All Forum Posts by: Keith Courtney

@Alex Boyce

I don't think you should buy anything now based on your financials. You should not buy a SFH now because, after paying the 20% down on your loan, you are not going to have enough cash left to adequately upgrade and renovate a single family vacation rental that has good investment potential. Regarding townhouses and condos - I have witnessed condos and townhouses here taking a bigger hit on their rentals than SFHs due to COVID-19. I think one of the main reasons for that is a lot of SFH owners have cut their rental rates so that they are not too much higher than the rates for a condo or townhouse. The prices on condos and townhouses have softened quite a bit, and I think that will continue for a while.

There is a lot more potential income in a single family vacation rental than a condo or townhouse.  I would be patient until you have more cash to finance your loan and adequately renovate a home.  The right renovations or lack of are a major factor effecting whether a vacation rental is profitable or not.

Keith

@Jeff Smith

I agree that, if you are managing your short term rental property(s), the work you put into it is 3-4X greater than if a long term rental as stated above.  The point I want to make is it is also possible to own a short term rental and have a property manager take care of the day to day requirements of your vacation rental, have someone handle the short term rental marketing and still make a good profit.  And, in this case, your involvement is no greater than with a long term rental. All of the owners I have dealt with or deal with now are from out of Florida. Many of them do not handle the property management and marketing of their properties. Their involvement is writing a check each month to pay for the services. The keys for this scenario to be profitable are the homes have to be in good locations and renovated/upgraded properly, a good property manager, and a good short term rental marketer. You really need to do your homework to make sure that you have these 3 keys covered if you are going to be what I call a turnkey owner.

Good luck to you.

Keith

Tyler -

I am familiar with Southern Dunes only because I helped a friend of a friend buy a primary residence in the community.  I personally have not been involved in any transactions in the Haines City area other that one.  All of my focus for short term rental investments is up in the Kissimmee and the very north part of Davenport in ChampionsGate.

Keith

@Tyler Casey

My thoughts are I would take the marketing of your short term rental away from Evolve and do it yourself as long as your livelihood and lifestyle allow you to respond fairly quickly to inquiries when they come in.  List it for sure on Airbnb and VRBO and maybe other more local listing websites that list homes in your area.  l'd look at the nightly rates of the other vacation rentals in the area of your home and make sure that your rates are competitive.  Sounds like you have a nice golf course view out of the back of your vacation rental.  I would show those photos at the front of your photos along with photos that show other highlights of your home that make it stand out against your competition.

Good luck with it.

Keith

Sneha -

I recently inquired about Sycamore Resort as a short term rental investment for a vacation rental investor.  If I understood them correctly, here is the breakdown.

You first will have to pay 25% of your unit's price until you close, which will be at least 1 year from now.

After closing on your unit, you will be paid monthly 10% of the purchase price/12. Your expenses will be the HOA fee, insurance, property taxes and mortgage payments.

If you bought a 2 bedroom unit for $340K, you will be paid monthly $340K X .1 = $34K/12 = $2833.
$480 (HOA-includes utilities) + $150 (Insurance) + $500 (property taxes) = $1130
If you borrowed 75% of $340K = $255K, your mortgage payments will be ~$1145/month at 3.5% over 30 years.

$2833 - $1130 - $1145 = $558 cash flow/month with nothing being put in reserve for future repairs and replacements

Then, when the 2 years are up, you have to allow them to manage it, and your split with them will be 65/35.
Your breakeven rental income/month based on the above will be about $2500 (putting aside ~$225/month as reserves)
Based on that your unit will have to generate at least ~$3900/month in income to break even from a cash flow standpoint.

I think I am close on the numbers above, and I don't think I missed something (but it's possible!).  I approximated the insurance and property taxes.  

My opinion - I wouldn't do it for 2 reasons:
1) With the leaseback for 2 years, your cash flow will be ~$300/month after reserves.  That is only a 4% return on the $85,000 you put down on the loan.  And, keep in mind your unit has had some wear and tear during the 2 years.  Then, once the leaseback is up, your 2 bedroom unit has to generate ~$48K/year to break even. That is a very good rental income on a 2 bedroom condo in the Disney World area.
2) I don't like the fact that you have to use them for property management, which includes the marketing of your unit. A huge part of the operation of your unit is basically out of your control.

I hope this helps. Again, I may be missing something in my analysis, but I don't think I am.

Keith 

@Jason Sensi

I would encourage you to do your own research and search listings of comparable condos in the communities where you are looking for short term rental condos.  Search in VRBO and Airbnb.  Look at the nightly rates and the calendars of the comparable condos currently being rented. Bookings are down at the moment due to the pandemic (I am now starting to see bookings coming back), so the published rates will probably be lower than what they normally would be and the calendars will not be as full.  You should still be able to get a feel where the best short term rental condos are located.

I would also encourage you to create some pro forma statements on the condos. A big question is - Are you going to handle your own short term rental marketing?  If not and you are going to pay a property manager or a third party to handle it, I think you will find that the commissions they will charge you will greatly decrease or wipe out the profit you can make.  My experience with condos in general has been they don't generate that much profit here in Central Florida.  

I hope this helps. Good luck to you.

Keith

Louis -

I am not familiar at all with your market, as I deal exclusively with short term rental vacation homes here in Central Florida in the Disney World area.  However, what I have witnessed here may help you with your market.

I try to guide investors away from condos here because they are more difficult and more expensive to finance.  There also is not a lot you can do to them to make them stand out against the competition.

Since townhouses are financed like SFHs, they are much easier and cheaper to finance. They normally are more profitable than condos as a rental, but you are still limited to what you can do to a townhouse to make it unique and stand out against the competition.

SFHs are the best option here because of ease and cost of financing and the potential for profit.  The most profitable rentals here convert the garages into air conditioned movie theaters or game rooms, which obviously you can't do with a condo or townhouse. And, usually a home has other common areas where other fun amenities can be added to the home (i.e. large tvs with Xbox and PlayStation).  I have found that many vacationers who come here will pay more per night and rent a home more often when a home has been renovated and loaded with of these types of fun amenities.

Good luck with whatever you decide.

Keith

@Alice Horn

What vacation home communities are your homes in that you are currently getting 66-80%+ occupancy?  What nightly rates are you getting for these homes?

While I am very bullish on our vacation rental market as COVID-19 subsides, I am just not seeing the occupancy you are getting currently.

Thanks,

Keith

Hi Laura -

I normally work with investors of vacation rentals in the Disney area, but recently I have helped some people sell some vacation homes - 2 in Emerald Island. I urge you to check into the reviews about the community and the HOA. I agree with Melissa's statement above that the amenities are outdated. I have heard a number of complaints about the HOA including they recently raised the capital contribution to join from $1500 to $3000.

One other suggestion I would make to you regarding buying a short term rental here - wait.  The rental market here is currently slow resulting in many owners losing money. More homes may come on the market in the next 2 months with some excellent buying opportunities coming up.  Once the COVID-19 situation calms down, I think our short term rental market will be better than ever because a lot of people who used to stay in the expensive Disney hotels will opt to stay in vacation rentals due to social distancing and they're cheaper. There is a lot more awareness now of vacation home rentals.

Keith

Frank -

I recommend a townhouse in Windsor Hills. Windsor Hills is much closer to Disney World and has great amenities and is guard gated. Townhouses are cheaper and easier to finance than condos. The HOA monthly fee for townhouses in Windsor HIlls is ~$418 vs ~$470 for the condos.

Regarding timing - I would not buy quite yet.  More vacation homes are coming on the market due to slower rentals due to Covid-19. I think late August or September could be the time to buy a short term rental here. This applies to a Windsor Hills townhouse also.

Keith