Dolby Properties Inc. Orlando Florida Investment Properties, Vacation & Second Homes







 

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Orlando, Kissimmee, Davenport, Clermont - Disney Area Investment Real Estate, Second Homes & Vacation Homes

Investment Property Analysis

Firstly, a word about "guarantees"

People often ask us about guaranteed rental income programs and we have some very strong opinions on them. If it looks too good to be true, it usually is!

There are a few companies offering guaranteed rental programs and to be fair, there are one or two good companies out there. However, in the vast majority of cases, if you take a closer look at the program, you'll find that they aren't all they are cracked up to be.

Either you are "steered" towards certain new properties, which are often higher priced to begin with, or the guarantees are only for the summer months, which you should be able to easily book anyway. Another thing is that many of these companies will restrict your personal usage during these times. We have also heard of owners either having to wait to get their money, or not getting paid at all. In these uncertain times, if something is guaranteed, you have to be paying for it somehow!

At Dolby Properties, we believe in finding you the right property, at the right price, to begin with. We believe that you should have no problem in renting out your property yourself during those "guaranteed" periods.

At the end of the day, if you are looking for guarantees, then perhaps you should be "saving" your money in a safe bank account, rather than "investing"!


Alternative # 1-SHORT TERM RENTALS (updated Jan 2014)

The following property analysis shows an example of what you can expect to earn in one year from a typical Disney area furnished vacation home with private pool. This presentation is offered purely for guidance purposes and is not a guarantee, as situations may vary.

Rental income shown assumes a total of 39 weeks of rental, after paying out commissions to travel agents and other rental agents, but including several weeks of renting out the property yourself. Please note, it is highly unlikely that you would achieve 39 weeks bookings unless you are actively involved in obtaining your own bookings through marketing the property yourself, rather than expecting this from all management company bookings.

Of course, the more active you are in obtaining your own rental bookings, the higher your income will be, as your own bookings will generally be at a retail rate, rather than the wholesale rate offered by many property management companies. Once you buy a property through us, we will be happy to show you how to be successful in the business of short term rentals.

  3 bed villa
(avge $180K)
6 bed villa
(avge $280K)
Rental income $ 23,400 (13% gross ROI) $ 34,125 (12.2% gross ROI)
Expenses:

Property Taxes

$ 3,000 $ 4,000
Insurance $ 1,400 $ 1,700
Pool/Lawn care/Pest control $ 2,500 $ 2,500
Utilities $ 4,600 $ 6,400
Management fees $ 1,200 $ 1,200
Assoc. fees $ 500 $ 800
Rep & Mtce and furniture replacement. $ 1,750 $ 3,000
Cleaning(25 cleans&1 major) $ 2,050 $ 2,625
Licensing, ads & other Misc $ 1,000 $ 1,000
Total expenses $ 18,000 $ 23,225
Net profit
before mortgage
$ 5,400 (3% net ROI) $ 10,900 (3.9% net ROI)
Mortgage payments, based on 35% down payment, 30 year amortization at 5.00% interest $ 7,537 $ 11,724
Net cash flow
after mortgage
negative ($ 2,137) negative ($ 824)

Please remember that some of your mortgage payments for the year would be applied to the principal mortgage balance. In addition, we estimate that your property should increase in value, conservatively around 5% per year.

Of course, with a vacation rental of this type, your return on investment is mostly coming from the increase in value of your property, in addition to the increase in equity resulting from more of your mortgage payment each year being applied to principal, rather than interest.

No one can really expect to make a large annual net income from renting out vacation property, but for the person who wishes to spend a few weeks per year in the property personally, this also is a great benefit. Again, if you are personally more active and involved in renting out your own property, you can expect your income to be increased.

If you are not totally comfortable with the risks and work involved with short term rentals, yet you need rental income and also would still like to be able to spend your annual vacation at your property, there is another avenue to consider. Some of our clients rent out their property long term on a 12 month lease (see below), then arrange to spend their vacation at the property at the end of the lease. This gives them the best of both worlds and also allows them to come and check out the property after the lease and make any repairs/improvements ready for the next 12 month lease to new tenants. Of course to do this, the long term rental would have to be furnished, which most long term tenants don't want.


Alternative # 2 - LONG TERM RENTALS (updated Jan 2014)

For those who do not want to spend time at their property themselves, one of the best ways to be an active real estate investor to own long term rental property.

With this type of property, you are not tied to being in an area zoned for short term rentals, so you can buy anywhere. Dolby Properties can advise you which areas of Orlando are good for long term rentals, as obviously, there are definitely several areas better than others.

To better compare the difference between long and short term rental income, let's take an average $150,000 property, with no pool, suitable for long term rental, with 35% down. We would advise that for this type of investment, it is better to buy lower priced homes without pools, since they are generally easier to rent out.

Rentals are usually for a lease term of 12 months and the tenant provides their own furniture, pays all the utilities and you can also have them do their own lawncare. You would, of course, have no cleaning fees. The estimate below does not account for any vacancies, but with good management, vacancies should be kept to a minimum.

Rental income for 12 months $ 14,400 (9.6% gross ROI)
Expenses:
Property Taxes $ 2,500
Insurance $1,200 (less than short term rentals)
Management Fees $ 1,440 (based on 10% of rent)
Homeowner's association fees $500
Repairs & Maintenance & Misc $1,000 (less than short term)

Total expenses $ 6,640
Net profit before mortgage payment $7,760 (5.2% net ROI)

Mortgage payments (based on 5.00%) $6,280
Net cash flow after mortgage = $1,480

In contrast to short term rentals, the monthly rental is guaranteed, because the tenant is on a lease, usually for 12 months.

PLEASE NOTE, MOST LENDERS WILL CURRENTLY NOT LEND ON LONG TERM RENTAL PROPERTIES, SO MOST INVESTORS NEED TO BE PREPARED TO PAY CASH.

Both short term and long term rental property investments are good for people who are looking more towards capital appreciation, rather than cash flow. This type of investment is also good as a temporary measure, for those who want to buy property now with a view to perhaps spending more time in it themselves in the future.

For those thinking about venturing into becoming a landlord, you might find the following information about the FLORIDA LANDLORD TENANT LAW very useful.

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Lesley Dolby


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(407) 352-3664

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Dolby Properties, Inc.

5218 Ridgeway Drive
ORLANDO, FL 32819
 

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