Orlando Vacation Homes - 'To Let or Not to Let'

Short term or Long term in Orlando?

It seems that this is the BIG question being asked by people buying property in Orlandoy. Do I rent my new vacation home in Orlandoi on a six month or annual contract, essentially guaranteeing a year round occupancy or rent it week by week, day by day and try to achieve the maximum return from the property.

First of all there are three principle types of property in Florida and predominantly in Orlando:

• Short term rental properties which are located in short term rental zones allocated by the state.
• Residential properties which can be rented out on contracts of a minimum of 6 months and upwards.
• Commercial rentals – shops, businesses and offices.

What type of rentals you are comfortable with will no doubt depend on your current property portfolio and experience.

The majority of out of state and international investors like to be able to enjoy their Florida home for at least part of the year themselves and then rent it out to fellow vacationers for the rest of the year. This essentially dictates what and where you can buy a property as short term rental zones are in high demand and normally within a short drive of theme parks and attractions. Prices tend to be a little higher but in return you are able to rent your property as and when you like.

Investors who already own a vacation home in Orlando may like the idea of a long term tenant who will pay the mortgage on a monthly basis and offer the “security” of having maximum occupancy levels. The long term rental market in Orlando is currently very strong with the market requiring a constant supply of rental properties upto the 3000 dollars per month. The typical tenant will be a family awaiting construction of their own home and professionals who have recently moved into the area. The local housing demand is also very healthy at present due to the continued growth of the city, the employment market and ever popular universities, plus of course the further expansion and development of the theme parks.

Many European property investors are accustomed to the annual rental market and Orlando offers and excellent location in which to diversify your portfolio.

Commercial long term rentals are often overlooked except by more seasoned investors. There are many great opportunities from which to choose, with new shopping malls and business communities in construction as well as some bargains on the resale market.

As with any investments whether they be on the real estate market, the stock market or on the commodities market – careful consideration is important as well as the knowledge that you will rarely buy at the bottom and rarely sell at the top. “Follow the trend” is the old adage and the current market dictates a buyers market – the market has already been discounted since 2005, there are many owners that need to sell and add to that the dollar at new lows against both the Euro and the Pound Sterling, the market is a buyers market for the first time this Millennium.

Purchasing incentives are often available and professional realtors will know where they are at any given time and will be able to steer you in the right direction.

Short Term Returns are based on daily or weekly rentals to the tourist market. The competition is tough but not dauntingly so. Many vacation home owners simply buy a property to use it for a few weeks per year and then hand over the reigns to a management company. The key to survival in the short term market is to have a planned marketing offensive already planned out prior to purchase. By self promotion, a website, good advertising, networking your family and friends plus a professional management company you could achieve excellent occupancy levels and a good annual income.

Bear in mind that you need to deduct cleaning fees, utilities, maintenance and other costs from your earnings plus you will need to furnish your property. The marketing process is on going as you will realistically need 14-15 rentals of two weeks to reach your break even point and only a proportion will rebook for subsequent years.

Long Term Rentals are in high demand in the Orlando and outlying areas within easy commuting distance and where schools, colleges and universities. Condos, townhouses and homes in good neighbourhoods and communities attract quality tenants especially when there is added value included in the rental price, such as golf incentives, sports facilities and security .

Unlike corporate lets and many European long term rentals, the Orlando market is predominantly for unfurnished properties. Essential lighting and white goods should be fitted, otherwise the property is delivered empty, hence the initial set up costs are considerably lower. There are no cleaning costs and few ongoing costs other than the management charge which should be far lower due to the amount of work that the management company will have to do.

Commercial rentals have always been a lucrative investment and Orlando is no different. As the housing market expands and the general and tourist population continues to grow, more commercial centres, malls, offices and retail units are being built. Selective investment in this sector can reap sufficient rewards for years to come. This is a market for more hardcore investors who are not going to run the risk of becoming personally involved in their tenants businesses.

You can expect a relatively high turnover of tenants as unfortunately businesses open and close all the time in Orlando as with anywhere else in the states. The good news is that as Orlando is one of the most popular destinations in Florida, for out of states and international families and a well positioned unit, office or mall will always be rented out very quickly.

The by-line on all of the above is buy what you can afford, make sure you have done your due diligence, taken professional advise and finally but by no means least, Location, location, location.