Orlando Real Estate – Buyer Beware
Now would seem to be a good time to purchase a vacation home or villa in Orlando wouldn’t it? After all, home prices are as low as they have been in decades and more and more visitors are coming to Central Florida to enjoy a vacation with their friends and family. So, buy a home, rent it out when you’re not using it and enjoy the easy life. Sounds simple doesn’t it? Unfortunately it’s not.
A couple of years ago I wrote a book titled “What You Must Know About Buying Your Vacation Home” and the advice contained therein is every bit as relevant today. If you are seriously thinking of buying a home in Florida, you need to do your homework if you are to avoid some of the mistakes and problems that many before you have experienced.
One of the big mistakes that some people make is falling for the “Guaranteed Rental” trick. It sounds great in principle, fork out for your home, put it in the hands of someone you trust and let them rent it for you making you lots of dosh in the process. Unfortunately, not one of these schemes works and not one is sustainable. Buy a home based on this and your heading for a mighty fall.
It’s not often I write about the tricks some real estate companies and vacation rental management companies use to lure their prey in but as we start to see home prices rise ever so slightly again, it is now that a timely reminder needs to be given.
Here’s how just one of the schemes work… and there are many variations on this theme.
In essence, the homes / villas are being sold at way above their actual value. For example, a few years ago, one developer sold a home for $300K to an interim company. This company then sold the villa on to the buyer for $360K. The interim company was owned by the management company and the buyer was buying through that company because they’d believed the promises of the guaranteed rental program. The clever bit was that the $60k difference was then used to pay the owner the guaranteed rental payments for the two years of the guaranteed rental program.
What then happens is that the management company have control of the villa for the two years of the guaranteed rental program. All of the money they then make in rental income is pure profit as the owner is still lumbered with the utility bills, the property tax and insurance.
At the end of the two year guaranteed rental program the management company drops the owner onto their standard non-guaranteed rental program. One that doesn’t turn up anywhere near as much rental income.
Unfortunately, many owners fall for this. Essentially, it’s the quick fix pill and the attraction to them is that they don’t have to do anything during the course of the first two years. Frankly, it’s rather dumb thinking and it’s no wonder so many owners crashed out of the market during the recession as their homes went into foreclosure because they couldn’t support the mortgage payments.
Again, as we see a slight rise in the market, many potential owners are being sucked into the machine that is “guaranteed rentals.” One very prominent and trusted tour operator is now making claims of guaranteeing income for 5 years! Yes, 5 years! Marketed as “66 New 3- & 4- Bedroom Year-Round & “Buy-To-Let” many fools will be tempted to part with their money in the hopes of yet another get rich through real estate scheme.
The bottom line here folks is simply not to trust anyone offering such a “bargain.” From experience I can tell you that the people who make owning a home a success in Florida are those who take responsibility for their own home and work hand in hand with a reputable management company to get bookings directly with the consumer. No other way works. That simple.
Sure, there are others out there making promises of 40+ weeks of rental income but that is all driven by tour operator bookings and at very low rates. How low I hear you ask? Well, how about rates of below $70 per night in the peak Summer season for a 4 bed home with private pool? Crazy and now here’s the kicker… the $70 is what the management company gets…so what do you think the owner is receiving? A pittance. And then, they’re expected to maintain their home to the highest standard, refurnish it every so often, fit new pool heating and a/c as well as repaint and decorate once in a while. It’s simply madness.
What really bothers me the most about this is the guest experience. For over two decades we have worked very hard as an industry to be seen as a viable alternative for families who want a vastly superior experience than staying in a hotel when they go on vacation to Orlando. Vacation homes are now as popular with families and business folks traveling to Central Florida as hotels are but there is a great danger that the experience will be compromised when a homeowner doesn’t have the financial wherewithal to maintain his property to the highest standard.
When that happens, everyone suffers. Guests fail to return, more money must be spent marketing the home and eventually if new rentals don’t materialize, the owner experiences significant financial loss.
So how do you avoid going down this route? For a start you do your homework. You obtain and read as much information about buying a home from as many different sources as you can. Next, you decide which of those sources talks the most sense and you see if they can help guide you along the process. Most ethical and professional Realtors / Management companies will be only too pleased to give you further information and to give you solid advice.
Over the years, I have helped many families fulfill their dreams and an awful lot of my own clients have owned their own Florida dream home for well over a decade. Some over two decades. It can be done but you do need to be careful about who you listen to. If you are considering buying a home, I’m happy to help…but here’s my caveat, don’t contact me until you’ve read my book. You can get it from Amazon or if you are in the Kissimmee area, you can drop into my office at 4624 W Irlo Bronson Highway and get a FREE copy there.
I can’t be fairer than that can I? Forewarned is forearmed. Buying a home in Florida can be one of the most rewarding things you’ll ever do in your life. It can also be one of the worst decisions you’ll ever make.
