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Understanding Condo-Hotels. Taxes- The Achilles Heel.

By
Real Estate Broker/Owner with Daytona Condo Realty, 386-405-4408

Taxes are the Achilles heel not only for condo-hotels, but for any property in Florida. With the next cycle of skyrocketing prices, which is not out of sight, the tax burden would again come into play.

Achilles HeelJanuary 29, 2008 there was adopted a Constitutional Amendment, that changed the way the property taxes are paid in Florida. For homesteaded properties the homestead exemption is increased from $25,000 to add another $25,000, however, school tax is still assessed on the second part, so it is not exaclty $50,000 exemption, but still a good one at about $39K - $40K of just value, whihc translates into about $700 - $800 less in tax.

The other good side of homestead, is that it caps the annual increase at 3% or Florida Consumer Price Index, whichever is less. SO, if the prices would start going crazy again, the tax would not. that's great.

Non-homesteaded properties do not have the exemption, and their annual maximum increase is capped at 10% a year, wihc is still better than nothing.

Now, let's look at the condo-hotel situation. If this is your investment/rental property and you use it sporadically or do not use at all, you do not really care. You do not have homestead, and you get the increases at the limit, if the values go up. That's how it is supposed to be.

However, if you decide to retire in a condo-hotel, which you can't homestead (and in Daytona area there are two homesteadable condo-hotels), then you put yourslef in a situation where you know for sure that there would realtively soon come a time when you won't be able to keep up with the taxes.

The units that you can buy now for $55 in Plaza Resort were initially sold for $300K. When the market warms up, they will not only go back to $300K, but will go higher than that. I am not going here to argue this point, and if somebody really thinks that this would never happen again needs a healthy dose of Cool-Aid. When this happens, you are faced with annual 10% increases. which would force you pay every year more than before, and after the first year it would look approximately like that:

  Homesteaded   Not Homesteaded
Year Value Tax   Value Tax
0  $55,000  $1,100    $55,000  $1,100
1  $60,500  $1,210    $56,650  $1,133
2  $66,550  $1,331    $58,350  $1,167
3  $73,205  $1,464    $60,100  $1,202
4  $80,526  $1,611    $61,903  $1,238
5  $88,578  $1,772    $63,760  $1,275
6  $97,436  $1,949    $65,673  $1,313
7  $107,179  $2,144    $67,643  $1,353
8  $117,897  $2,358    $69,672  $1,393
9  $129,687  $2,594    $71,763  $1,435
10  $142,656  $2,853    $73,915  $1,478

See the difference? Of course, this is not the exact calculation, but it gives you the idea that you would be paying double in taxes in 10 years, if you can't homestead your condo.

Therefore, if you are planning to live here, think about residential condominiums (apartment condominiums). There are plenty of them on the market now, and i am here to help you make a smart and intelligent choice. Just call me 386-405-4408, or send me an e-mail.

Here are other blogs in this mini-series:
Understanding Condo-Hotels. What Is It?
Understanding Condo-Hotels. Is This For Me?
Understanding Condo-Hotels. A Glimpse At History
Understanding Condo-Hotels. Association Fees
Understanding Condo-Hotels. Simple Math

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Jon Zolsky, your Daytona Condo-Hotel guru
www.DaytonaCondoHotel.com

 Image is courtesy of Vembu Technologies Ltd.

Comments (1)

real estate real estate
Providence, RI

Jon, thank you for another article on Condo-hotel. I am very interested in this topic. Thank you.

Feb 22, 2009 03:40 PM