Should I enter the Vacation Home market now? (Orlando: mortgage, real estate)

[Teom]

We are a family of 2 adults + 3 childern (6, 12 and 14) considering buying a vaction home in your favorite vacation state of Florida.

After considering different options it looks like the Orlando/close to Disney is the best for a home used for vaction by us 4-5 weeks a year and as a rental the rest.

We have come across a great area being built at the Paradise Palms, and are considering a 5BR Townhouse with private small pool + resort pool. They seem to sell for ~ $340K with HOA at $435/month.

Looking at the other "resorts" in the area (like Windsor Hills etc) i am trying to get a feel for the price if Paradise Palms. Is it a good deal or not?

I would really love to get your opinion on:

1. THe market ? ....should I do my vacations in Disney Hotels another year and come back in 2009/2010 to buy ?

2. Buying new vs. a 2-3 year old resort.

3. Will they actually finish the resort ? ...or could I be stuck with doubling the HOA because theres only half of the houses built to cover the pool, clubhouse etc.

4. Will I be able to cover the montly costs (excluing mortage) with the annual rental income ?

Regards,
T

[GregTraub]

1. Who knows. The Vacation short term rental market moves very differently than the normal housing market. Alot more sensitive to economic conditions as a really bad economy will keep people from going on as many vacations, a mild economic downturn, and people may just vacation locally instead of traveling abroad (good for disney), and of course a good economy is always good. These will all effect the rental vacancy you may see, which directly correlates to what people may pay for these investments.

2. Newer is usually bigger and better, but you usually have to pay for it, and you always run the risk the developer goes belly up. Just have to do a little homework on the developer.

3. See #2

4. This depends on the particular resort, as your expenses will be different at each, and the demand for your unit for rentals will be different. STR property isn't always consistant as well. You will usually be able to cover your expenses minus mortgage, but know there may be some months that you may not depending on the property you select.

You will definitely want to choose a professional to help you see all the options in the STR market. For 340K there are many placed to choose from. And you always have to ask each community what the HOA dues cover. Some communities may include the management of your property in there, some not. You also have to know whether they charge booking fee's cleaning fee's etc. etc. etc.

[americannurse7184]

It is NOT a good time to buy a vacacation home unless you plan on living in it your self,,,Your chances of renting it out while you are not in it ,,ARE NOT GOOD,,The market in Orlando and close to disney / davenport area where a lot of VH located,,HAVE flooded the market,,GEt out orlandosentinel paper,,Keep your eye posted,,Brits have a lot of vacation homes in the area,,NOONe can rent there places,,when they are not in them,,I see tons of vacation home rental ads every day in the orlando paper,,They are renting them furnished for 800 to 1000 bucks a months furnished,,,I have a friend who owns a 3 bedroom TH,,SHe wants 2700 during june july,,if you stay a month,,1700 a week,, during peak,,HER place stays emplty,,It;s been like that for 2 years,,She even dropped her monthly rent off season to 1700 month with all utlities,,SHe can not get any one to rent,,EVERY one that lives local wants cheap!!!!We have a VERY high spanish community in orlando,,THe white peopl are the minorities here,,They all work the parks,, and have to work 2 to 3 jobs to make a living,,Around disney, kissimme area,,davenport( that area has no pulic transportation) People are broke,,So if you do not need to make money off your vacation home when you are not in it,,,,I say go for it,,WHY not buy?They are dirt cheap to buy in the area now,,But if you are expecting make any money or an investment ,,soley,,I say do not buy a vacation home unless you can afford one,,You can not count on steady income,,May ,june, jylu and august,,The british holiday over here,,,They stay any where from 2 weeks to a month at a time,,Now if you can build a web sight or find a uk web sight and advertise on that side of the water,,Geared to British ,,You might have a chance,,Dont trust these companies they promise you a profit,,to manage your home and rent them,,They are full of it,They only want your money and for you to sign the contact,,GOODLUCK

[Teom]

This is what I hear from most people: Do not buy to let....the market in Orlando has too much vacancy.....

So this leaves me with the question of increase in property value to make this a good investment. In my calculation - if 30% rental is a fair assumtion - I would need a 5% increase in the property value to give me a return on money in excess of what I could get risk free in a bankaccount.

To me that does not sound very realistically for the next year or two......

[cfIfan]

Im not sure where that person got her figures from but the clients i have assisted have had no problem renting their properties. You need to go into this being realistic and knowing that your property isnt going to be rented 52 weeks of the year and not all of your expenses will be covered but most management fees, hoas taxes and a portion of the mortgage are likely to covered. In terms of monthly fees that person was talking about, i think she is confising different markets. The property may be in a short term rental area, but if you are dealing in the tourist market which most people do, and are dealing with a reputable vacation management company, property rents wont be marketed monthly, but on a weekly basis. If they are marketing in the sentinel then to be quite honest you are not likely to get the same response as you will by using a reputable management company who advertises nationally and internationally. Those people will not rent their properties simply because they dont want the expense of engaging a management company which if you are serious you need to do.

Also you need to consider that investing in real estate is a long term investment. If this is something you want to do for a period of 3 years then forget it. The majority of foreign investors purchase here because they love vacationing here and want to have a home away from home when they come here. And in my experience they hold on to the property for over 6 years which is what you should be looking at. In 6 years time you could potentially make a sizeable return on your investment. If you are looking at 2-3 years forget it because you will simply find yourself in the same situation as those who were flipping properties.

[GregTraub]

CFIfan knows what he's talking about. I'm sure there are some short term vacation neighborhoods that don't rent out, not all are made equal. But go to any vacation rental site (google Orlando Vacation Rental) and almost all of them have an availability calendar, you can compare neighborhood vacancy rates there and probably have enough info to figure out what your yearly gross may be.

[Teom]

I agree - and I definately would go with a management company. I guess what would be the best option is a management company that does marketing on most of the larger rental sites + I do local marketing in my country?

The way I am hoping this would work is a rental of $140/night or $900/week for the 5 BR and an occupancy of minimum 40% (> 20 weeks of rental). Does that sound realistic?

[cfIfan]

Well it depends on what facilities the property and the community have to offer, location, and the company you are using to market the property, but it may be realistic if you have all the right things in place. I recommend having a realtor in place to assist you as it costs you nothing for our services.