One of the biggest disappointments with second home ownership comes from investors making a fairly simple mistake. They think that they can buy a condo in a place like Orlando, stay there whenever they want, and have it rented out the rest of the time to make them some money. Sounds reasonable?
- Orange County (home of downtown Orlando etc.), unlike Osceola County does not permit rental periods of less than 7 months. (Disney and its environs are in Osceola County.)
- If you (or your extended family, friends, colleagues, co-workers etc.) are in the property, it’s costing you rental money;
- If you’re expecting to find vacation renters who happen to want to rent it for the exact periods you and your crew happen not to be there, ask yourself how realistic this is. It’s not a hotel.
So if you’re using up 4-8 weeks a year, expect your income not only to be reduced accordingly, but also expect that you may have some vacancy downtime, since it’s unlikely that someone is going to want to rent out your condo for exactly the vacant two weeks between you leaving Orlando and your Uncle Jack arriving.
Management companies are not miracle workers and you might consider using websites like HomeAway.com or VRBO.com as a means of finding additional occupants yourself. Those investors that take an active part in renting out their homes usually wind up with a much better occupancy rate than those who just leave it to a management company. Even then, try not to expect more than about 80% occupancy overall per year. Most Orlando hotels don’t do better than that.
Of course, if you’ve paid all cash, or put a hefty deposit down on the home then you can still cash flow. And none of the above takes into account the equity appreciation you might be building up on your real estate purchase. Any monthly losses could be fully mitigated by the rise in value on your home. If you’re smart and you’ve purchased while Orlando home prices are very low and / or you’re a foreign investor taking advantage of the weak U.S dollar then you should still come out on top – sometimes even when the place is empty year round. You’ll need to examine your situation carefully to find out what works best for you.
Another option worth consideration is the Orlando condo hotel – since rooms can be rented out on a nightly basis regardless of the county they happen to be in. This can be a more flexible form of ownership for those that like to come and go as they please. The above still applies though. It may or may not cash flow depending on the price you paid, the average nightly room rate, and how you’ve financed it.