Florida draws renovation investors from the US and from abroad, and the financing works the same for both. The loan is a business-purpose loan made to a US LLC, secured by a non-owner-occupied property, and underwritten on the deal rather than on a US credit file. What differs for a foreign investor is the setup (the LLC, its EIN, a US bank account) and the exit (FIRPTA withholding on the sale).
How the loan works
- Borrower: a US LLC, owned by you; no US credit score, US tax returns or Social Security number required
- Leverage: up to 90% of total cost (purchase plus renovation), checked against the after-repair value
- Size: $1M to $5M, on single-family, 2-4 units, condos and townhomes, and small multifamily up to 9 units
- Funding: the purchase at closing, the renovation budget in draws as the work is inspected
- Speed: term sheet in 24 to 48 hours, closing in about two weeks on a clean file
- Fee: 1% to 2% of the loan, paid at closing, no upfront fees
Florida closing costs that are specific to the state
Who pays which item is set by the contract and local custom; your title agent will show each line on the settlement statement. On a flip you meet the deed tax twice in effect, once in the purchase economics and once on the sale.
- Documentary stamp tax on the deed: 70 cents per $100 of consideration in every county except Miami-Dade
- Miami-Dade: 60 cents per $100, plus a 45-cent surtax per $100 that does not apply to single-family dwellings
- Documentary stamp tax on the loan: 35 cents per $100 of the amount secured
- Nonrecurring intangible tax: 2 mills (0.2%) on the amount of the loan secured by Florida real property
Flood zones and the 50% rule
Much of coastal Florida lies in FEMA special flood hazard areas. Under the National Flood Insurance Program, an improvement whose cost equals or exceeds 50% of the market value of the structure before the work is a substantial improvement, and the building must then be brought into compliance with current floodplain requirements, which can mean elevating it. A renovation budget that crosses that line in a flood zone can become a different project.
Check the flood zone and the local floodplain administrator's approach before you set the scope. Insurance (wind and flood) is also a closing item and can take longer to bind than the loan takes to approve.
Florida legal points a flipper should know
- Foreclosure is judicial: Florida law requires that loans secured by real property be foreclosed in court
- Property tax: a non-homestead property's assessed value can rise by at most 10% a year, but it resets to full market value after a change of ownership or control or a qualifying improvement
- Permits: renovations follow the Florida Building Code, enforced by the county or city; permit timing is a schedule item, not a formality
- The LLC: a Florida LLC, or an out-of-state LLC registered to transact business in Florida
The exit: FIRPTA when you sell
If your LLC is a single-member LLC treated as a disregarded entity, the IRS treats you, the foreign owner, as the seller. The buyer generally withholds 15% of the sale price and remits it to the IRS. You recover any excess by filing a US return, or reduce the withholding in advance with a withholding certificate (Form 8288-B). Partnership and corporate LLCs follow different rules. A US tax adviser should set the structure before you buy.
The loan is repaid from the sale proceeds first, so FIRPTA does not affect the financing. It affects the cash you take to your next project.
Where foreign investors flip in Florida
Miami and the rest of South Florida draw buyers from Latin America and Europe in particular. The financing terms are the same across the state; the after-repair value and the comparable sales are local.