Hello everyone, I am VERY new to real estate investment, and tend to be very conservative when it comes to any investing but I am very interested in real estate and have the capital to invest. I live in CT but would like to enter the STR game and of the places that are hot I am most interested in Orlando -- I know the area and find myself already down there multiple times per year.
Since I would be remote, I am likely going to work with a management company (at least year one) so hope to have booking/cleaning/maintenance taken care of by the company. Since I am not local I am trying to optimize my strategy for looking into and securing a property. I have spent a few weeks on Realtor, AirBNB, and other sites trying to compare costs with the approximate rent I could expect nightly.
With my conservative nature I was a bit hesitant to move forward with anything yet -- I am seeing a lot of condos in nice areas with amenities (saving me having to get a property with a pool) that are in the $150-$200k price range. I haven't found the exact neighborhoods on on AirBNB, but I am seeing a lot of properties being rented for $60/night. If I assume a 50% occupancy rate, that would be $900/month less the 20% management fee would net me $720/month, with the mortgage and utilities and HOA coming in closer to $1400/month.
I wanted to reach out to see if I am a) looking in the wrong areas of Orlando when evaluating $60/night on an AirBNB rental, b) spending too much on a condo to come in at 1400/month and expecting to turn a profit in Orlando, or c) looking into a condo when I should be looking at a single family home to turn a profit?
Thank you in advance for any guidance or suggestions!
Mike, I live near Kissimmee and also recently looked into STRs there. I am also similarly cautious and assess everything related to real estate investing against the much easier alternative of leaving that money parked in mutual funds/index funds. My conclusion was similar to yours in that I just don't think Disney area vacation rentals are a great investment right now. I have looked at the financials of several properties and also toured some places with a Realtor, based on recommendations from a property manager who's been in the business over 20 years. The problem is that the HOA fees and hidden additional fees tacked on by the developments are so high that it's hard to make any money. Yet you need to buy in these specific developments (all relatively close to Disney) with lots of amenities because that's what vacation renters expect. Occupancy is also quite seasonal and tied to school holidays. Some of the properties I looked at were netting $40 a month-or losing money. And I did not see any with 50% occupancy rates. The other wrinkle is that this property manager told me that you need to get a place with its own pool-as renters expect that. (It's a little splash pool.) And the place should also be updated-e.g. granite or better counter tops in the kitchens, bathrooms, etc. All of that adds to the cost. The property manager I spoke to was Stephen Behlor. The Realtor I worked with was Raquel Ells.
@Holly Kurtz Thank you for the reply. I was not considering a place with its own pool due to the added maintenance, but I do understand that is what people expect.
I did see some properties that looked very updated that I felt I could add some amenities to in order to attract renters, but unless I could average over $100 per night with a 50% occupancy rate I just don’t see how I could turn a profit.
Hi Michael, we started the same process of searching about 2 years ago, and now we are finalizing the purchase of a townhouse we thought would be a good one for STR. We've spoke with about 5-10 property management companies and saw at least 30 houses before buying this one.
Your numbers roughly seem accurate, as others said firstly look at HOA+CDD how much will that cost, than electricity is a big bill I've heart too.
On the location, we ended up really like the community called Story Lake. It is in Osceola Parkway, which is the road you take to go to Disney. It takes 10 minutes a day no hayways necessary to go there. It has really good amenities, and they are building it still, so you can find brand new condos and homes.
They have a bunch of condos, I was pretty attempted to get one, but ended up investing more in a TH. I probably will get a condo as a second if this turns a profit this year.
Now, on being coservative, I think I am in the other side of the scale here. I am not super aggressive, but after crunching the numbers multiple times I realized the worst this can give me is 2%, which is inflation rate. If that turns to be giving me anything like that or lower for 2 years I will sell it an move on. But until then, I will never know.
In regards the property management company, you can find ones that charge 15%. And occupancy rate at Story Lake should be at least 60%.
Hope it helps
@Arthur Neves Thanks, Arthur. I haven’t yet found a management company for 10%, at least one that handles the coordination of cleaning and maintenance as well.
Just out of curiosity, your numbers assume a 60% occupancy, 10% management fee, and a nightly rate over $100?
Are there any concerns about the condo associations in those areas restricting or banning Airbnb / STRs? That's something else you have to watch out for! You could buy a place hoping to STR and then the condo association bans it after the neighbors complain. It's happened in many other areas. That's another advantage of a free-standing home (so long as it's not in a neighborhood with an HOA which could also ban or restrict it)
@Eric P. Hi Eric, I definitely was keeping my eye out for that. I read a bunch of stories where this happened to investors!
@Michael Stokes There are more expenses with STRs than you probably expect. You have to pay to have it cleaned and restocked between occupancies. I don't think the management company is going to foot that bill.
There is much more to it than just buying a property, renting it out as and STR, and having money deposited in your bank. I have 23 STRs, 82 beds total.
Try running an STR in your geographic area first, within 30 minutes driving distance, to get your feet wet.
Something that rents for $60/night isn't worth bothering with in my opinion, especially at 50% occupancy. My cabins in the Smokies rent average more than $100/night and are in the price range you're looking at, with >85% occupancy.
If the returns are so small, go for an LTR (not necessarily in Orlando/Kissimmee) that'll return the same or higher with a LOT less hassle/expense/risk. STRs are only worth it if you can return significantly more than an LTR.
@Julie McCoy Do you have one of the luxury cabins out there? I was reading that those tend to draw most of the occupants but they also go for more than I am looking to spend for my first time investing. Did you have any trouble finding a cleaning/management company out there?
@Michael Stokes No, I don't have luxury cabins, I aim for middle-of-the-road while still being nice (solidly B-class, to use LTR parlance), and my target demographic is couples, so mine are all small. I don't feel that it's accurate to say the luxury cabins draw the most occupants - occupancy rates in the area tend to be high across the board, but I'm not convinced the returns you get from luxury cabins justify the higher capital investment. I'm curious where you read that, I'd like to investigate more.
I self-manage, which - with a solid housekeeping team - is not difficult, and well worth the effort. Local property managers charge 30-40%, and anyone doing it for less is probably cheaper for a reason. Great housekeepers take some looking, and the really good ones are really busy, but they definitely exist (I'm incredibly pleased with mine) and are worth the hunt.
@Julie McCoy I am glad to hear that about the luxury cabins, I read it on another forum where they didn’t cite any factual data, so I have been trying to prove/disprove it as well. They also commented that without some things like gaming and a heated pool or hot tub that it was very tough to fill vacancies.
I am happy to hear that you have found at least some of these things to not be true. Thanks for the response and info!
@Michael Stokes Well, a hot tub is definitely an expected item, but otherwise that is frankly nonsense. I'm not sure what they're doing to get results like that, but that's definitely not reflective of my experience with my three cabins (or the experience of anybody I know who invests in the area, and I know quite a few people). All three of mine have hot tubs; one has a pool table; none have pools or community pools. Only one has a view, and it's not a spectacular one. They're all cute and well-kept with newer furniture and within a 10 minute drive from the main drag in Pigeon Forge/Gatlinburg, and while I really like all of them, none of them are vastly more special than a thousand other cabins in the area.
Perhaps the people on the other forum don't do anything to maintain their cabins and as a result they're kind of run down, and cabins like mine appear "luxury" to them, but there are definitely true luxury cabins on the market right now (as you noticed) so I can only guess as to why they aren't seeing similar success.
@Julie McCoy This is very helpful information! Does your cleaning company also maintain your hot tub between visits? Since I would be remote for a vacation rental I wanted to minimize any chance of disruption and the potential for bad reviews with things like maintenance and housekeeping.
@Michael Stokes They do! They dump/refill it between guests and handle the chemicals, etc. I can't guarantee all housekeepers provide this service, but if you can find one that does, it's so worth it.
I will say, most cabins are on well water, which can be tricky - the water can be very mineral-y and, depending on the well and conditions, can have an odor (sulfur) or some color. Sometimes if it's been raining a lot, the water at one of my cabins will discolor; I've found the best policy is just to tell the guests what's going on, and assure them the water is clean/safe for the hot tub/bathing. It's rare, but when it happens my guests have been very understanding. That said, it's a good idea to get the water tested before purchasing, so you can anticipate if a filtration system is needed (or, rarely, if it looks too problematic to deal with).
@Michael Stokes , I have 5 properties right in that area and have been doing STRs for about 4 years in that area. I plan to buy more and hope to have 20 or 30 someday.
I would be happy to share some of my experiences and financials with you if you would like to PM me. There are a lot of factors that go into making money down there. I think the absolute biggest one is being willing to manage your own bookings and having a management company be your boots on the ground. The big companies that do the bookings for you take way to much of a cut and have little incentive to book your place over others or to treat your guests they way they need to be treated to come back. I am a firm believer that repeat guests are one of the keys to this business.
Shoot me a PM with your email and I will do what I can.
Thanks a lot,
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