Needed: Advice on purchase of first STR in Orlando area
I am in the market for my first short-term rental and I am looking in the Orlando Disney Area, specifically Championsgate, Windsor at Westside, and Storey Lake. I have an agent with the Short Term Shop. I am having trouble deciding on a strategy - am I better off buying a fully themed, ready-to-go eight-bedroom home and paying a large appraisal gap (which seems to come with the territory with the themed properties) or would I be better off buying one with little to no theming, hopefully a smaller appraisal gap (no guarantee) and theming it myself? I know the more bedrooms the better, but I have seen some data to suggest that smaller fully themed homes can perform as well as larger, lightly themed homes. Here is our situation: we have been approved for a jumbo ten percent down vacation home loan up to 1.5 million and have a home equity line to draw upon for theming. Our concerns are 1) how long will a property be offline to be fully themed (three bedrooms and a garage game room is our goal), 2) are contractors readily available there to do the work and are they being affected by the shortages? At this point, it seems like we will be lucky to get any property at all because bidding is so competitive.
@Melanie Martin del Campo your agent/PM should be able to answer all of those questions. Are they not assisting you, seems like that is their niche.
There isn't a direct answer to your question. It partly depends on when you buy and close. If you are looking to buy now and close in about 30 days..you will be wanting to just keep the cleaning and repairs to a minimum so you can capture spring break bookings. Since you won't have any reviews, your listing won't rank for some time, so you don't want to be postponing that any longer than needed. If you buy one fully themed, it is going to cost you upfront, but no real downtime to block off dates and lose revenue. There is such little inventory, you may not be able to choose themed or unthemed. I put an offer in this week in Championsgate and there were 17 other offers. So count on an appraisal gap, most listings are requiring no appraisal contingency.
If you do get one that is not so themed, there are shortages in everything you need..labor, furniture etc. So if you block off dates from your calendar (have to do this far in advance), you run the risk of having no labor when the time comes, furniture comes in late or broken etc. So I would try to tackle one room at a time to hedge the risk of long down times and bad reviews. May is typically a slow month, so if you buy now, plan for anything big then. It may be better to get things you can now and store them so at least you know what you will be able to do and plan for the trades to get it done.
Hope this helps, good luck
@Melanie Martin del Campo I recently purchased a 5 bedroom in Windsor Hills. It needed updating. The general contractors have been available. The theming folks and decorators seems to be very busy. And expect the furniture to take 3 months if you order new.
Thank you both for your insight. Do you think that there will be a supply increase in the coming months that might ease the number of offers being made on properties?
@Shawn McCormick is spot on here. I echo what he says about May being a good time to plan on updates etc. And really you don't need to crush it all then or be worried about a shortage b/c worse case scenario you could finish a project in the downtime in Sept and still capitalize on the amazing summer bookings. From my experience - and I am not an agent - have very specific criteria, very specific DATA as to what you are looking for.
So when the project/house hits you are ready to strike with escalators and appraisal gaps. And appraisal gaps are a thing now for sure b/c the houses are themed and I believe - correct me if I am wrong here @Shawn McCormick - but most of the appraisers don't count the inners of the house that comes with the sale in ORL. There will be a cash investment beyond your downpayment either way - just depends on where it is spent.
I do agree about the themed smaller BR vs unthemed larger. But my rule of thumb is this, go for the bigger BR. You can always add an Encanto room (BTW do THAT b/c nobody has those yet!!) but you cannot add a bedroom. You can always add harry potter wallpaper and an epic train bunk. You can't make the house closer to disney... which is one of the most key variables to consider relative to ADR and %occ.
So yes I see the "theme data" as well - and relevant to the market realtime... but may or may not be relevant to your goals large picture. What we are seeing as time goes by in the buying process, is that revenue projections need to come from multiple sources to really build a pro-forma out.
One last point/story to consider: we had 3 clients this week (each with a different agent) and they were all bidding on the same house. One got it but it was his 5th attempt. He learned more the further he went. So stay on it. It is competitive but it's competitive for a reason and it's competitive b/c the numbers work. Hope this helps! Keep building your team and resources @Melanie Martin del Campo!
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I so appreciate all of the good advice given here. I was feeling frustrated, and considering looking at a different market (High Country North Carolina anyone?) but I stuck with it and my latest offer was accepted. We are scheduled to close on March 1. I think I will follow @Shawn McCormick's advice and just clean and do minor repairs, hoping to get some spring break listings. The home I am under contract on is a 9 bedroom at Windsor at Westside. No real theming to speak of. Do you think theming could wait until August or should I prioritize it in an effort to get more cash flow this year?
Hi Melanie,
Congrats on sticking with it and winning this most recent deal. Exciting times ahead and hope things progress well from here.
@Melanie Martin del Campo Congrats on getting under contract, it's difficult right now on the larger homes. You asked about theming..I would take into consideration how well it is currently booked out and do you plan to keep those bookings. I would take a look at the nightly rate and see if there is opportunity to raise those based on availability in the market. As long as your calendar is full, I would focus on what you have and make sure the first couple of months worth of guests are getting a clean home and you maybe even incentivize them to leave a great review to get you going. If you are available and you have the contractors/theming company ready to go with redoing a room or two, I would say go for it. Try to do a room or two at a time and that will be less stress than shutting down for a couple of weeks and trying to rush everything.
Best of luck!