[Time sensitive] Advice on first rental property in Orlando?

Question

Hi BP community, my offer was recently accepted on a SFH in Orlando and I would appreciate your thoughts / feedback on the financials to see if I should move forward. This would be my first rental property. I have until Friday to decide how to proceed without penalty.

A few more details -- I live out of state but grew up in Orlando and know the area well. I'd really like to invest in my first rental property in order to diversify my net worth. As many are alluding to, the Florida market has exploded in recent years I've been finding it difficult to find strong cash flow. My goal is to hold this house for 7-10 years then sell it and either use the proceeds for the down payment of my primary residence, or continue acquiring properties.

I'd like to commit to the central Florida SFH strategy but not sure if the numbers are supporting this.

Below are my calculations -- what are your thoughts? The cash flow is obviously not good but the overall returns are still strong based on growth in the area? Am I being too optimistic? Thanks in advance!

Purchase price: 315,000 (putting 20% down payment)

Interest rate: 5.25% ARM (anyone have a strong view for / against these?)

Jeff T. · Answer

I would double check they insurance rates. Insurance went up something like 40% statewide last year. Unless the house was built since 2017, your rates are likely higher than that.

Also, property taxes will probably increase if the current taxes are based on an owner occupied tax exemption or if the assessed amount is low. You can find out the millage (%) in your area at the county tax assessor website to get an idea.

Not saying anything about the deal, just make sure you don't have any surprise numbers.

Sam O'Brien · Answer

Thanks, Nicholas, good point. The lack of cash flow is making me reconsider this area and check out a town in Indiana where I went to school. The thought behind Orlando was get a stable home, have a tenant pay down the mortgage for me and sell it in 10 years, using the profit as our down payment for our house. The success of this is fairly dependent on the house appreciating, which I have mixed feelings about. Selling at the same entry multiple (0% appreciation) results in 5.42% returns, which isn't exciting.

Sam O'Brien · Answer

Thanks, Brandon -- I pasted the wrong second picture, the correct one is below. It would be a 3/3 ARM.

Sam O'Brien · Answer

Thanks for catching that. I was running two scenarios -- one for this Orlando home and the other for a house in Indiana and must have pasted the wrong second picture. The right one is below:

Javier Marchena · Answer

Hi @Sam O'Brien,

Not sure about the numbers.

First year Income and Expense shows a monthly income of $2,300 and next picture shows a monthly rent of $1,300.-

Check the numbers again.

Nicholas L. · Answer

no offense.... but you'd make over 4x the cash flow just putting 60something thousand dollars in a savings account.

[Time sensitive] Advice on first rental property in Orlando?

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