Property Taxes

There was a story on the evening news last night about the political debate going on in Tallahassee (Florida's state capitol) over property tax reform. It seems that real property values have increased so dramatically over the past few years that there are many new home buyers that can afford the price of the house, but cannot afford the property taxes. Likewise, existing homeowners are getting squeezed by ever-increasing property values that make their taxes more costly.

CLICK HERE to read a short article in today's Miami Herald that discusses the issues concisely.

The tax rate in Monroe County Florida is set near ten mills. That means property owners pay $1 for every hundred dollars of value of the real property. A home with an assessed value of at $890,000 would pay $8,900 per year in property taxes. If the property is homesteaded, the assessed value would be reduced by an additional $25,000, so the tax would be 890,000 - 25,000 = 865,000 X .01 = $8,650. CLICK HERE for a description of Florida's Homestead Statute.

I was very surprised to learn that the tax rate is not uniform across the state. Each county sets it's own rate. And some counties apparently have very high tax rates--much higher than Monroe County. So it is understandable why so many taxpayers are feeling the pinch.

If you are looking to buy a property in the Lower Florida Keys you can use a computer tool provided by the Monroe County Tax Assessor to predict what your property taxes would be on any given property. CLICK HERE to go the the page, identify the property, enter the proposed sales price, the the County Assessor's website will show you what your taxes will be.

A spokesman for the county assessor told me that the county looks at the sales price to make sure that the price paid was bona fide (arms length transaction) and the value of improvements to the property to determine the final assessed value. I always tell prospective buyers to contact the county assessor directly and not to rely on anything I or any other Realtor tells them about what their individual taxes will be. Do your homework so you are not mistaken or mislead. Generalizations are just that.

Florida does not have an state income tax. So property tax is one of the primary sources of funding local government. Don't expect any rapid or dramatic change to the current system. But it does look like some type of reform may be in the works.

CLICK HERE to preview all current mls listings in the Key West are. Then give me a call for further information. Thanks. 1-305-766-2642.

Key West Guest Houses -- For Sale

I know something about Key West Guest Houses, because I used to own one -- Eaton Lodge located at 511 Eaton Street. Selling it ranks in the top five mistakes of my life. Buying it was one of the best things I ever did. Taking as long to buy it cost me big time. The time value of money.

I pretty much decided that I wanted to own a guest house after my first trip to Key West in 1984, but I put off even looking on that trip thinking I was being too impulsive. I had stayed in other guest houses in Provincetown and California during the four previous years and those experiences led me to believe I could be a very good innkeeper. Kind of like Bob Newhart on NEWHART.

When I first started to look at properties guest rooms were being sold in the range of $25,000 - $35,000 per room. Most recently the rooms have been sold around $300,000 per room. Quite a dramatic increase in20 years. Yet the prices pretty much fall in line with the price appreciation of single family homes in Old Town.

The reason it took me so long to buy a guest house was my failure to listen to my Realtor. I kept on insisting on over-lawyering every offer I made. I kept trying to weasel the last nickle out of every deal. And I kept not getting any deal done.

I ended up buying Eaton Lodge at a public auction conducted by the Small Business Administration. It had foreclosed a mortgage on the property and let the building sit vacant for two years. It is a beautiful Greek Revival building with mature gardens in a heck of a great Old Town location. Because of the auction, I was forced into accepting the building "as is" and without any ability to negotiate anything. I couldn't over-lawyer or nit-pick. Thank God.

I tell buyers to consider the following factors when looking at prospective guest houses:

1. Location. Once vacationers arrive in Key West, they can't drive anywhere. Pick a good location that is easy to find and that is near Duval. Many visitors come to Key West without reservations, so the better the location, the more likely you are to stay full.

2. Improvements. Every guest house that I know of was built and was used as something else before converted into a mini-hotel. And even though guest houses may be priced similarly, the fact is that each property is very different in the quality of renovation and utility for it's end use. Some buildings have more deferred maintenance than others. Others may have code violations. Or some properties may have more guest rooms than transient licenses. Some may have locational problems (noise, lack of any nearby parking, distance from Duval, etc.).

3. Book of Business. It is virtually impossible to create a new guest house out of an existing building. The City of Key West has so many restrictions on buildings that it is just easier to buy an existing business. Look for a business that is operated as a business. Request and study the business's financial records. Study the reported income for the periods of January through April. Well located guest houses ought to be near 100% occupancy during the entire period. If the numbers are not there, then something is wrong with the numbers or the operation. Some owners operate "off book"--they do not report all cash income. This can have a severe impact on a potential sale because all banks require appraisals based on the number of legal rooms (rooms with transient licenses) and verifiable income. Operations that are successful are easier to takeover than businesses that are mismanaged. Sometimes property costs more because it is worth more.

4. You are not Newhart. Many people think they will live in one of the guest rooms and live the life of Bob Newhart in his charming Inn. Wrong. You have to be rich, really rich to live on site. On most properties you would lose $200 or more per night in room income for 365 days a year. It is less expensive and easier on your mental health to live near, but not on the property.

5. Help. No, not "help me!", but how many employees will you need and how much will it cost to pay them. A mom and pop type of operation can usually handle a small guest house with 6 or 7 rooms with one or two additional employees to help as maids and relief from the front desk. But that mean mom and pop will be doing a lot of the work as well. Guest houses with 13 to 14 rooms become very profitable because you can afford to have enough employees to let you run the business and mingle with the guests as necessary. Some guest house owners use a service company that provides maids on an hourly basis, so the owner pays a flat fee to the company and that is it. The worker is not an employee of the guest house so there are no FICA or unemployment taxes to pay. However, many very successful guest houses run just the opposite. They pay their employees a good hourly wage, offer some form of medical insurance, and maybe even paid vacation. The latter businesses have employee loyalty and longevity. And returning guests know the names of those employees and come back year after year because they are treated nicely. In employee relations cheap labor can be very expensive.

A Realtor should be able to help you understand how these factors impact your potential investment in a Key West guest house.

Earlier I said "Selling it ranks in the top five mistakes of my life." After I sold Eaton Lodge I understood that I had thrown away years of easy income for a quick (real quick one time profit). Running a guest house is not an easy business, but it is not hard one either. Making the right choice and operating a business as a business and not as a hobby can provide a good and stable income and significant property appreciation.

To view all current Key West Guest Houses that are for sale CLICK HERE.


CLICK HERE to checkout all current Key West mls listings. Then give Gary Thomas, that's me, a call for more information. 1-305-766-2642.

Where do you park your Yacht?

One of the interesting things about Key West real estate is the continued development of boat slips in the Key West area. The Historic Seaport :"Conch Harbor" was re-vitalized a few years back and it looks great. It has great new facilities including pool, showers, restaurants, and businesses that meet the needs of boaters. Not too far away is the Galleon Marina that is located next to the famous A&B Restaurant. The yacht pictured to the right is located at the Westin Resort Marina. A mile or so east you will find the Garrison Bight Marina and not too far from that is City Marina and then the Key West Yacht Club.

When you cross over Cow Key Bridge and go on Stock Island there are a bunch of new marinas in existence or in the process of being built. On the Gulf of Mexico side you will find the Sunset Marina. Classy and it has deep water access. The Sunset Key Condominiums are right next door (some even come with their own deeded boat slips). And those condos are just across the street from the Key West Golf Club. You can park your yacht at your back door and drive your golf cart across the street to play 18 holes of golf.



The Atlantic Ocean side is where all of the new action is. Major development is going on there with expansion of existing marinas to the creation of new ones. One particular boat slip that may attract your attention is the 50' slip at Ocean Side Marina CLICK HERE. It is priced at $450,000.


CLICK HERE for an aerial map that shows the location of each marina mentioned above. Use your mouse and drag to get "up close" aerial images of each marina. This may help you if you are in the market for a boat slip in the Key West area.

There is a boat slip available in just about every length, and prices vary depending on location and amenities. CLICK HERE to checkout all current Boat slips in the Key West area.

CLICK HERE to checkout all current mls listings in the lower Florida Keys. Then give me a call for more information. Gary Thomas 1-305-766-2642.

Open House Sunday -- 617 Fleming Street

Please visit me on Sunday, April 15th between 11:30 AM - 2:00 PM at Campbell Courtyard, 617 Fleming Street to see
what I call a Slice O' Paradise. CLICK HERE for more pics and information on this charming two story cottage right in the very heart of Old Town Key West. It is two blocks to Duval and three blocks to the Historic Seaport. But tucked away in a quiet little island on the Isle of Key West.

This charming 2 bed / 2 bath home was recently appraised and is priced at the appraised value, $785,000. The home is an eyebrow house, and it sits at the rear of the Campbell Courtyard compound. The home is offered fully furnished as well. The home has an excellent rental history and would make an excellent investment for folks who want to buy a little place in Key West that can help pay for itself.

If the charm, convenience,location, furnishings, ability to rent the home but still use it and don't win you over, maybe this will. It also has privately owned off street parking space. Bring your checkbook. Let's write an offer this Slice O'Paradise this weekend.

Trouble (Ya Got Trouble) Fractured

ALBUM: The Music Man
ARTIST: Meredith Willson

FRACTURED BY: Yours Truly

Oh, we got trouble
Right here in Key West City
Right here in Key West City
With a capital 'T' and that rhymes with 'P' and that stands for 'Phool'
That stands for Phool
We surely got trouble
We surely got trouble
Right here in Key West City
Right here

I recently responded to a query from Solares Hill Newspaper regarding advice on listing ones home. In my reply I added my thoughts on what I see as a very troublesome matter. Key West has a bunch of brand new $2 million (and up!) town homes, condominiums, and single family spec homes being built or currently available for purchase. (I have even written about several such projects in this blog.) Key West does not enough buyers for all of these projects. In fact we don't have enough buyers for town homes, condos. and single family homes that already exist and that are far more affordably priced.

I then suggested that the developers and the bankers financing these "over-priced" projects are in for a rude awakening. I assume that there may be some pre-sales on the projects, because lenders require it. But I believe that most of the pre-sales are to insiders of the individual developers or are buyers who signed up for units a couple of years ago when the Key West market was entirely different. And only a Phool believes that the $2 million asking prices are achievable. Not on one unit and certainly not one hundred,

I think the big projects being built at the Key West Historic Seaport, the Atlantic Shores, and the Casa Marina will be built, but proably be built in phases. I predict that some of the smaller projects will finish units under construction but not commence any more units until the market rebounds.

If the asking price on existing inventory (completed or nearly completed) is not substanitally reduced, the lenders will eventually step in. I think the only reason that the local banks have not foreclosed yet is that the banks are continuing to fund the interest payments out of the construction loans themselves. One of these days the OCC (federal Bank Examiners) is going to require the banks to start writing down the non-performing loans, and when that happens the prices will get reduced.

The smart lenders will not dictate the sales price, because when the project invariably goes south (and that is my prediction for many of these projects), the lender would be setting it up for a defense of creditor interference. But if the developers do not convert the units to sales and if they are unable to pay down the construction loan as agreed, we should anticipate the bank going into ownership either through foreclousure or by deed in lieu of foreclosure.

There is just too much inventory out there. There are not enough buyers. The prices are still too high. And the sky is going to fall.

Oh, and if you think my prediction is contrary to what I have previously written about individual projects, I don't agree. Quality homes in a good location always sell for a higher price than inferior quality properties or properties in less desirable locations. The problem is not the projects, it is the current pricing.

f you are looking to purchase a home in Key West, please CLICK HERE to search the mls website for all current mls listings. Then please consider giving me a call to help you find your next home, vacation home, or commercial property in Paradise. 1-305-766-2642.

Lost and Not Forgotten

There is a story in today's Key West Citizen that locals and anyone thinking of buying a home in Key West should read and ponder. It relates to the homeless population in Key West. CLICK HERE for the article.

According to the article city officials and citizens are complaining about the homeless population. "At a meeting Wednesday, city officials pressed Police Chief Bill Mauldin to do something it. Mauldin acknowledged the issue, even admitted his staff could do a better job, and promised certain strategies to tackle the problem." Hah. That's a laugh.

A few years back Key West elected a new mayor who was a compassionate soul, but a terrible leader. She wanted to create clean and comfortable space for the homeless to congregate. Drama, drama, drama, not in my backyard, more drama. A lot of well intentioned people wanting to help people who will not help themselves. Many are emotionally disturbed--or worse.

A couple of years ago an official from the City of Key West (worked directly under the City Manager) spoke to our office regarding a variety of city issues. I asked him why the City of Key West refuses to do anything to curtail the homeless situation like locking up people who violate the law. I specifically pointed out the Palm Beach does not have a homeless population. They don't allow it. No tolerance.

He came back and said that it costs some exaggerated dollar amount to arrest anyone and hold them in our new county jail. The figure he cited was in the several hundred dollar range.

I went right back at him and said his figures were ludicrous. I said if you include the amortization on the cost of the jail, the staff of the Key West Police Department, the staff of the Monroe County Sheriff's Office, and their respective retirement plans, then maybe the cost per inmate might amount to that figure. I added that the Sheriff is renting cell space to Miami-Dade County so that our county is profiting from the out of county inmates, whereas putting our own lawbreakers in jail costs us money. Why would anybody in their right mind put away people who cost you money when you can lockup people who make you money. I get it!

The homeless of Key West may be lost, but they are not forgotten. I will now get off my soapbox.

The pic above was taken by a tourist in the Key West Cemetery. What a nice way to remember your vacation in Key West.

Thar "almost" Sold in them thar Solares Hill

In spite of all the doom and gloom about the depressed real estate market in Key West, there are occasional bright spots. We had one over the weekend. And another office had an equally pleasing weekend as well.

I have written a couple of blogs about listings at 612 Olivia priced at
$3.2 million and 616 Olivia priced at $2.1 million. A single buyer purchased both homes over the weekend and will close within the next two weeks. I mention this because it reinforces what I previously wrote about certain segments of the market continuing to be strong. The high end homes always do well if they are in the right location.

Another big house at 620 Eaton that was originally priced at $8.5 million and reduced to $4.5 million also went under contract. That property was way over-priced when it was originally listed. It did not go down in value. There is a difference.

Another home I wrote about at 1400 Whalton that was priced at $2,995,0000 went pending yesterday. Whoever is buying this home is getting a bargain. It was under-priced so that it would sell this season. It is one of the most beautiful homes that I have ever seen. Anywhere.


I see each of these properties as a positive sign for continued positive sales opportunities for well located quality homes. Now, if the rest of the market would follow.

If you are looking to purchase a home in Key West, please CLICK HERE to search the mls website for all current mls listings. Then please consider giving me a call to help you find your next home, vacation home, or commercial property in Paradise. 1-305-766-2642.

How to Sell your Home in Key West

"What is the SINGLE most important thing someone selling a house should when putting a property on the market, and why?" That is the question posed by Nancy Klinger, Editor of Solares Hill newspaper to various Realtors for possible inclusion in an upcoming column she is preparing.

My Response: Get an appraisal form a qualified professional appraiser and list your home at or below the appraised value. Then use the appraisal in your marketing to show that your list price is reasonable.

The Key West real estate market is volatile right now. Prices continue to drop daily because listing Realtors (or their customers) set asking prices that were too high. The inventory of unsold homes is at an all time high, and the selling season is coming to a screeching halt in a few weeks—in my opinion.

Some Realtors are famous for obtaining listings by charming sellers into believing they can sell their home in spite of the market downturn.
Once the house is exposed to the market and there are no buyers (or maybe not even any lookers) the agent then suggests that the asking price be lowered. And the property sits and sits and sits. The “For Sale” sign gathers dust.

My suggestion is based on years of professional experience in selling bank owned real estate. We had an appraisal on every single house or commercial property we owned. We did not just rely on the opinion of the Realtors we used to sell the property. That would be foolhardy no matter how knowledable the Realtor may be because he has a vested interest in getting the listing and achieving the sale. Banks need an independent opinion of value that is not clouded by the potential of individual gain.

Even appraisers are having a difficult time arriving at opinions of value today, because they use past sales as indicia of what the current value is. But in a market of declining values (and that is generally what we are experiencing in Key West), the appraiser’s job is especially difficult.

Banks are required to follow federal banking regulations on how they treat assets acquired through foreclosure. If the asset value cannot be justified by appraisal, the asset must be written down to a verifiable amount. The balance must be charged off. So the bank takes a financial hit. But it is this process that keeps the banks from trying to obtain a “wish price” for property owned through foreclosure.

I suggest that homeowners adopt the same approach in pricing their homes for sale. With the appraisal in hand, the listing Realtor should then list the house at the appraised price and use the appraisal in marketing the property.

When you go to SEARS to buy a TV you may see several brands with various options at different prices. You can choose the TV you want to buy based on price or other criteria. But you know the listed price is the price you must pay, because you cannot negotiate with SEARS on price.

My theory is that when a potential buyer knows that the asking price is based on an independent appraisal that the seller gains real marketing advantage. The buyer can’t discount the negative items affecting the property such as age, condition, location, etc. because the appraisal already took each item into consideration during the appraisal process. The price thus becomes “objective” rather than “subjective”. And I think that makes selling a home in a difficult market much easier.

A short case in point: Last year I got a listing next to a large school parking lot exit on a busy street in Key West. The house had sustained some flooding during Hurricane Wilma. And there were three similarly sized houses for sale across the street. The seller was the sister of the deceased former owner. She lives a thousand miles away. She had to get a home equity loan on her own home to continue making mortgage payments and pay other expenses on the Key West property. Another Realtor told her she could ask for substantially more than my approach. I showed her mathematically the cost of ownership on a monthly basis, and she saw how much holding out for a “wish price” could potentially cost her. She accepted my approach. I got the listing, and we closed the deal 53 days after listing at 98.91% of asking price.

By using the appraisal as part of my marketing strategy I was able to get the seller to accept listing the property at a realistic price. The seller was disobliged of questioning whether she could have sold for more money. And I was also able deflect potential buyers’ criticism by showing that all the property’s negative attributes were already taken into consideration in pricing the property.

This approach works. Banks use it all the time. It takes the drama out of selling your home. It treats the process as a business deal.

If you are thinking of listing your home or business for sale in Key West, think about contacting me. You may not know my name, but now you know my game. And it works. Call Gary Thomas 305-766-2642.

Less Is More

Ludwig Mies van der Rohe famously said, "Less is more." And when I decided to write about a little house on Elizabeth Street, that phrase came through so loud and clear.

The house at 514 Elizabeth hasn't changed much since it was built in 1922--according to county records (which are notoriously incorrect!). It's facade certainly hasn't changed since I sold it ten years ago as a second home to a couple from New York. Yesterday I happened to see the owner trimming the shrubs by the front porch. We talked for a bit and he invited me in to see the pool that they added to the property.

I had forgotten how utterly charming this little 1 1/2 story home is. As I walked inside I was immediately transported to another time when material honesty and structural integrity were more important than marble, granite, faux finishes, designer cabinets, stainless steel appliances, name brand this and that. The simplicity of design and the materials used was breathtaking.

The floors are painted, not stained. The windows, doors, doorknobs, hinges and other architectural relics are from an era gone by long ago. The rooms are small but not tiny. They serve their intended purpose. The bedroom on the second floor still has its scuttle, a small hatch with a movable lid in the roof that permits the warm air to rise to the outside. There are two additions to the house. The kitchen and living room were additions built by the previous owner a little over 10 years ago. And the current owners built a small cottage next to the new pool and deck. There is also a small terrace below the deck that is dwarfed by the majestic trees from Nancy's Secret Garden located next door.

Many potential buyers look at homes as projects to tackle and rebuild. If every owner had messed with the house at 514 Elizabeth Street, it would not be the quiet little charmer it is today. Sometimes it is better off to leave things alone.

I personally don't think all houses need granite counter tops, marble baths, or odd looking bowls that sit on a cabinet that are to be used as a sink where you shave and brush your teeth. This house certainly does not. It would look ridiculous and totally out of character.

There are some splendid little houses like the one at 514 Elizabeth Street looking for new owners. If you are looking for such a house, please give me a call at 1-305-776-2642. Or CLICK HERE to search all of the Key West mls listings.

709 Bakers Lane is a Bargain

I have mentioned several times that I used to do commercial loan workouts for commercial banks in Denver. The Denver economy went bust in the late 1970's and both the housing market and commercial real estate market took a steep nosedive. I never knew a good economy until I moved to Key West. I mistakenly thought we were immune from the economic pressures of the rest of the world because of our isolation and the scarcity of real property.

Two months ago I wrote about a great property at 709 Bakers Lane that I thought was a great buy then. CLICK HERE to read that blog. The house was originally designed and renovated to sell for $2.8 million. The owners are Realtors and have done several successful projects in Key West. They relocated to Ft. Lauderdale and the three building compound was just reduced to $1,749,000. The three buildings total 2300 square feet on a 5700 square foot lot in the heart of Old Town and at one of the highest points on the island. The property is surrounded by expensive homes, but is an enclave to itself. It is within walking distance to everything Key West has to offer, but it is secluded from the hubbub of our busy little city. The asking price equates to $760 per square foot.

CLICK HERE for more details and photos of this property that I think is a bargain. This property is not for every buyer. It is unique, even by Key West standards.

CLICK HEREto find your own good property in Key West's mls database. And then call me for more information. 1-8777-778-7092.