Thinking About Investing in Florida Real Estate; Caveat Emptor

Thinking about buying investment property in Florida; it’s “Caveat Emptor” for the inexperienced. Many novice Florida residents are unaware of Florida's construction licensing laws, try to imagine being from out of state and investing in Florida. I was recently contacted by a novice investor, from the Midwest, who had been reading about buying investment property and why Florida is a prime state to invest in. There are real estate deals everywhere, all you have to do is take your pick, so they did. Once they closed on the property, it was time to hire a contractor but they didn’t know where to start so they asked their real estate agent for a list of contractors and the agent supplied a list of contacts to the investor. The contractor they chose has a website stating they are licensed general contractors and a real estate group. The contractor drove the investors around several neighborhoods, pointing out homes they had remodeled and flipped. Yes, Florida is a wonderful place to invest in real estate and the young investors has chosen the right property, at the right price, at the right time and the only thing remaining was to sign a contract and the contractor promised a turnkey job in a timely manner. Since the investor was from out of state, the contractor explained he would need the entire repair cost up front so he would be able to expedite the project and he felt more comfortable being paid up front from the new out-of-state investor. The investor felt a little uneasy about the proposition but concluded; this must be how it’s done in Florida, so they wrote the check; that was March. Two and a half months later, the house is in disarray, work which should have been permitted, wasn’t permitted. Dangerous work areas, environmental problems, obvious code violations done by the contractor and let me fill you in right here; the contractor isn’t licensed.

The owner/investor now gets to fill out paperwork to submit to the State of Florida to initiate an investigation of unlicensed activity and if the unlicensed contractor is found guilty, the owner has the right to file a suit against them for up to three times the damages incurred. In the meantime, the unlicensed contractor has the investor’s money as well as created a mess for the investor. As the house sits idle, it’s only going to become an albatross for the investor with all the current codes and building violations to be cured by the owner/investor. The owner can’t pull a permit for the project because it isn’t their homestead. Most licensed contractors will be reluctant taking the project on, as they will have to cure the current problems with the home as well as bringing the entire home up to current code because of the value of the remodel/repair. My best guess for the investor, the project may once again start sometime by the end of the year.

Before you decide to invest in Florida or outside your home state, learn what the state, local and municipality building codes are before investing in that state. Know what the state, local and municipality license requirements are before signing any contract with any business. The most disappointment for me, is there are many real estate agents who are just as ignorant about our Florida construction and licensing laws, as many out of state investors. Still thinking about investing in Florida real estate; Caveat Emptor!

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