I have considered getting into real estate investing for awhile. Been reading forums, doing math in our local area, etc. Nothing terribly exciting, so kept passing.
Was on vacation in Florida, and noticed homes nearby for sale in a short-term rental community. Saw places like this (https://www.redfin.com/FL/Kissimmee/8551-La-Isla-D...) Places nearby for cheaper, but this is a decent example.
Says $370k price. Says in the description $92k gross. Not sure what that means, but lets pretend full occupancy at $252 per day. At 70% occupancy, we'd make ~$65k. That's $5,416 per month. Property taxes are $5,200 annually. HOA is $3,540 annually, which looks like it covers lawn maintenance & a few other things.
Assuming "normal" costs, I think the $5416-$433 (taxes)-$295 (hoa) = $4,688 per month. On a $370k purchase price, that feels... pretty good? What am I missing? Lots of homes in the area cheaper as well.
Just learning how to evaluate potential investments, and would love a heads up on some of the "gotchas" on this type of investment.
Better factor in LOTS of vacancy for STR. Not so much for annual, but income will be MUCH less.
You've done your research. But what does the HOA say about having short term rentals in the community? I'm pretty confident that the HOA prohibits this sort of activity.
@Dave Anderson , it's looking like a winner from my side as well. Just be sure of any HOA limitations regarding rentals and realize you are going to have a large FFE cost to furnish that beast. But, the numbers are lining up to about $10k a year cash flow on my quick high level analysis.
You need to make sure you include Property Management (20%), cable, electricity, gas, sewer, home automation devices, pool maintenance, rental permits, etc. But even so, on my end it's still cash flowing at those prices and based on what Everbooked is showing me for that property.
I would kill for those kinds of numbers in California. :)
Well, the property is in a short term rental community.. the HOA itself caters to short term rentals. Still looking into details, but it doesn't seem like the HOA would be against full rental. Will investigate more :)
It's Kissimmee, it caters to the Disney crowd. :) It doesn't surprise me that communities like this exist - while you should definitely do your due diligence, I agree that the HOA itself is probably designed for vacation rentals. (there are lots of these in East Tennessee where I have a cabin)
The "up to" $92k gross number likely means the house took in $92k in gross rents in some recent 12-month period. That probably also includes cleaning fees, etc. collected - basically, all the money taken in. You'd want to explore if the previous owners had it with a professional management company (and if so, what cut did THEY take? It's probably significant), and if the HOA requires a property to be professionally managed or not. Some will allow self-managing, some have an in-house management team that you are basically required to use.
Ask for the rental history on the property, as far back as they'll give you. That will let you break down what kind of vacancy they were experiencing, and what the nightly rents were (and how they change over the seasons). It's good of you to assume you won't achieve those kinds of numbers right away; it'll probably take some time to get the same traction an established property gets.
See if they can give you a P&L statement too - you want to know what the REAL expenses are, which are going to include housekeeping turnover, utilities (that's a big house and Florida summers are HOT, brace yourself for a big power bill), cable/internet, commercial insurance to cover the STR business activity, possible additional insurance for flood/wind, good of the HOA to cover lawn maintenance, at least.
Even after all that, the numbers might still be sexy - definitely worth looking into!
I am very familiar with Emerald Island and its homes.
Regarding the short term rental concern - Emerald Island is a short term rental community as are a lot of communities in the Disney World area. That will not change.
What I question is the rental income number. I don't see similar size homes in Emerald Island achieving that $92K number especially homes that have not been upgraded like the one linked in your posting. I would ask for sales tax records and expense numbers.
Homes in Emerald Island do have potential to be good investments. However, any home you buy in there will be a resale and will most likely require upgrading. Depending on the size of the home, you will probably need to spend at least $30K on upgrades.
@Dave Anderson chiming in here. I HIGHLY doubt they grossed 92k. Reason being is because they have so many rentals in that area that the competition has pushed rental rates significantly down. I would say around 60k which is still good.
If you are self-managing you will make good income but self-managing the fees will eat away your profit. I have a great realtor in that area if you need more advice. She has sold the majority of the units in Emerald Island/Windsor Hills. I know this because I was going to invest in a unit in Emerald Island but business shifted elsewhere.
And yes, the community promotes short-term rentals. They have zero restrictions on nightly stays.