Good evening, I have an opportunity to purchase a 2 bedroom/2.5 bath townhouse. Prime location 10 minutes away from Disney in Orlando, in a resort that offers pool/clubhouse/gym/restaurant. The property was built in 2014, is fully furnished, ready to be rented for short term guests. The price is 285,000. I would be putting 20% down, and my expenses would be approximately $2500 per month, including the mortgage, $474 for HOA fees, taxes, and property management fees.
My expected monthly income from AirBNB will be at least $3000 per month (I say this because my friend owns two units in that resort and that is what he brings in every month on average), leaving me with approximately $500 a month in profit.
Does this look like a worthwhile investment? It will be my first short term rental property!
Property Manager · Orlando Kissimmee, Daytona Beach & Cocoa Beach · Member since 2016 · 331 posts · 166 votes
4y
Sure. We are discussing a townhouse. Here is what I gathered from the investors or my own observations/ experience 1) owners don’t pay utilities, sales and tourist taxes, routine maintenance (almost every check out, a touch up paint is needed as guests leave wall marks with their luggage; just a basic example), inventory ( sheets, towels, furniture, and etc) 2) in long term, tenants cover lots of maintenance; so another saving. 3) in long term, occupancy rate is higher and more stable. 4) long term rental rates are high today. 5) townhouses or condos have to compete with the hotels, and Orlando has more of these than any other city probably in the world. And quality will never be the same as hotels/ resorts would offer. Because of that, nightly rate is lower and occupancy rate is not the best. It’s clear that tourists like to stay in properties that have provide pools (something that hotels don’t offer) 6) insurances are less expensive in long term 7) less licenses needed. 8) less admin work is required 9) long term has less headache. However, it depends on how you like to handle the whole rental situation. Even if you manage bookings yourself, you still need to be there for the guests. Takes time and special type personality. And you need to pay someone on site who can inspect property, manage inventory, and etc.
Also, I see that people who run some vacation rentals (again, we talk about condos, they use the property themselves time to time. This is a benefit they enjoy and this is why many keep renting it short term. Once they stop using it, often they shift to long term or sell.
Hopefully, it helps.
PS! Please note that I personally own long terms and short term rentals. So, I am absolutely not against vacation rentals. Every property/ community is different. It’s important to run an analysis and study all financial reports statements/tax return schedules.
Santa Rosa Beach, FL · Member since 2018 · 81 posts · 67 votes
4y
Are you managing remotely or are you hiring a property manager? We own a 4 bedroom townhome with similar amenities in Kissimmee and we manage it ourselves and because we don’t have to pay 20% we are able to profit more. Where is your unit?
Investor · FL · Member since 2020 · 40 posts · 19 votes
4y
The average net monthly is very low. Better off going long-term rental for that cash flow. The point of STRs is to turbocharge the cash flow. I would say $500/month for an STR is not an STR strategy.
Santa Rosa Beach, FL · Member since 2018 · 81 posts · 67 votes
4y
Are you planning to do any renovations on the townhome to make it stand out? We bought in a community where all the rental units were identical so we took some time and money to make it stand out. We actually went away from themed rooms and just made it look really nice and now we are charging more then the other units in our neighborhood and still staying at least 85-90% booked every month almost. It’s definitely worth the investment to do that.
Investor · Raleigh-Durham · Member since 2020 · 24 posts · 30 votes
4y
I agree 100% with @Carlos Garcia, the monthly cash flow is low. Perhaps double check your numbers and total expenses and consider managing the property yourself as @Courtney Radmall mentioned to maximize your return. I know a lot of people who work demanding full time jobs and use automated tools to assist in managing their STR. It could be a good option.
Santa Rosa Beach, FL · Member since 2018 · 81 posts · 67 votes
4y
@Candice Bernard have you thought about managing it remotely? Your profit margin can be so much more if you do that. We have a 4 bedroom and this year when we raised our nightly rate we are now making $700-$2000 profit each month (not including December which is closer to $3000 profit).
Kissimmee is a saturated market so people think they have to lower their nightly rates but we have done the opposite. We make our unit stand out from the average rental and charge more. Feel free to PM with questions.
Santa Rosa Beach, FL · Member since 2018 · 81 posts · 67 votes
4y
@Billy-Dee Greenwood I 100% agree with you. I actually homeschool my children and don’t have much spare time and I honestly only spend 30-60 minutes a week doing things with my Airbnb. It took a lot of work up front but everything is pretty much automated now. Its great.
Thanks but how can you possibly make more with long term rental? My mortgage and HOA alone would be close to $1800. If I charged that in rent I would barely break even...
Property Manager · Orlando Kissimmee, Daytona Beach & Cocoa Beach · Member since 2016 · 331 posts · 166 votes
4y
Sure. We are discussing a townhouse. Here is what I gathered from the investors or my own observations/ experience 1) owners don’t pay utilities, sales and tourist taxes, routine maintenance (almost every check out, a touch up paint is needed as guests leave wall marks with their luggage; just a basic example), inventory ( sheets, towels, furniture, and etc) 2) in long term, tenants cover lots of maintenance; so another saving. 3) in long term, occupancy rate is higher and more stable. 4) long term rental rates are high today. 5) townhouses or condos have to compete with the hotels, and Orlando has more of these than any other city probably in the world. And quality will never be the same as hotels/ resorts would offer. Because of that, nightly rate is lower and occupancy rate is not the best. It’s clear that tourists like to stay in properties that have provide pools (something that hotels don’t offer) 6) insurances are less expensive in long term 7) less licenses needed. 8) less admin work is required 9) long term has less headache. However, it depends on how you like to handle the whole rental situation. Even if you manage bookings yourself, you still need to be there for the guests. Takes time and special type personality. And you need to pay someone on site who can inspect property, manage inventory, and etc.
Also, I see that people who run some vacation rentals (again, we talk about condos, they use the property themselves time to time. This is a benefit they enjoy and this is why many keep renting it short term. Once they stop using it, often they shift to long term or sell.
Hopefully, it helps.
PS! Please note that I personally own long terms and short term rentals. So, I am absolutely not against vacation rentals. Every property/ community is different. It’s important to run an analysis and study all financial reports statements/tax return schedules.
Real Estate Agent · Orlando, FL · Member since 2019 · 25 posts · 7 votes
4y
@Valentina Naumenko I completely agree with you. Maybe to be profitable you need to own at least a 4 bedroom place with a private pool? Anything smaller probably just may break even at best? What are your thoughts?
Rental Property Investor · Naples Fl · Member since 2015 · 10 posts · 6 votes
4y
@Valentina Naumenko you make several great points. How about HOA fees? better for her to invest in property w amenities but high HOA fees or opt for No HOA fees & keep expenses under control
Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
4y
Hard pass. Spread is way to low. Wear and tear on STR's is out of sight. Too many unforeseen expenses the greatest of which are the HOA fees. They rocket to the stratosphere like an Elon Musk space ship in no time.
Realtor · Central Florida-Orlando · Member since 2014 · 1k+ posts · 892 votes
4y
@Candice Bernard for you first unit and budget, that sounds like a good start. I agree with both sides of the analysis that others have pointed out. I don't feel that is a great area/community for long term renters myself. It is not geared for that and you will likely have lots of turnover and not quality tenants. Use the unit as a stepping stone to learn the STR business and how to manage it, the tools that are available to you so that you can ween yourself away from a property manager down the road (if you want to and if you have the time to).
I advise starting with a property manager that has proven results and can help you learn. If it does well and it makes the $500/mo and the unit will likely appreciate in the next couple of years, sell it and move up to something bigger that will provide better margins. Cash flowing properties are hard enough to come by in the LTR game right now due to the high cost of entry. The rental market is fantastic, but most are getting appreciation rather than really good cash flow.