Vacation Rental near Orlando

14 Replies

Hello, 

I am going to purchase a vacation rental in the Central Florida (Orlando) area. Compared to other places in US, new construction homes still seem fair priced and I think they could cash flow as a vacation rental. Has anyone had experience with a SFR or Condo as a vacation rental in the Orlando area?

One property I am looking at on the MLS is a 3/2 new construction with pool for $260,000. No HOA, in a subdivision.

My primary goal is to own real estate where my family vacations. Breaking even would be a win in my eyes. 

Could anyone share insight on this type of investing, and/or share a good realtor/property management team to get started. 

I invest in SFR and small MultiFamily in Green Bay/Appleton area and would be happy to help anyone find properties in this great cash flow market.

Thank You,

Jon 

Strick Properties

I am a real estate investor and broker here in Orlando. I looked into this as a business three years ago and considered purchasing SFR's to rent to vacationers. I talked to a number of brokers who specialize in this and they basically told me it is not an investment, it is an expense. You have a lot of foreign buyers who fall in love with Disney and Orlando and purchase second homes here. Most of them will rent them to minimize their cost, but they do not make money or break even. That was three years ago and the pricing has gone up since then. Make sure you are talking to a broker who does not manage these properties to make sure you are getting a honest opinion. Also make sure the county you are considering purchasing in will allow vacation rental owners, because Orange County does not. They even encourage neighbors to turn in illegal vacation rentals owners. Some parts of Osceola County do allow it. Having owned a mountain home that was supposed to break even (lost a bundle) and condo at the beach (that is paid for and just breaks even), I can honestly say that I have gone down this route and it makes more sense financially to purchase a great cash flowing property in your area and use the cash flow to rent a vacation home from one of the rental companies. You can rent a really nice one for less than it would cost to own it. Plus you would not have to worry about hurricanes like the one that is approaching this weekend. Insurance is expensive in Florida so make sure you get an actual quote to run your numbers.

That being said, my wife would never let me sell our beach condo so it is a lifestyle thing.  You may have to take off your investor lenses to make it really work.  I hope I did not burst your bubble. I just thought you might want an opinion from someone who has traveled a similar path. Good luck.

@Jon S Strick A timeshare might be a better choice for what you want...a place to go on vacation.  There are too many things that can go wrong with what you are considering doing.  What's the worst that can happen?  You lose a ton of money and your wife divorces you.

@James Fitzsimmons You nailed it. The 600 lb gorilla is Disney. Rather than a SFH which will be more work and $$, look into a condo close to Disney with on site management. There are a slew of them. Might be a break even.

Or... Make your $$ at home and buy into the Disney Vacation Club. I would have if I were in my 30s. Long term it's a quality deal that gives you prepaid time to places all over the world and you can leave it to the kids. I wouldn't touch any other timeshare.

@Jon S Strick The best vacation rental properties in Orlando (best rent rate and lowest vacancy) are in the communities designed for vacation rental and provide resort-like amenities to your renters. Also make sure you find some way to differentiate the property - otherwise you're just another hotel room and the lowest price always wins. 

It sounds like you have your expectations set correctly. Breaking even is a win if you have financing. 

The "make your money and home and buy a Disney timeshare" is good advice. But I would amend that to just be, make your money at what you are best at and stay in a hotel of your choice whenever and wherever you want...

If you love real estate and taking care of your customers, then maybe a STR will work for you. It is def not for everyone.

Easy to do wrong. A good amount of work to do right. 

Hi Jon, 

I'm from the Green Bay/Appleton area and own two vacation rentals by Disney. I have a lot of things I can share with you about our experience there. We moved to FL now and property manage in FL so I can offer you some insights. We've been able to profit but there were some things that I was surprised about. Send me a message if you'd like to chat. 

Thank you to all that contributed to the thread and provided information. Once again, BP proves to be the best place learn about REI. I feel this was a good start to our journey to find a vacation property.

P.I.T.I on 260,000 with 20% down would be around $1430 on a 25 year 5/1 at 5%. 

Should I assume 30-40% of gross rents for property management and turn over? 

If so, $2500/mo or $120/night at 70% occupancy would be breaking even. 

Does this seem attainable?

Two areas I was looking at were Davenport and West of Kissimmee about 5-10 miles. 

Appreciate the insight. 

Jon


 

Hi Jon,

The closer you are to Disney and the more amenities you offer the higher your occupancy rate will be. I would recommend a condo Hotel. They are the most turnkey and get the best return. If you want SFH I would look at Story Lake. It's one of my favorites right now. In a hotel system, a70% occupancy rate is probably low. I have been dealing with these properties since 2005 and im happy to guide you any way I can.

I think your 40% of gross is close/low once you include HOA, and don't forget your county tourist dev tax another 5 or 6%.

Some people price rents high and accept low occupancy. Some people price low and try to book out. Unfortunately trial and error is the best prescription I have found for finding the balance. No easy answers ;)

@Jon S Strick , here is a real story that might help you.

Purchased a brand new 2 bed 2 bath condo hotel very close to Disney when they opened in 2017. Purchased for 290k, 25% down at 5.25% at 5/1 ARM. Financing is very hard for condo hotels. First lender declined. Another community bank approved finally. Entered into a 2 year leaseback at 8% of the purchase price. Monthly payments covered mortgage and tax and left me with $100 cash flow! Builder waived HOA $530/mo during the lease back period. Hence the positive cash flow! Builder developed the property as a luxury resort with rides, pools etc. with excellent guest ratings on bookings.com, Expedia etc. They also gave 2 weeks free stay per year during the lease back period.

My lease back period ended now. My first option is to sign a rental agreement with the in-house operator at a fee of 45% plus HOA $530 plus utility expenses. This will leave me with a negative cash flow of $1200 per month on average! I need to give a 1 year notice to exit this arrangement.! My second option is to go with an independent property manager. Currently researching on this option, which might be the only option left.

Good luck with your plans.

Originally posted by @Jon S Strick :

Thank you to all that contributed to the thread and provided information. Once again, BP proves to be the best place learn about REI. I feel this was a good start to our journey to find a vacation property.

P.I.T.I on 260,000 with 20% down would be around $1430 on a 25 year 5/1 at 5%. 

Should I assume 30-40% of gross rents for property management and turn over? 

If so, $2500/mo or $120/night at 70% occupancy would be breaking even. 

Does this seem attainable?

Two areas I was looking at were Davenport and West of Kissimmee about 5-10 miles. 

Appreciate the insight. 

Jon


 

 Wanted to follow up. Where did you end up investing? I've been looking into those same areas and in 2021 it seems prices are a little to high to cashflow positive. I'm finding most homes for 280-300k.