Kissimmee FL - STR Analysis

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Kissimmee FL - STR Analysis

Michael Stokes
Rental Property Investor · Winter Garden, FL · Member since 2013 · 46 posts · 22 votes

Hello everyone, I am VERY new to real estate investment, and tend to be very conservative when it comes to any investing but I am very interested in real estate and have the capital to invest. I live in CT but would like to enter the STR game and of the places that are hot I am most interested in Orlando -- I know the area and find myself already down there multiple times per year.

Since I would be remote, I am likely going to work with a management company (at least year one) so hope to have booking/cleaning/maintenance taken care of by the company.  Since I am not local I am trying to optimize my strategy for looking into and securing a property.  I have spent a few weeks on Realtor, AirBNB, and other sites trying to compare costs with the approximate rent I could expect nightly.

With my conservative nature I was a bit hesitant to move forward with anything yet -- I am seeing a lot of condos in nice areas with amenities (saving me having to get a property with a pool) that are in the $150-$200k price range. I haven't found the exact neighborhoods on on AirBNB, but I am seeing a lot of properties being rented for $60/night. If I assume a 50% occupancy rate, that would be $900/month less the 20% management fee would net me $720/month, with the mortgage and utilities and HOA coming in closer to $1400/month.

I wanted to reach out to see if I am a) looking in the wrong areas of Orlando when evaluating $60/night on an AirBNB rental, b) spending too much on a condo to come in at 1400/month and expecting to turn a profit in Orlando, or c) looking into a condo when I should be looking at a single family home to turn a profit?

Thank you in advance for any guidance or suggestions!

-Mike

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Holly Kurtz
Member since 2018 · 13 posts · 10 votes
7y

Mike, I live near Kissimmee and also recently looked into STRs there. I am also similarly cautious and assess everything related to real estate investing against the much easier alternative of leaving that money parked in mutual funds/index funds. My conclusion was similar to yours in that I just don't think Disney area vacation rentals are a great investment right now. I have looked at the financials of several properties and also toured some places with a Realtor, based on recommendations from a property manager who's been in the business over 20 years. The problem is that the HOA fees and hidden additional fees tacked on by the developments are so high that it's hard to make any money. Yet you need to buy in these specific developments (all relatively close to Disney) with lots of amenities because that's what vacation renters expect. Occupancy is also quite seasonal and tied to school holidays. Some of the properties I looked at were netting $40 a month-or losing money. And I did not see any with 50% occupancy rates. The other wrinkle is that this property manager told me that you need to get a place with its own pool-as renters expect that. (It's a little splash pool.) And the place should also be updated-e.g. granite or better counter tops in the kitchens, bathrooms, etc. All of that adds to the cost. The property manager I spoke to was Stephen Behlor. The Realtor I worked with was Raquel Ells.

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  • Holly Kurtz
    Member since 2018 · 13 posts · 10 votes
    7y

    Mike, I live near Kissimmee and also recently looked into STRs there. I am also similarly cautious and assess everything related to real estate investing against the much easier alternative of leaving that money parked in mutual funds/index funds. My conclusion was similar to yours in that I just don't think Disney area vacation rentals are a great investment right now. I have looked at the financials of several properties and also toured some places with a Realtor, based on recommendations from a property manager who's been in the business over 20 years. The problem is that the HOA fees and hidden additional fees tacked on by the developments are so high that it's hard to make any money. Yet you need to buy in these specific developments (all relatively close to Disney) with lots of amenities because that's what vacation renters expect. Occupancy is also quite seasonal and tied to school holidays. Some of the properties I looked at were netting $40 a month-or losing money. And I did not see any with 50% occupancy rates. The other wrinkle is that this property manager told me that you need to get a place with its own pool-as renters expect that. (It's a little splash pool.) And the place should also be updated-e.g. granite or better counter tops in the kitchens, bathrooms, etc. All of that adds to the cost. The property manager I spoke to was Stephen Behlor. The Realtor I worked with was Raquel Ells.

    3Reply
  • Michael Stokes
    OP
    Rental Property Investor · Winter Garden, FL · Member since 2013 · 46 posts · 22 votes
    7y

    @Holly Kurtz Thank you for the reply. I was not considering a place with its own pool due to the added maintenance, but I do understand that is what people expect.

    I did see some properties that looked very updated that I felt I could add some amenities to in order to attract renters, but unless I could average over $100 per night with a 50% occupancy rate I just don’t see how I could turn a profit.

    0Reply
  • Arthur Neves
    Rental Property Investor · Orlando, FL · Member since 2017 · 56 posts · 33 votes
    7y

    Hi Michael, we started the same process of searching about 2 years ago, and now we are finalizing the purchase of a townhouse we thought would be a good one for STR. We've spoke with about 5-10 property management companies and saw at least 30 houses before buying this one.

    Your numbers roughly seem accurate, as others said firstly look at HOA+CDD how much will that cost, than electricity is a big bill I've heart too.

    On the location, we ended up really like the community called Story Lake. It is in Osceola Parkway, which is the road you take to go to Disney. It takes 10 minutes a day no hayways necessary to go there. It has really good amenities, and they are building it still, so you can find brand new condos and homes.

    They have a bunch of condos, I was pretty attempted to get one, but ended up investing more in a TH. I probably will get a condo as a second if this turns a profit this year.

    Now, on being coservative, I think I am in the other side of the scale here. I am not super aggressive, but after crunching the numbers multiple times I realized the worst this can give me is 2%, which is inflation rate. If that turns to be giving me anything like that or lower for 2 years I will sell it an move on. But until then, I will never know.

    In regards the property management company, you can find ones that charge 15%. And occupancy rate at Story Lake should be at least 60%.

    Hope it helps

    1Reply
  • Michael Stokes
    OP
    Rental Property Investor · Winter Garden, FL · Member since 2013 · 46 posts · 22 votes
    7y

    @Arthur Neves Thanks, Arthur. I haven’t yet found a management company for 10%, at least one that handles the coordination of cleaning and maintenance as well.

    Just out of curiosity, your numbers assume a 60% occupancy, 10% management fee, and a nightly rate over $100?

    0Reply
  • Eric P.
    New York City, NY · Member since 2016 · 470 posts · 348 votes
    7y

    Are there any concerns about the condo associations in those areas restricting or banning Airbnb / STRs? That's something else you have to watch out for! You could buy a place hoping to STR and then the condo association bans it after the neighbors complain. It's happened in many other areas. That's another advantage of a free-standing home (so long as it's not in a neighborhood with an HOA which could also ban or restrict it)

    2Reply
  • Michael Stokes
    OP
    Rental Property Investor · Winter Garden, FL · Member since 2013 · 46 posts · 22 votes
    7y

    @Eric P. Hi Eric, I definitely was keeping my eye out for that. I read a bunch of stories where this happened to investors!

    0Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    7y

    @Michael Stokes There are more expenses with STRs than you probably expect.  You have to pay to have it cleaned and restocked between occupancies.  I don't think the management company is going to foot that bill.  

    There is much more to it than just buying a property, renting it out as and STR, and having money deposited in your bank. I have 23 STRs, 82 beds total.

    Try running an STR in your geographic area first, within 30 minutes driving distance, to get your feet wet.

    0Reply
  • Julie McCoy
    Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    Something that rents for $60/night isn't worth bothering with in my opinion, especially at 50% occupancy.  My cabins in the Smokies rent average more than $100/night and are in the price range you're looking at, with >85% occupancy.  

    If the returns are so small, go for an LTR (not necessarily in Orlando/Kissimmee) that'll return the same or higher with a LOT less hassle/expense/risk.  STRs are only worth it if you can return significantly more than an LTR.

    2Reply
  • Michael Stokes
    OP
    Rental Property Investor · Winter Garden, FL · Member since 2013 · 46 posts · 22 votes
    7y

    @Julie McCoy Do you have one of the luxury cabins out there? I was reading that those tend to draw most of the occupants but they also go for more than I am looking to spend for my first time investing. Did you have any trouble finding a cleaning/management company out there?

    0Reply
  • Julie McCoy
    Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Michael Stokes No, I don't have luxury cabins, I aim for middle-of-the-road while still being nice (solidly B-class, to use LTR parlance), and my target demographic is couples, so mine are all small.   I don't feel that it's accurate to say the luxury cabins draw the most occupants - occupancy rates in the area tend to be high across the board, but I'm not convinced the returns you get from luxury cabins justify the higher capital investment.  I'm curious where you read that, I'd like to investigate more.  

    I self-manage, which - with a solid housekeeping team - is not difficult, and well worth the effort.  Local property managers charge 30-40%, and anyone doing it for less is probably cheaper for a reason.  Great housekeepers take some looking, and the really good ones are really busy, but they definitely exist (I'm incredibly pleased with mine) and are worth the hunt.

    0Reply
  • Michael Stokes
    OP
    Rental Property Investor · Winter Garden, FL · Member since 2013 · 46 posts · 22 votes
    7y

    @Julie McCoy I am glad to hear that about the luxury cabins, I read it on another forum where they didn’t cite any factual data, so I have been trying to prove/disprove it as well. They also commented that without some things like gaming and a heated pool or hot tub that it was very tough to fill vacancies.

    I am happy to hear that you have found at least some of these things to not be true. Thanks for the response and info!

    0Reply
  • Julie McCoy
    Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Michael Stokes Well, a hot tub is definitely an expected item, but otherwise that is frankly nonsense.  I'm not sure what they're doing to get results like that, but that's definitely not reflective of my experience with my three cabins (or the experience of anybody I know who invests in the area, and I know quite a few people).  All three of mine have hot tubs; one has a pool table; none have pools or community pools.  Only one has a view, and it's not a spectacular one.  They're all cute and well-kept with newer furniture and within a 10 minute drive from the main drag in Pigeon Forge/Gatlinburg, and while I really like all of them, none of them are vastly more special than a thousand other cabins in the area.  

    Perhaps the people on the other forum don't do anything to maintain their cabins and as a result they're kind of run down, and cabins like mine appear "luxury" to them, but there are definitely true luxury cabins on the market right now (as you noticed) so I can only guess as to why they aren't seeing similar success.

    0Reply
  • Michael Stokes
    OP
    Rental Property Investor · Winter Garden, FL · Member since 2013 · 46 posts · 22 votes
    7y

    @Julie McCoy This is very helpful information! Does your cleaning company also maintain your hot tub between visits? Since I would be remote for a vacation rental I wanted to minimize any chance of disruption and the potential for bad reviews with things like maintenance and housekeeping.

    0Reply
  • Julie McCoy
    Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Michael Stokes  They do!  They dump/refill it between guests and handle the chemicals, etc.  I can't guarantee all housekeepers provide this service, but if you can find one that does, it's so worth it.  

    I will say, most cabins are on well water, which can be tricky - the water can be very mineral-y and, depending on the well and conditions, can have an odor (sulfur) or some color.  Sometimes if it's been raining a lot, the water at one of my cabins will discolor; I've found the best policy is just to tell the guests what's going on, and assure them the water is clean/safe for the hot tub/bathing.  It's rare, but when it happens my guests have been very understanding.  That said, it's a good idea to get the water tested before purchasing, so you can anticipate if a filtration system is needed (or, rarely, if it looks too problematic to deal with).

    0Reply
  • Sid Payne
    Longmont, CO · Member since 2018 · 105 posts · 79 votes
    7y

    @Michael Stokes, I have 5 properties right in that area and have been doing STRs for about 4 years in that area. I plan to buy more and hope to have 20 or 30 someday.

    I would be happy to share some of my experiences and financials with you if you would like to PM me. There are a lot of factors that go into making money down there. I think the absolute biggest one is being willing to manage your own bookings and having a management company be your boots on the ground. The big companies that do the bookings for you take way to much of a cut and have little incentive to book your place over others or to treat your guests they way they need to be treated to come back. I am a firm believer that repeat guests are one of the keys to this business.
    Shoot me a PM with your email and I will do what I can.
    Thanks a lot,
    Sid

    3Reply
  • Michele Velazquez
    Member since 2019 · 144 posts · 46 votes
    7y

    @Michael Stokes can you DM me info? I am thinking about a STR or LTR in Kissimmee area too!

    0Reply
  • David Chi
    Member since 2020 · 11 posts · 1 vote
    6y

    @Sid Payne

    Hi, my name is David, I’m a newbie str investor in the Orlando area as well. I’m interested in hearing about your experiences in str in the Orlando area and how you manage your own bookings. A little background; I live in Hawaii and have a few long term rentals here. I am interested in investing in real estate more, but the prices here are too high even if you have some capital. So I thought to look to other areas and also saw that str are popular and ended up buying a place in the Solterra community. Didn’t know about bigger pockets at the time and probably should’ve done more extensive research. It’s a 7 bedroom 5 bath house with a pool just finished in 2019. I use a booking company, villa key that partners with a management company. I’ve had the place since August 2019, which I know isn’t a long time, but it hasn’t been making as much as expected, I don’t know if it is due to it being a slow time of the year, or the percentage of the booking company. That’s why I’m kind of interested in managing my own bookings but don’t see how being across the country. Last month was the first time I made more than my mortgage note, so I’m thinking there could be potential. Any help/advice would be greatly appreciated.

    Thanks!

    1Reply
  • Mark Miles
    Rental Property Investor · Philadelphia, PA · Member since 2016 · 543 posts · 716 votes
    6y

    STR Property managers are simply schedulers. Don't let a scheduler take your profits. Either self-manage like many on here do, or hire an inexpensive offshore PM who works US hours & speaks eloquent English (that's what I do). Mine can set door codes, message (or call) guests, schedule cleaners, adjust the thermostat, monitor my cameras, & call a plumber just as easily as a local PM can, for 1% of the cost

    Hire good cleaners, a solid handyman & befriend some helpful neighbors. Save your money on PMs & pay these people well instead. Call me crazy, but I prefer to spend my money on people who will actually see the inside of my houses, not a scheduler

    2Reply
  • Ken Latchers
    Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
    6y

    Ditto to the self-managing. A lot of what Mark has done by virtual assistants can be done by software such as ownerreservations or other Property Management Systems.

    0Reply
  • David Chi
    Member since 2020 · 11 posts · 1 vote
    6y

    @markmiles. Thanks for the reply. I’m used to self managing where I live, but being the house is across the continent managing seems all more daunting. Where do you find offshore PMs? Also how do you find good cleaners and handyman being that I don’t live in the area?

    0Reply
  • Mark Miles
    Rental Property Investor · Philadelphia, PA · Member since 2016 · 543 posts · 716 votes
    6y
    Originally posted by @David Chi:

    @markmiles. Thanks for the reply. I’m used to self managing where I live, but being the house is across the continent managing seems all more daunting. Where do you find offshore PMs? Also how do you find good cleaners and handyman being that I don’t live in the area?

    Last time I needed to find new cleaners, I gave my VAs a list of 10 cleaning companies & a list of 10 questions to ask each one. They called & interviewed each one, then they sent me a summary of each interview with pertinent facts along with a recommendation for which one I should hire. I approved their recommendation so they hired that cleaners who still works for me. They did all this while I was out looking for my next property to buy. Play chess not checkers

    2Reply
  • Nidal Daraiseh
    Member since 2019 · 42 posts · 10 votes
    6y

    @Mark Miles totally makes sense. Its about optimizing your time! Where else do you do STRs?

    1Reply
  • Mark Miles
    Rental Property Investor · Philadelphia, PA · Member since 2016 · 543 posts · 716 votes
    6y
    Originally posted by @Nidal Daraiseh:

    @Mark Miles totally makes sense. Its about optimizing your time! Where else do you do STRs?

     I invest in STRs in the Southern half of the US for 2 reasons:

    1) you get much higher year-round occupancy rates in the South & it's simply tough to earn a good ROI in the North if your place sits vacant for a big chunk of the year

    2) Culturally, the Southern half of the US seems to be a lot more accepting of STRs regulation-wise. A lot of these southern beach & mountain towns have been supporting STR for 75+ years, long before Airbnb was a thing, so they're very comfortable with it and it's a built-in part of the community.

    A lot of Northern places are FREAKING OUT over STRs & STR regulations & they don’t seem to be very supportive of it. So, in the North, best case you’re fighting an uphill battle with a lot of uncertainty. Worst case, it gets outlawed in a town AFTER you’ve bought a place there & now you have to sell at a HUGE loss bc there’s no buyer demand once STR use is banned! I’ve seen it happen...

    As you can see, I’m not the only person on here with this viewpoint. As you can see from this thread that I’ll link to, most of the experienced investors on here are also heavily invested in the Southern half of the US!

    https://www.biggerpockets.com/...

    “Wise Northerners invest in the South” -Mark Miles

    2Reply
  • Nidal Daraiseh
    Member since 2019 · 42 posts · 10 votes
    6y

    @Mark Miles thank you. Yes, I reviewed that discussion earlier. Doing my research of different markets and getting ready to move forward with a couple of opportunities. 

    1Reply
  • Kristyn Morgan
    Investor · Utah County Area · Member since 2020 · 11 posts · 4 votes
    5y

    @Arthur Neves--I am curious how your experience has been? We are considering investing in a STR in the area as well.

    1Reply
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