Florida closing costs on a flip
You pay closing costs twice, once when you buy and once when you sell.
- On the purchase, a loan triggers documentary stamp tax on the note at $0.35 per $100 and intangible tax of 0.2% of the loan. Both are added automatically.
- On the sale, the seller customarily pays deed stamps of $0.70 per $100 of the price. In Miami-Dade the rate is $0.60, plus a $0.45 surtax unless the property is a single-family home.
- In most of Florida the seller also pays for the buyer's owner's title policy. Rates are set by the state, and the calculator uses the promulgated schedule. In some counties, including Miami-Dade, Broward and Sarasota, the buyer often pays it instead, which is a negotiable term.
Holding costs
Hard money lenders usually charge interest only, plus points at closing, and release rehab money in draws. The calculator assumes about half the rehab portion of the loan is outstanding on average. Insurance on a vacant house under renovation costs more than a standard policy, and many carriers will not write older roofs at all. Permits in coastal counties can add weeks. If a home in a flood zone needs work costing half or more of its value, local rules on substantial improvement may require it to be raised or brought up to current flood code.
The 70% rule
A common screen for flips is to pay no more than 70% of the after-repair value minus the rehab budget. The remaining 30% has to cover closing, holding, selling and profit. It is a starting point for an offer, not a guarantee. With Florida insurance and carrying costs, many investors use a lower percentage in practice.
Questions
How is annualized ROI calculated?
The return on your cash is compounded to a 12-month rate. A 15% return in 6 months is about 32% annualized.
Who pays title insurance in a Florida sale?
In most counties the seller pays for the owner's policy. In Miami-Dade, Broward and a few others the buyer usually pays. It can be negotiated either way.
