Question for folks who own vacation rentals

[IluvKingLouis]

My husband and I are thinking about spending a day with a realtor during our next trip to explore the feasability of buying a 2 or 3 bedroom condo for the purpose of owning a rental. We'd also like the perk of being able to use it ourselves when visiting.

Can this pay for itself? Can we expect to earn enough monthly to cover the mortgage? We live in Colorado and would definately need to turn it over to a management company. Venetian Bay Villages looks rather interesting to us, though we've not yet visited it in person.

We're looking in the 150K range, with 10-20% down.

If anyone has an opinion as to whether or not we can make these numbers work I'd love to hear your thoughts on this.

TIA

 

[5mins2disney]

Hmm..not familiar with that resort.

Consider this, the vast majority of homeowners lose $$ on a month-month basis owning a vacation rental home.

You will need a mgmt company to care for the home and the guests. If you let them take care of the bookings, you will lose more money since they 1) take a cut of the bookings as a percentage and 2) won't do as good of a job (generally speaking) quantity / quality wise as you can yourself.

That's the downside, the upside, well, if you're willing to work VERY hard at it you can make it work, depending on a lot of factors I won't get into here.

I would suggest buying 2 books on the topic before you even consider buying a home:
1 - www.howtorentbyowner.com
2 - www.fullybookedrentals.com

(Kind of the industry gold standard reference books!).

Would you have the financial means to carry the property for 6-12 months if bookings don't go as expected? The real estate market isn't exactly good right now...well, it's a good time to buy...but suppose you don't get bookings...go to sell the place, how long could you "carry" it without any income if you had to? We figured we had a year of reserves if need be when we bought our first home last summer, just in case, but of course, that would be a worst case, err, nightmare scenario for us.

One other perk by the way, in case no one's told you...you can write off 2 trips a year to your investment property, including travel, food, rental car, etc., it's like getting a Disney trip at a nice discount a few times a year.

The one thing I didn't realize as a new owner though, was how much work goes into it. I answer dozens (if not 100s!) of emails on a DAILY basis, and you have to be very responsive and on top of it at all times. It's like a mini part time job, and I wouldn't trust a MC to do it as well as we do, no one is going to care about your home and your investment or your guests like you do!! I talk to other owners all of the time who were very dissatisfied with bookings generated by their MCs, then they eventually decide to either do it on their own, or give up and sell. To do it on your own means you need a website, a little know how, some advertising, etc (this is all covered in those 2 books).

Good luck! Oh...if you need a great local realtor to work with in the area who specializes in vacation home resort / rental properties, please PM me. I would suggest you look at more resorts than just the one you mentioned, knowledge is power after all. Take your time, look around, shop wisely, and look for a great deal, they're out there right now!

 

[IluvKingLouis]

Thank you for all that great information. I will PM you about a realtor.

Thanks again!

 

[tednvon]

Hi, great place to ask the question....

check out this thread from a while back...

do your homework on Venetian Bay...insist you talk to at least 5 owners or go to Google and search "venetian bay orlando rentals by owner" and email or call the owners and see if the will talk to you...
there is very little difference in rental rates for 2 and 3 bedroom condos...so keep that in mind...


here is the thread...Ted http://www.disboards.com/showthread.php?t=1550084

 

[IluvKingLouis]

Thanks Ted for posting that link. There's some great info over there. I'm starting to think this may not be the best thing for us to do. The potential for major negative cash flow is very daunting!

 

[tednvon]

Hi again, certainly not trying to rain on the parade, but things are much different now than when we bought in 03 and sold last year.

Condos will not have the pool expense other than through the condo fees for the central pools which is one difference from a home and of course exterior maintainance and roof are usually covered.

If other questions let us know...

All the best...Ted

 

[IluvKingLouis]

Hi Ted,

When you say things are much different do you mean better or worse?

Since we live far away, I would have to go with a condo (I don't want to worry about lawn care or swimming pool). However I did go to VRBO and looked at a lot of the calendars and the condo's were barely rented out, whereas the homes had a much higher occupancy rate (some were still surprisingly skimpy).

I'm financially very conservative and my dh is more of a risk taker. So we will really have to put these numbers under a microscope.

I suppose I don't mind losing a certain amount of $$'s a year in order to own a nice investment property, but I just don't want it to be a money trap.

 

[OlderMan]

Don't forget to factor in rapidly increasing property insurance.

Here in Central FL, many ins co's are not writing new policies, and many are cancelling/non-renewing existing policies. Even those that keep writing policies are applying for HUGE increases with the state.

Just FWIW.......................

 

[MikeKV]

Don't do it. Sorry to seem like I'm also raining on your parade. The link that Ted provided also pursuaded my wife and I not to buy...and that's a good thing. Unless you have a lot of disposable income it really would not be a good decision. I had a long discussion with a financial guru (senior VP at Host Hotels...used to be a part of Marriott) and he also thought it would be a very bad decision.

 

[tednvon]

In answer to the question about what is different now here is my, and only my, opinion:
1. Prices are much higher now for units even with the current down market. (Early 2003/$298,000 for a 7 bedroom 6 bath home with pool. many condos were selling for well under $100,000. The home rented for $250/day and up)
2. There are many many more units for rent today than in 2002/2003
3. Insurance is much higher ($900/year for a 7 bedroom home in 2003!)
4. Taxes are much higher than in 02/03
5. In 02/03 there was not the need for flat panel HGTVs, propane gas heat for spas, huge game rooms, top of the line mattress's, and other amenities that cost a lot of money without much increase in rental prices.
6. On the positive side, there are many more people traveling now to Orlando than in the early 2000's. Many of these folks are looking to rent homes or condos vs. hotels.

So, if, and only if, you would like to retire one day to the Disney area, and the home or condo you buy now will become that home, then maybe the risk is worth the reward for just the right place. Again, my opinion only, we have not seen the bottom of the Florida market by a long shot and when all of these mortgages start to adjust and people cannot pay them, there will be some real deals around. I would not be surprised to see some condos back down around $100,000 or less in the next 2 years.

FYI, We love Disney and the area...we are there 3 months now and this will be our 3rd winter in the area. Spouse even works 1-2 days/week at Disney and loves it...
We spend 3-4 nights a week just wandering in the parks, having dinner and watching new shows. So we are sold on the area and will most likely spend many of our retirement years in the area part time...It has everything we want....warmth, oceans if we want em, lots and lots to do, plenty of good golf, something new at Disney all the time..plenty of high school basketball and baseball games for me to officiate if I want, and great places to eat....
so, we decided to rent rather than buy again...it works well for us...others will need to make their own decision..

And, not to question one's motives, but it does not surprise me that a hotel manager would suggest one not get involved in a business that is a direct competitor!!!

All the best....Ted



All the best....Ted