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I have seen a shift in the way investment properties are purchased. I have a good number of buyers in the Orlando area buying "villas" (TH with private pool), price range new 235K to 500K, where a 12 month lease to one tenant, the owner would get $2000 to $3500 per month. But they are turning these homes into vaca rentals, much like the beach, getting $5500 - $6000 per month. These communities will many time have an on-site check in agent, stopping short of being called a hotel. There's no daily maid service, only a clean-out between tenants. Some even have shuttle services from the clubhouse to nearby attractions. The rental rate is at least $100 less per night than the attraction hotels, and in some cases, can handle 2 families in one unit, increasing the savings to well over $300 per day. The beauty of the location is near perfect weather 365 days a year, near one of the top tourist attractions in the country. We have found our way on the approved lender list for several major builders that sell to Foreign Nationals.
Are the homes marketed /booked through Airbnb type sites ? What percentage of the revenue is taken for management ? What does the net return /cap rate work out to on these after all expenses ?
In addition to the other suggestions, I would look at mid-size or larger college towns where many of the students move off campus after the first year. It should be within walking distance of the college. While there are a few places near the campus in my town that go unrented the occupancy rate for rentals in the college are is in the mid/high 90's percent. The only downside is that many others have the same thought. House costs are typically higher.
Are the homes marketed /booked through Airbnb type sites ? What percentage of the revenue is taken for management ? What does the net return /cap rate work out to on these after all expenses ?
When I Google this resort area (Bellevida FL) Bookings.com and VRBO floats to the top. This is just one example, I must have a dozen communities working right now. This is one resort:
As a lender, we only care about the collateral and the buyer's qualifications. We don't get into the methods of rental or the buyers net.....we just make certain the buyer can carry the Note and for the income on the subject property, we use the rental rate as determined by the appraisal.
YMMV. But a ton of money is being dropped in these communities.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Originally Posted by SmartMoney
I have seen a shift in the way investment properties are purchased. I have a good number of buyers in the Orlando area buying "villas" (TH with private pool), price range new 235K to 500K, where a 12 month lease to one tenant, the owner would get $2000 to $3500 per month. But they are turning these homes into vaca rentals, much like the beach, getting $5500 - $6000 per month. These communities will many time have an on-site check in agent, stopping short of being called a hotel. There's no daily maid service, only a clean-out between tenants. Some even have shuttle services from the clubhouse to nearby attractions. The rental rate is at least $100 less per night than the attraction hotels, and in some cases, can handle 2 families in one unit, increasing the savings to well over $300 per day. The beauty of the location is near perfect weather 365 days a year, near one of the top tourist attractions in the country. We have found our way on the approved lender list for several major builders that sell to Foreign Nationals.
Looking at the link you provided you can rent a 4 bedroom for 129 a night. Assuming you can rent it out and have it occupied 90 percent of the time that's about 3500 a month, a far cry from the 5500 to 6000 a month.
Having owned beach rentals before myself, management costs more than a yearly tenant would cost when you are turning it over a lot for vacations renters. Plus you have to furnish it and pay utilities whereas a long term tenant would pay these fees. Don,t forget maid service to clean up after each renter leaves.
Plus in the off season your occupancy rate can plummet. But you will still have utilities to pay for.
I'm not saying you can't make more money, but actual numbers would be helpful to see.
Looking at the link you provided you can rent a 4 bedroom for 129 a night. Assuming you can rent it out and have it occupied 90 percent of the time that's about 3500 a month, a far cry from the 5500 to 6000 a month.
Having owned beach rentals before myself, management costs more than a yearly tenant would cost when you are turning it over a lot for vacations renters. Plus you have to furnish it and pay utilities whereas a long term tenant would pay these fees. Don,t forget maid service to clean up after each renter leaves.
Plus in the off season your occupancy rate can plummet. But you will still have utilities to pay for.
I'm not saying you can't make more money, but actual numbers would be helpful to see.
I don't do a rental income analysis based on what they are planning and the pencil we use for their scenario is based on a 12 month lease. Guidelines have not caught up to reality. But I am saying, these guys are buying the places, most sight unseen. Almost all buyers own their primary residence free and clear, have no debt, including their other properties (in the area).
For a vacationer, its a no brainer, 4 adults and 3 children at a mid-level Disney Hotel is $983 per night (lol, excluding taxes) for a two bedroom suite. Or, for $211 a night, this same group can get a 7 room villa, complete with private pool, spa, wifi. And that's not going thru the subdivision property management.
Or said it was a vacation property right off the bat.
Not strictly a vacation property; I plan to live there myself part-time now and full-time later. Could be rented, in the meantime, as either a vacation property (short-term) OR regular rental (full-time). The location would need to be "tourist friendly," though.
To clarify: I'm buying ONE vacation rental property to be managed by onsite vacation rental property managers and to live in part-time when it's not rented out and eventually retire to full-time - or sell - when I'm very elderly and can't travel anymore. Only one.
What and where should it be for best return?
I didn't think this question was that hard...
Hah well your opening question was not at all this specific so you were bound to get a variety of answers. I would have said a large C-class apartment complex in a less expensive gateway city (like Atlanta) in a B neighborhood that you can get cheap and fix up.
Anyway, I'm gonna make a few assumptions:
1) you have good property managers who will move to wherever your location is (otherwise my advice would be to only invest where you will have good management
2) you really don't care where this is (rural resort town to beaches to big city)
And offer the caveat that I obviously don't know all the markets in the entire country nor do I have a crystal ball regarding future municipal regulations of short term rentals
So with all that said, I think FL beach towns are generally a good bet. And not suggesting it is a beach town but I have done really well in Jax and have partners who do well financially but with far more headaches in Palm Beach county. Orlando was great at one time but the numbers have shifted quite a bit (purchase price and competition) so not sure if it is still worthwhile. Indianapolis seems like a pretty solid STR market but I have no personal experience. We have traditional rentals there and have considered switching to STR but have not done so yet. And I have seen several analyses that put Savannah very high on the ROI list for STR, however I would be wary of regulations akin to the battles in Charleston and NOLA.
Not strictly a vacation property; I plan to live there myself part-time now and full-time later. Could be rented, in the meantime, as either a vacation property (short-term) OR regular rental (full-time). The location would need to be "tourist friendly," though.
Where. Do. You. Want. To. Live?
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