Buying A Vacation Home In Orlando

So, you want to buy a vacation home in Orlando . . .

When I tell people that I’m a real estate agent specializing in Orlando and Florida vacation properties they often pause for a sec and say “Oh, you sell timeshares, right?” Well, the answer to that question is an emphatic “NO.” While I have nothing against time share companies or the people who sell them, comparing a vacation property to a time share is like comparing a moped scooter to a full-blown custom chopper. Sure, they both have two wheels, but the similarities pretty much end there.

In a vibrant, beautiful tourist destination city such as Orlando, owning a vacation property can be a wonderful experience provided that you have purchased the right property in the right location for the right price and it’s being managed, market and maintained in the right way. So, how do you know what’s the right this or that? Well, the first thing to do is find a good realtor who’s knowledgeable and experienced in all aspects of the vacation property industry. That’s correct, I called it an industry because owning a vacation property is a business and successful owners treat it as such. In this article I will be detailing some of the things I feel is important for buyers to know and understand when considering the purchase of a vacation property:

PROFIT

One of the biggest misconceptions about owning a vacation property is that you can make a fortune renting it our while still having the ability to use it for free whenever you want. Unfortunately, this myth is perpetrated by many unscrupulous salespeople and real estate agents who are only interested in making the sale and don’t care what they have to say to make that happen. The reality is that most vacation properties do not generate enough income to cover all the expenses associated with their ownership, management, marketing and maintenance. This can be true especially true for properties that are financed and mortgaged.

LOCATION, LOCATION, LOCATION

Orlando consistently ranks as one of the world’s top tourist destinations year after year. In 2018 over 75 million tourists visited Orlando, which represented a 4.2% increase over the previous year. The main reason they come of course is our amazing theme parks including Walt Disney World Epcot, Animal Kingdom, Hollywood Studios, Magic Kingdom, Universal Studios, Islands of Adventure, SeaWorld, Discovery Cove along with dozens of others.

When considering locations, it’s a given that the closer the property is to the theme parks the more desirable it will be for tourists. While this might allow the property to be rented at a higher rate than others that aren’t as conveniently located, it probably means the property will be more expensive to purchase as well.

NEW CONSTRUCTION VS EXISTING

The idea of an owner renting out their property to vacationers is not a new concept. In the beginning, most of the homes were your typical 3- or 4-bedroom single family home or townhouse capable of sleeping up to as many as 6-8 guests. They often came with few or no amenities, but they did, and still do, provide a price friendly alternative to booking multiple hotel rooms. Jump forward to today and the vacation properties available have expanded exponentially as entire communities are being developed specifically for vacation property owners and their guests. These communities often feature both town houses and single-family homes that can have as many as 14 bedrooms and 12 bedrooms. Some builders such as Pulte  are even taking this concept to a higher level by incorporating theme park and resort style amenities into the communities that include lazy rivers, multi-story water slides, movie theatres, recreational facilities, recreational facilities, spas and marketplaces.

NEW CONSTRUCTION

Purchasing a vacation property in one of these newer, resort style communities doesn’t come cheap. The initial purchase prices can range anywhere from the mid $300’s to over $1M and that’s just the beginning. Depending on your taste, it normally costs an average of $10K times the number of bedrooms to properly furnish and outfit a vacation property with all the creature comforts your guests will demand. So, if you’re purchasing a new 7-bedroom house, you should expect to pay an additional $60K - $80K to make it a true vacation property.

HOA

You should take the time to thoroughly read and understand the rules and covenants of the HOA or Homeowner’s Association. The rules and regulations for vacation communities can be much more restrictive than a residential community, so knowing the details can go along way in avoiding any unpleasant surprises.

CDD

In addition to HOA fees, many builders have what is called CDD or Community Development District fees, which helps cover their cost for the infrastructure improvements such as roads, sidewalks, sewer, school, community amenities, etc. The builder finances this part of the development via a bond, the cost of which is split amongst the owners until it is paid off, usually in 25-30 years.

MARKETING, MANAGING & MAINTAINING

Unless you are able and willing to do everything that’s needed yourself, it will be necessary to hire a company or companies to assist you with the marketing, managing and maintenance of the property. Most property management companies can provide you with a turn-key package that includes everything required. Some even have what’s called “fixed income” plans as opposed to everything with the property being “performance based”. Many companies will allow the owner to separately market and book the property themselves without having to pay a commission, which can greatly increase the properties ROI. (Stay tuned for a future article that’s dedicated to detailing the pros and cons of vacation property management).

Other things to be aware of is that the electricity and water bills will be much higher than usual since guests love to crank down the t-stat and take long hot showers. Furniture, bedding and housewares will have to be replaced on a regular basis as they become worn or broken and the property will need to be spruced up and updated on a more periodic basis so that it remain fresh and inviting to guests.

EXISTING HOMES

While it’s easy to fall in love with all the bright, shiny new vacation homes being built around the theme parks, an existing vacation property that was built a few years ago could be a fantastic option worth considering. These homes have often had the opportunity to develop a dependable rental history with repeat customers and positive reviews, so you can step right into a proven property and hit the ground running. While they might not have all the glitter and pizzazz of a newly constructed property, they can be a good way to get into the industry at a much lower price point while still living the dream of vacation property ownership.

GETTING STARTED

So, where should you start? Well, with a Realtor of course! An experienced, knowledgeable Realtor will be able to provide you with invaluable advice while helping you navigate the myriad of things you need to consider when purchasing a new or existing vacation property. Just a few of the things your Realtor should be able to help you with is understanding the pros and cons of the various builders and developers, communities, property managers, furniture companies, tax reporting obligations, ROI, HOA and CDD along with the dozens of other things that will need to be addressed along the way.

And don’t fall for the other myth that if you are purchasing a new construction property from a builder that you can get a better deal without a Realtor getting paid a commission. There are countless statistics and sales records that prove this is simply not true. The builder’s salesperson, regardless of how nice they are, is still working for the builder, so why not take advantage of having an experienced Realtor working for you?

If you would like more information about selling your house, buying your next home or investing in Orlando and Central Florida’s amazing real estate market, please contact me - Brian Hayes, Realtor®