Short Term or Long Term Rental In Orlando Florida

9 Replies

Hello Everyone,

I am a first time Home Buyer/ Investor looking to purchase a home in the Orlando Area. I was pre-approved for a conventional mortgage with a 3 % down payment 2.75 Interest Rate. My Budget is 200k for this property. I was told by my lender that this has to be my primary residence for some time.  I've looked in Clermont, Kissimmee, and davenport. I've used the calculators BP has provided and most of these Homes don't cashflow. If I go by the 1% percent rule a home that cost 200k would have to gross 2k in rent, Homes I've seen typically rent for 1450 - 1550 max. 

This leads me to explore Short Term Rentals. I checked the website AirDna and most homes that rent well offer a pool as an amenity.  These homes are 30-50k over my budget. Should I stay within my Budget or pay more for potential earnings? I'm looking for any Knowledge that can help me make a sound decision thanks.

Hi @Frank Vanegas !  Do NOT buy more house than you can comfortably buy for the sake of potential future revenue.    

That said, if you can comfortably handle the additional down payment and monthly payment consequences of a higher purchase price (and the lenders agree), and you have a few different good options with the property then it could be a wise investment.

By a few good options . . . you want to have some exit strategy other than STR that will work in case the something happens to make STR uncouth in your area. If it does and you can't rent your house traditionally without covering $1,000 a month in costs, and you can't sell because the value isn't there, then you're in a pretty frustrating situation. However, if you can STR the home at a higher profit, or LTR it at a lower profit then you've got the makings of flexibility :)

Hi @Frank Vanegas . I live in Clermont and depending on where you are looking $200 will be pretty tough to find at all. Rents for long term have been steadily increasing for years here, but you're right, they do top out at some point. Cash flowing in the type of market we have is extremely difficult, especially with such a small down payment. 

I don't agree with your lender that you have to live in the property if you are using a conventional loan, but depends on what product they are giving you, maybe a work around for that.

I would not purchase based solely on what income you can derive from STR. That market is recovering, but with covid still taking a stranglehold on the Country and tourism, you need to have the numbers work as a long term rental also. We are experiencing fantastic appreciation here, but most investors want cash flow or both and this isn't the right market for that if you are new(er).

I am a full time Realtor® and investor in this area so I would be happy to help navigate this with you if you need some help. Reach out anytime.

Hey @Shawn McCormick thank you for your help. I will make sure the numbers work for a long term rental also. I do hear a lot of good things about Clermont, and the developments that are going on. I don’t agree with my lender either because It’s a conventional loan. I will get more clarification about this loan program. I will be sure to reach out thanks.

Originally posted by @Frank Vanegas :

Hello Everyone,

I am a first time Home Buyer/ Investor looking to purchase a home in the Orlando Area. I was pre-approved for a conventional mortgage with a 3 % down payment 2.75 Interest Rate. My Budget is 200k for this property. I was told by my lender that this has to be my primary residence for some time.  I've looked in Clermont, Kissimmee, and davenport. I've used the calculators BP has provided and most of these Homes don't cashflow. If I go by the 1% percent rule a home that cost 200k would have to gross 2k in rent, Homes I've seen typically rent for 1450 - 1550 max. 

This leads me to explore Short Term Rentals. I checked the website AirDna and most homes that rent well offer a pool as an amenity.  These homes are 30-50k over my budget. Should I stay within my Budget or pay more for potential earnings? I'm looking for any Knowledge that can help me make a sound decision thanks.

 Frank if you are coming into the Florida Market, I would try for a long term rental first and get your feet wet. A lot of the data you are looking at in terms of what homes rent for down here are not accurate btw. I have a client right now that we are buying a house for right up the street from where I live and invest. The old company was renting it out for $1,500. We will be buying it, giving it a good rehab, and then renting out for $2,100 or so. She is using a conventional loan and her mortgage will be $1,600ish so she is getting a solid return.

Hi Frank - your lender is likely requiring the primary residence clause as part of the 3% down loan program.  For investment properties on a conventional loan, the minimum down payment is typically 20%.  For second/vacation homes, the required minimum is typically 10% down with no primary residence requirement.  I work with a mortgage broker with connections to a variety of lenders so if you want me to look into any options for you, feel free to PM.

Be very careful when it comes to vacation homes you need to be very experienced to be able to calculate the exact net cash flow. there is so many expenses that you might not understand, in other words you need to do your homework before

touching any vacation rentals especially with the pandemic . Second be very careful if you’re planning to tell the lender that you will be occupying the property then rent it, if they find out you’ll have to come up with all the money.

Orlando and kissimmee are very strong markets for long-term rentals ( workforce housing )