Author Topic: Buying a small condo to rent out as a vacation property?  (Read 3436 times)

greenmimama

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Buying a small condo to rent out as a vacation property?
« on: November 24, 2014, 10:06:08 AM »
We are considering buying a condo type place around Orlando, something we would enjoy for a time each winter, but also something we could rent out quite easily, or so we hope because of it's location.

So who here has rentals that people rent weekly/monthly?

Is it a huge PITA, or are they good streams of income?

My goal would be to get a 2 bedroom or possibly 3 and deck them out with bunk beds and multiple queen beds, so that families could rent them out and get a good deal.

We could pay cash for this and would hope for it to be a better investment than the stock market.

Are we completely naive?

waltworks

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Re: Buying a small condo to rent out as a vacation property?
« Reply #1 on: November 24, 2014, 10:15:29 AM »
5 years ago, your plan would have worked. Now, not so much. What do the places you are looking at cost? What would they rent for? How much of the year would the place be vacant, and how much do management companies in the area charge for vacation rental stuff?

If you look into these questions, I think it's very likely you'll find that it's a money pit. But maybe not. In any case, go do your research and come back with numbers, then we can give you useful advice.

-W

greenmimama

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Re: Buying a small condo to rent out as a vacation property?
« Reply #2 on: November 24, 2014, 01:24:00 PM »
5 years ago, your plan would have worked. Now, not so much. What do the places you are looking at cost? What would they rent for? How much of the year would the place be vacant, and how much do management companies in the area charge for vacation rental stuff?

If you look into these questions, I think it's very likely you'll find that it's a money pit. But maybe not. In any case, go do your research and come back with numbers, then we can give you useful advice.

-W

I think I could easily anser questions 1 and 2 but yikes, I need to get on that number 3, then I will be back, I should have known better than to throw up a half ass question. I just thought it would be easy to say, no way or, it could be good. I'll see what kind of concrete numbers I can come up with.

Eludia

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Re: Buying a small condo to rent out as a vacation property?
« Reply #3 on: November 29, 2014, 11:10:47 PM »
We are thinking about doing something similar.  However, we haven't done the detailed research yet either.  As far as cost and rents, on the face, a lot of condos look good.  But I think the devil is in the details. 

For example, we were just in Orlando, staying at a place for $110/night.  Its a 2 bedroom / 2 bath condo, decent, and near Disney.  It recently sold for $97K and has a $440/mo HOA.  I did some back of the napkin math when we were there, just wondering what kind of return the owner might be getting:

Assuming something like a 75% occupancy, and 25% management costs:

.75 * 30 * 110 = $2475

$2475 * .75 = $1856.25

it looks relatively good.  But then you've got HOA, and lets assume a 20% down mortgage, with insurance, hurricane and flood insurance.  You're probably looking at:

$1856.25 - $440 = $1456.25 (after HOA)

then something like $1000 per month for PITI + Hurricane/Flood leaving:

$1456.25 - $1000 = $456.25 profit per month.

Again, that's assuming 75% occupancy which is likely way too high, and 25% management costs which is probably way too low.  Based on prices for Hotels/Condos in Orlando, there is way too much inventory.  You can get a hotel right now in Kissimmee for under $30 per night.  A nice hotel for under $60 per night.  Plus, I think 25% is probably low for vacation rental property management, but I could be wrong.

I think to make one of these work you need to find a really cheap place that rents frequently.  I think they can be found, but its probably not easy.  The areas around Disney World are way overbuilt.




GrayGhost

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Re: Buying a small condo to rent out as a vacation property?
« Reply #4 on: November 29, 2014, 11:46:44 PM »
One issue with buying nice places to stay in some time, and rent out the rest of the time--especially here in Florida--is that there are way too many other people who are doing the same thing, and they'll undercut the Hell out of you. In other words, if you're looking for an investment vacation rental, you had better get a deal, because there are a ton of people around here who own vacation rentals and rent them out as it pleases them, not to make cash.

SnackDog

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Re: Buying a small condo to rent out as a vacation property?
« Reply #5 on: November 30, 2014, 01:27:20 AM »
Someone has already pointed out you should do your due diligence on all recurring (PITI, HOA, Utilities) and non-recurring (maintenance, annual cleaning) costs. If you get a great deal, minimize costs by taking care of all the business side yourself (AirBNB, VRBO), and have a desirable place that rents well, you might make some money (but probably less than you would in an index fund). It can be done.   But you need to live nearby to take care of renters 24/7.   Otherwise, you will have to rely on an agent which means you will not break even, just defray costs.  If you are dying to own a place and would do it even without the renters, go ahead and defray your costs.  Make sure you understand the liability this brings.  Bear in mind one major repair for the condo association (or a lawsuit) could cost more than all your vacations to Orlando.