Are you thinking about buying a second home in Orlando? Investing in real estate can be both exciting and overwhelming. If you choose to rent your property out to holiday guests, that decision adds an element of stress too.
The good news is that the vacation rental market has grown over the past few years, and the prospects for generating rental income have never been better. More and more vacationers are forgoing the traditional hotel stay in favor of renting luxury vacation homes.
Here are a few common mistakes to be aware of so you can minimize your risk while maximizing your profits for your Orlando vacation home.
1. Not Sticking to a Plan and Budget – It’s important to do your homework before you make any offer on a property. Research the area. Decide if you want to buy a home close to Disney, or a championship golf course. Figure out what type of unit will be best for you and your rental guests. The Orlando area has a variety of properties that are available for short-term rental including condos, townhomes and luxury villas. Compare average rental prices in the area. Compare your costs of buying vs. renting in a given location using this tool from Realtor.com. And then ask yourself if a particular property is a good investment.
2. Going it Alone – If this will be your first real estate investment, and your first foray into the rental business, consider partnering with someone who has more experience to learn how the industry works. It’s important to recognize your own strengths and weaknesses and consider how they could affect your investment strategy. Having a partner will help you ensure that no aspect of the real estate transaction is overlooked, and that you don’t appear unprofessional.
3. Hire an Agent that Specializes in Vacation Homes– When you’re ready to start looking at properties, hire an agent that specializes in vacation homes, like Team Donovan. We have become experts at working with absentee owners, buyers and sellers, and can provide guidance on what areas of Orlando offer homes for sale that also allow short-term rentals.
4. Not Keeping Up with the Competition – Since you will be competing with other rental owners and area hotels for guests, it’s important that the property you buy has amenities that will appeal to vacationers. Potential rental guests expect new finishes, and amenities like a swimming pool, hot tub, outdoor grill, etc. Investing in these extra touches can help you attract a steady stream of renters, and allow you to set your rates higher than you otherwise could.
5. Get a Home Inspection – One common mistake home buyers make is not having a property inspected by a trained professional. Even newly built homes can have flaws that aren’t apparent to the naked eye, so make sure you get an inspection done so you’re aware of any safety issues, major or minor defects in the wiring, plumbing, roofing, insulation or structural features of the home.
6. Buying, then Renting “As Is” – Even if a home is structurally sound, it may be worth spending money on cosmetic improvements and finishes such as paint, countertops, crown molding, recessed lighting and stainless steel appliances. The investment you make in these improvements will increase the curb appeal of your property and make it more attractive to potential rental guests.
7. Not Understanding HOA Fees – Some vacation home buyers look for properties in communities that have a lower monthly HOA fee. But a higher HOA fee can have some advantages. For one thing, it can deter buyers who are looking for a permanent home in the vacation home community. If a community starts to attract permanent residents, it may start offering fewer amenities to cut costs, and that will take away the appeal for rental guests. The higher the HOA fee, the more amenities the resort community can offer, which can help you in charging higher rental fees. Higher HOA fees also translate into better maintenance and upkeep of the community, which is definitely appealing to guests.
8. Not Expecting the Unexpected – If your vacation home becomes popular with renters, be aware that damages will happen, in part due to simple wear and tear. Make sure you set your rates high enough to cover repairs. It’s also wise to consider durable products when selecting materials and finishes to keep your maintenance costs down.
Bonus Tip: Vacation home buyers can sometimes get a great deal on a property in the Orlando area by purchasing a short sale or REO property. However, be aware that this process has some risk involved. Talk with your real estate agent so you can be fully prepared.
Contact a Team Donovan agent today at 407-705-2616 for assistance in finding an Orlando vacation home.