Should I Buy or Rent in Florida [The Real Questions You Need to Be Asking Yourself]

I'm moving to Florida, but I don't know if I need to rent a place or if I should buy a place. Right? These are the real questions that you should be asking yourself when you're moving here to the Sunshine State. So, we put out the top six things that you may want to consider prior to making that decision, so stick around.

So, should I buy or rent in Florida and the real questions that you need to be asking yourself? Now, I've been a real estate agent and moved in many different places. And, I've always asked that same question, especially in the military. It was always, always moving and always kind of curious of what's the best way to go for my specific situation. Well, this is what it's going to be for you. And I bet that probably going to be thinking, like, yeah, that he's a realtor, he's going to tell me to purchase. That's not necessarily true, which is why I want to go through and give you this information.

1. Will Renting Be Cheaper Than Purchasing?

So, number one on the list is, will renting be cheaper than purchasing?Well, what I'm going to ask is, of course, another question to you is how long are you going to be there? Are you planning to move here and stay here for the next ten years, five years? Or, you just planning on dropping in for a year or two and then kind of seeing what happens from there. If you are going to be here or come to this area and plan to stay at least two years, purchasing might be the best option for you. Why two years? Well, after about that amount of time, you in a normal market that we've been in have had enough appreciation in that property over time that you can sell it and still recoup your money, still get some nice tax breaks during that time, and also build up your credit for the next actual purchase or whatever else that you want to do with your money. If it's going to be less than that, you may want to consider going ahead and renting in that time, just in case you need to move somewhere else very quickly. You may have to still pay to get out of your lease. We see a lot of that here in Florida. Actually, a lot of it statewide, that if you're only there for six months, your lease is for year, sometimes you got to pay that extra, like, six months just to get out of it. And that's a contract that you sign because rentals, especially here in Northwest Florida, are in such high demand. It's actually cheaper if you're looking month to month to purchase a place, than it is to rent one. At least here in the Destin Fort Walton Beach area, that's absolutely true. So, as long as you're going to be at least in our area for at least two years, I would say absolutely do that. But, are there cost? Yeah, of course! But we're going to talk a little bit more about that here in a minute.

2. What About The Hurricanes?

One of the highest questions I get is, what about the hurricanes? Like, how does that work? I want to buy a property and then a hurricane blows it over and now I don't have a property and I'm completely out. Right? Or, you know, what about that insurance? You know, I got to have hurricane insurance on top of this other insurance. Like that, whoa! Like, there's way too much money. That's not necessarily true. Now, granted most of everybody moving here is going to be financing, meaning you're going to have to finance through bank. And, we do this all the time. It's 95 plus percent. I don't know the actual statistics, but at least that many people come in and actually do and finance a home. But hurricanes, when you get insurance for the house, you have to bind that insurance prior to you closing on a house anyway. And that insurance, all the ones here in the state of Florida, needs to have a hurricane deductible with it. That's just what it is across the board. It's always going to be in there. So, when you look at our insurance here in comparison to other places, you're like, wow, that's really high. It's like, yeah, but the hurricane insurance is in that policy. Now, certain things like flood, and anything extra that you put on there, that is extra, but you don't necessarily have to have flood. At least here in the Destin Fort Walton Beach area, a lot of places aren't in a flood zone. They're in a zone x, which means they're minimal. And even if you go into an AE, that means that it's highly or it's a little bit more probable that it could flood. Then the flood insurance is still FEMA covered, so it's not as much as, say, private insurance, which if you have VE, which are those places that are, well, pretty much right on the water and, like, very very flat to the water, or sitting there on the golf, you had to get private insurance for that. And, that gets pretty darn expensive. So, if you're not rolling in the cash, well, maybe you want to consider getting a little bit further off the beach. But you are covered for hurricanes. So, if you're looking to purchase, don't let that stop you. Okay?

3. Can I Afford It?

I told you I'd get back to this. Right? Can I afford it? Can I afford the purchase? Can I afford not to purchase? Right? First thing, let's talk about purchasing a home. There are initial cost. So, if you're going to purchase, we'll just say a $300,000 home. That's kind of average in the Fort Walton Beach area for a single-family home. The initial cost is inspections, it's earnest money, things like that. So, let's kind of talk what that looks like. So, if you're not in the military or previously military, you'll probably need to put down an earnest or a down payment, which is somewhere between 5 to 20+ percent. If you want to try to get an FHA loan, it could be 3.5% down, but just know that you may carry additional costs over time with that. Your initial cost out of pocket. You'll have to put down earnest money or EMD, which is basically just good faith money to say I'm serious with the contract. That money is going to go towards your closing cost at the end of the day,but it's usually about 1%. So, in our example, $3,000. What else? You're going to have to pay for inspections. Now, inspections here in the state of Florida are optional, big old air quotes because you don't want to spend $300,000 on a house and have no idea what's going in it, and it be a money pit. Right? So, you want to go ahead and get your own inspection for it. Now this is different than the bank's inspection. But in our area, you'll see a standard inspection for, let's say, a 2,000 square foot home, somewhere around $400. Now, there are some additional inspections you may want to consider such as, a four point inspection. Which, anything built 25 years or older, your insurance is probably going to require it. Tim, what's a four point inspection? Well, it goes a little bit more in-depth on your roof, your HVAC, heating and cooling, your wiring and your plumbing. Okay? And your insurance are going to need that. And once they have that, they can give you better discounts providing it passes. Right? Also, you will always want to get, unless it's a brand-new house, you want to get a wind mitigation inspection with that as well. Now, wind mitigation is basically just taking a look at your roof and making sure it's not as likely that if the roof is going to fly off when a hurricane or a big storm comes through. So then make sure it's got hurricane clips on it. There's enough nails in the shingles, you know, stuff like that. So all in all, most people spend somewhere around five to six hundred bucks on inspections initially. Okay? There's one other inspection you may want to consider as well or may be required from your lender, which is a WDO, or Wood Destroying Organisms, termites. We live in Florida, termites are a thing. Make sure that you go ahead and get that inspection for that. So, there's not active termites in the house after you purchase it. Okay? Other things to consider too is you may need to pay for your appraisal upfront as well. That's another out of pocket cost somewhere around five to six hundred dollars depending. And that's the bank going through to make sure that it's worth whatever that you and the seller agreed for. Okay? So, those are your initial costs. You will have closing costs. Closing cost at that price that I just had mentioned is somewhere around $8,000 - $10,000. And that's really going to be dependent upon the deal. If you want some more information on what closing costs are, please reach out to myself or anybody on the team and we'd be happy to give you a detailed explanation for that. Can I afford it also includes, alright, after you close on the house, what are the things would I not have to worry about if I was a renter? How about maintenance? What if the cooling unit goes out? This isn't like living up north. Now I'm from upstate New York, and we didn't have AC units. We may have a couple of window units, but we didn't use them all the time because it was didn't get that hot. I mean, in comparison. So here, mostly everything's cooled. So, if that cooling goes out and you're in your house and you're just dying of heat exhaustion, those are some things that you need to fix and fix fairly quickly. So maintenance on the house is not just that, but maybe there's a leak in the roof or something goes wrong. Well, that's up to you. But one thing to note is that during this time, yeah, you may have a couple of maintenance costs that happen. But as long as you're hanging on to this asset over time, that you're making money on appreciation of that asset over time. So typically, that goes up around 3-4% each year, meaning the value this house keeps going up as long as you maintain it. Right? Now, this is 2020, I'm sorry, 2022 when I recorded this video and last year in 2021, appreciation was like 12%. It was insane. So, obviously, moving forward is probably not going to be that way. But, there's no indicators as real estate agents that we can put up, that says that there's going to be any dip in the market. Now what we're going to see is a deflation of the market, meaning that it's still going to climb, but it's not at that same rate. Right? So, probably start to or at least they're predicting. realtrends.com is where I got this information from if you're curious you want to look it up. But, it did spike, but it's going to still go up, but at a lower rate, and we're going to get down to that 3, 4% year over year, which is still good.

4. What if I'm Moving Out Soon?

What if I'm going to move here and I'm going to move out sooner or I have the potential to move out sooner? Now, me as a young military guy, this was something that I was always considering. What if, you know, what if I get orders? What if they're going to ship me out? You know, well, what am I going to do with that house I've only had it for a year? It's going to cost money to go ahead and sell this. Well, one thing to kind of think about is, what's the rentability of these units? Now, here in the entire state od Florida, there are lots of people moving down. And if you're lucky enough to be somewhere close to the coast or in a desirable area or you're out in Orlando, Miami, something like that, the rentability of these units is still really good. By and large, there are some pockets that won't be quite as good. But is it going to be rentable back out? Is it possible that I can use this rental as an Airbnb for the time that I'm going to be gone? Is a long-term rental like, what are those rental numbers looking at? So, a lot of those times you have to consider that moving forward, hey, can I rent this out? Worst case scenario, I got to go. And most cases, especially here in Northwest Florida, we're surrounded by four military installations. So, there's always a high demand for that. Not just that, but if you live in an area that allows Airbnb's, VRBO's, basically short-term vacation rentals, you can definitely do that and make very, very good money from doing those short-term rentals.

5. Are There Tax Benefits For Purchasing?

Absolutely there are, absolutely. When you purchase a home, you have lots of different tax benefits that you'll be able to get. A couple of ones I want to point out specifically, is that when you purchase a home, you can file for what we have or what we call homestead exemption. You can go ahead and file up to $50,000 off your tax appraised value. And that is all you're going to be taxed upon year over year. Not only that, but it stops the state of Florida from taxing you or raising your taxes more than 3% per year. So, that's pretty awesome that you're able to take that down and the taxes, your property taxes where they make up a lot of their money, you can actually kind of take that down quite a bit. Now, if you're a veteran and you're a hundred percent disabled, you don't have to pay property taxes at all, which is insane. But that's awesome. That's how Florida looks after their military vet, which is pretty darn good. Alright.

6. Is This The Right Time To Buy In 2022?

And the last question that I get asked all the time, especially as the new year kind of came around. Is this a right time to buy here, this year in 2022? Well, let me give you some outlook of what it looks like. So, at least currently, we're still seeing the onset of low inventory and a high amount of buyers trying to move. Right? The caveat that I'm going to give to this is that, the interest rates are still very low. But the outlook towards the end of this year is that they're going to go up. I can tell you right now as a day to this video in mid March, they're already going up. And, they're going to go up in different iterations. What they've been saying, and we'll see if this is true, is that quarter three of this year, we're going to see a big bump up at least a point moving up in all different types of loan products. So, if you're watching this video and it's prior to quarter three of 2022, I would suggest that you get into something and lock it in prior to that. Now, even after the fact, well, after the interest rate goes up, some of the buyers won't qualify anymore. So we'll have a lower amount of buyers, which means they're still the same amount of people that need to move. So the inventory, meaning the amount of properties, should increase. Well, that's awesome. But it depends upon what's important for you. Do you want that perfect house even though you're going to be, you're paying a little bit more in interest over time? Or do you want to get into something to capitalize on the low interest rate over time and go that way. So, is it the money or the house? You're probably like, Tim, it's kind of both. But, alright, well, whatever's important to you, that's what I would say. So, either way, it could be very advantageous to do it now. It could be very advantageous to do it later. Just know that the market is correcting a little bit more. Typically, in our MLS here, we have somewhere around 3,000, pushing 4,000 homes to list. Right now, it's like a thousand. So, it's crazy. Homes are flying out the market still, you're probably going to continue to see that throughout the summer, at least in our area and probably other areas of Florida. That being said, the rental market is just about the same. Here, we don't even tell people are like, hey, you can look at rentals now, but they're not going to be available later. Like, thirty days before you're supposed to be in a place. That's when you're going to be looking, you're probably going to have the purchase site unseen, all these different things. When it comes to purchasing, you got a little bit more of a pull because it's a little bit more drawn out, but more other people need to be qualified in order to purchase these homes. So, the pool of people that you're competing with is a lot more are more difficult to qualify to purchase a home than it is to rent, clearly. So, take those things into consideration whether you should buy or rent here in Florida.

And these are the real questions that you should be asking yourself. But if you have additional questions, please feel free to call/text us at 850.320.7757 or email us at Admin@WhittemoreGroupRE.com