Purchasing an investment property near Disney World

[sukhakuli]

We currently own an investment property 6 hours away from where we live. It's a yearly rental that is managed by a company, and it has been rented non-stop for 6 years. It's in an area we used to live, but will never live again. After the rental income, mortgage payment, taxes, insurance, etc etc we break even. Not too bad, but not any fun, either.

I'm seriously thinking about selling it and using the profit to purchase a home near Disney World outright. We could use it to visit the parks, and then rent it out the rest of the year as a vacation rental. We have considered retiring there, but that's a ways off and things change.

One thing to consider, as a family of 6, we have pretty much outgrown the Disney resorts, even the suites because my kids are getting older. Since we're in California, when we go to Disney we tend to go for 2 weeks to make the trip worthwhile. So DVC would be too much money for what we get.

Does anyone own a vacation rental near Disney and what have been your experiences?

 

[FairestOfThemAll37]

It sounds like you know what you're getting into in terms of all the logistics of income/rental properties.

I'm not sure where your current rental property is, has it been rented non-stop for 6 years on a weekly basis or have you had more long term tenants? Vacation properties can be a bit different than long term rental properties.

There's also market saturation to think about. Around Disney, especially in the Kissimee/Davenport area, there are entire neighborhoods of vacation rental homes. You might want to do some research to try to figure out if you'd realistically rent it every week, price to break even, etc.

If you just want a home for you and anything you make get back is gravy then there's little risk.

 

[MouseMomx2]

Also, keep in mind that Orange County does not allow short-term rentals. If you want to do this you should look in Osceola County or elsewhere.

 

[Darcy03231]

We travel to the Orlando area frequently (sometimes as much as 3-4x per year) and always rent a vacation home. I've used various sites over the years, but most commonly VRBO.

While my week may not be available for any one particular home, I've never come across one where their calendar was completely blocked out for the year. Sometimes I've seen them blocked out for the winter months (Jan, Feb, March and even into April), which makes me think either the owners are snowbirds or snowbirds are renting the home for the winter.

As a PP pointed out, there's a lot of competition in the Orlando area. The homes that tend to have fuller rental calendar also tend to be the ones that rent out for $150/night or less, but still look nice. Last rental we did in Kissimmee was $100/night inclusive of all taxes and fees, 4 bedrooms, 2 bathrooms, private pool, 8 miles from WDW, during a moderate season. Nice neighborhood, nice pool, nice furniture, great reviews. We booked it about 8 weeks before our trip for 10 days. When I started looking and put my dates and bedroom requirements in I had a lot to choose from. I had to pick something other than one of the two homes we usually rent as it was a last minute trip and those homes were already booked. I've actually put this home in my top two now.

 

[sukhakuli]

The rental we have now is a long term rental with a year lease. We have enough money in it to buy a home in Florida with cash if we sell it. We're not making any money on it now, so I figured we might as well get something we can use also.

We wouldn't need to rent it out every week of the year to break even. I'll need to do a little more number crunching, but I think the break even point (utilities, rental property management fees, landscaping, taxes etc) will be about, what, 5-10k a year? I'm of the opinion that if it isn't renting we need to lower the price. Our current property probably has the lowest rent in town, but it's also rented constantly, and none of the others are. We can probably at the very least get Christmas, spring break, and a couple of weeks in the summer. At 150/night, that's about 5-10 weeks a year it needs to be rented. It doesn't make or break us either way, though. And we can do our 2 week trips to Disney World without spending 8k on a hotel room like we did last time.

My thought is, to sell our current rental this summer, and then next winter fly out to Florida and find a property then. If we don't, oh well, we'll invest the cash and do some more thinking. We have also thought about getting a place on the Gulf or in the Rockies. I have family who owns a vacation rental in a non-touristy area of the Rockies (I thought it was a horrible idea) but it has been rented every single night for a year for 150 bucks a night. It's just in a normal neighborhood in the middle of nowhere. So I got to thinking, why are we sitting on this house we hate, in an area we hate, when we can do something fun with the money?

 

[TAX GUY]

Just don't forget to talk to your accountant about what the potential gains would be if you sold it.

Good luck. I had thought about a second home in the central Florida area before too, but never acted on it.

 

[sukhakuli]

If we pay taxes, we pay taxes. I'm not really all that wound up about that. It is going to change our yearly taxes since we zero out on our current rental after the fees and mortgage and all that jazz, and I'm not sure that would happen if we pay cash for a new one. But I'm not going in debt for a vacation home. Our current investment property we got stuck with basically, and it has annoyed me ever since, even though renting it has been easy and hasn't cost us anything. I just want all that cash out so we can do something useful with it. I hate that stupid house and that stupid town.

 

[TAX GUY]

If we pay taxes, we pay taxes. I'm not really all that wound up about that. It is going to change our yearly taxes since we zero out on our current rental after the fees and mortgage and all that jazz, and I'm not sure that would happen if we pay cash for a new one. But I'm not going in debt for a vacation home. Our current investment property we got stuck with basically, and it has annoyed me ever since, even though renting it has been easy and hasn't cost us anything. I just want all that cash out so we can do something useful with it. I hate that stupid house and that stupid town.

I'm only suggesting to have your accountant look at first, before you sell. I don't know the history and could be way off base, but you could potentially have little to no cash left depending on the prior history (from a tax perspective). I mention this because we see often enough, clients coming in AFTER something is done and they didn't know they'd have liabilities and end up with far less than what they thought or needed. Better to be proactive than reactive.

 

[GaryDis]

If we pay taxes, we pay taxes. I'm not really all that wound up about that. It is going to change our yearly taxes since we zero out on our current rental after the fees and mortgage and all that jazz, and I'm not sure that would happen if we pay cash for a new one. But I'm not going in debt for a vacation home. Our current investment property we got stuck with basically, and it has annoyed me ever since, even though renting it has been easy and hasn't cost us anything. I just want all that cash out so we can do something useful with it. I hate that stupid house and that stupid town.

Also talk to your tax adviser on whether a Like Kind Exchange (section 1031 exchange) makes sense. You may be able to defer the tax on the gain, though to be honest, I don't know off the top of my head how the personal use would impact this.

 

[TAX GUY]

Also talk to your tax adviser on whether a Like Kind Exchange (section 1031 exchange) makes sense. You may be able to defer the tax on the gain, though to be honest, I don't know off the top of my head how the personal use would impact this.

I was going to mention the like kind exchange until I saw this part in this post...

My thought is, to sell our current rental this summer, and then next winter fly out to Florida and find a property then. If we don't, oh well, we'll invest the cash and do some more thinking.

 

[sukhakuli]

Taxes aside, anyone have an investment property there and have any experiences?