comparison with the sale price of similar properties. Normally the property tax is between 2,000 and 5,000 dollars per year.
Sales tax/Tourist tax: For lettings of less than 6 months, property owners have to pay a quarterly tourist tax, which is a form of resort tax. There is also a sales tax, which is levied as a form of profit tax on rental income. The sales tax in Florida is currently set at 6 percent, and the tourist tax is between 3 and 5 percent. If your property is part of a residential complex, you first need to check that you are permitted to rent it out.
Inheritance tax: Inheritance tax, and how to minimise it, is a complex issue. A specialist lawyer should be consulted, who is familiar with German and American property and inheritance laws.
Insurance: If you have financing, you are obliged to have insurance. If not, insurance is optional. It is advisable to take out a house owner's policy, which covers such things as storm damage.
If you want to leave your luxury property purchase in Miami in the best hands and do not want to leave finding an agent to chance, then we are your best point of contact. We provide you with reliable advice before, during and after the purchase. Benefit from more than 20 years of experience, personal customer service and our high-quality standards.
Subject to change, 2017