Essential Reading
How to make more money from Orlando investment property with DIY rentals
Its rental arithmetic! I have found with my real estate firm Florida Countryside that Orlando investment property, "buy to let buyers" will initially employ a property management firm to both maintain and rent their home, although many will later progress to finding their own tenants, for this is how they can achieve the best financial return!
Ever since I first got involved with Orlando real estate sales to Brits back in the 80C's, I have been an advocate for "DIY rentals" and here I will explain why.
Whilst it is almost a fundamental requirement for an absent homeowner to employ the services of a good property management firm to provide regular home maintenance, the rental booking issue is a very different matter.
There are many management firms offering exclusive maintenance preferring to leave the job of finding renters to an owner, whereas others are more keen to promote their booking service, for this is where the company can make the most money!
Several firms have contracts that allow a "mix and match" service to operate, which in effect allows either the company or owner to find the renter.
When the owner finds the tenant without any help from the management company then considerable cost savings can be achieved!
When an owner takes exclusive control of finding the tenants a greater financial control is enjoyed plus there exists an opportunity to personally assess the suitability of any future tenant.
With over 700 property management firms currently operating in the greater Orlando region alone, competition is fierce and this has led to some unscrupulous management firms making wild claims and promises about the amount of potential rental income they can readily achieve for clients.
Another marketing ploy to watch out for is the so called "rental guarantee!".
From my experience rarely is there a sound rental guarantees that does not either have some kind of a catch or downside.
Even when such a proposals is indeed genuine, there is a downside for most will only offer a rental sum below the market rate and why settle for less than your home is worth?
When a somewhat high rental projection is offered I strongly suggest that the proposal is carefully reviewed and all paperwork is properly scrutinised, for I have never found there to be a "free lunch ".
Consider the following scenario, for there is probably an offer like this currently being offered by someone;
A management firm is offering a rental guarantee that looks like it is "too good to be true".
It offers to pay the owner a sum that covers absolutely every outgoing and yet although the price of the home may be a little higher than normal, it is not outrageously high!
By all accounts it appears as though the developer may be willing to suffer a financial loss and all of the risk is weighed in their favour. Ask yourself why?
I do not know of any reputable builder or developer that would do this unless that is their business is in some kind of financial crisis and les face it, such problems are often kept extremely quiet!
Take your time to seriously consider a proposed deal and try hard to find any hidden catch!
Next is "the leaseback offer"; this is when an owner wishes to rent back the home from the buyer and normally a written contract that is duly aligned to the purchase contract is provided.
In my opinion this is the best kind of purchase option, albeit again watch out for offers involving multiple homes!
Often the best proposals will only apply to a few selected new homes, such as when a builder wants to obtain future model /show homes.
In this circumstance I still recommend careful scrutiny and in particular check out the competition to ensure that the sales price is realistic, for it is possible that the price may just have been inflated to cover the attractive rent that is being offered!
Most property management firms are good at their job and I do not want to give the impression that all are untrustworthy or are trying to rip you off.
However in my opinion NONE should EVER be totally relied upon to make any owner considerable sums of money!
They will all look after themselves first, a tour operator or holiday company second and a private owner last. They will call it "enterprise and commercialism" and there should be no mistake.
Besides the potential pitfalls of solely relying on a management firm to find you rentals there is a high cost.
Property management firms charge sums that normally range between 10% & 50% of the actual rent received!
Circumstances can of course change and therefore even when a good well run tried and tested firm is employed there sill is a risk.
Something could change that leaves an owner in a potentially hazardous position.
I have witnessed firsthand good firms going bad due to an unexpected circumstance such as a tour company contract being lost or a valuable staff member leaving.
Whatever the position there lies an inherent risk so why take it by totally relying on someone else to make you money?
Those who choose to ignore danger signs when using a management firm for bookings do so at their peril.
It may take several months for an owner to realise that their bookings are going down and therefore why run any kind of risk when potential financial disaster can be avoided?
Many owners who initially work alongside their chosen management firm to find tenants are very often successful. So too are those who "go it alone" and most have said how financially rewarding iy has been.
The majority remark that it was not as difficult or as time consuming as they first thought it would be and all followed a few basics rules.
I have listed a few of recommended rules to follow;
Prior to the closing of your rental home, prepare a simple business plan incorporating the following
Thoroughly research the competition and you can do this by surfing the web and/or reviewing specialist publications where privately owned property is listed. This kind of research should be invaluable for it will greatly help to find out what potential rental rates you should charge.
This is the singular most important aspect for any business and yours is certainly no exception, for after all this is what you now have; hopefully it's a potentially lucrative new business!
Carefully assess the potential rental market and tenant profile - Where do you think your renters will come from? Do you aim to target, US UK or other nationals and will they be vacationers and if so how long is the expected average stay?
Advertising & general promotion
Website
Get yourself a great looking website & try to think of a catchy & fitting domain name! It will most certainly cost less to promote a small ad highlighting a website address in several major publications, rather than having to pay for a large display advert with considerable detail in just one! Remember the worldwide web is a really powerful tool, so use it properly!
A virtual tour incorporated into your website may cost less than you think and the result could be major!
Consider the merits and cost of website optimisation and Search engines submission.
Compile an annual expenditure budget and include sufficient costs for all advertising and promotions plus allow for printed material such as property description leaflets and business cards.
There are now many different specialist portal websites where you can list a privately owned vacation home and although many have annual subscription costs, several only charge when a booking is conducted.
Prepare a simple networking plan of action
Let absolutely everyone that you know that you now own a rental home.
Compile a list of friends, family and work colleagues. Many may well be interested in a visit to Florida at some point in the future.
Submit a copy of your marketing material to them once it has been completed.
Talk to fellow homeowners - As obvious as this may sound most buyers does not readily think of talking to other homeowners in order to network and this type of action often proves to be one of the finest low cost marketing strategies.
This demands limited effort time and cost!
3 years ago Mark & Kerry Jones who live with their 2 children in Staffordshire embarked on their purchase of a new 5-bedroom 3.5 bath home in the gated community of Highgrove, which is located in Clermont Orlando some 10 minutes from the main gates of Disney-World.
Although they had never visited Florida before their first trip, which was to take possession of their newly acquired home after it was built, Mark & his family were far from disappointed, in fact they were totally overwhelmed with enthusiasm and excitement.
Says Mark; "We decided to try and buy a home abroad and therefore spent considerable time on the Internet looking at all possible destination options.
We had watched several overseas property shows on the TV and this is when we saw the guys from Florida Countryside at work showing people just like us around wonderful spacious homes that looked to us like they were outstanding value for money"
This was the catalyst for us targeting Florida and after later running through several property options with the Florida Countryside personnel here in the UK, we decided to trust their judgement and asked them to let us know what they considered was our best option for an investment and holiday home.
They recommended a home on Highgrove, for this had just been released for sale and when we saw the plans they were certainly not wrong. When we first arrived at our home we were simply "over the moon, for it was even better than we could ever have imagined!
I have to say that today we still feel exactly the same way and we still get a buzz when we arrive at our 2nd home, something that we try to do at every conceivable possible opportunity.
We took all of the Florida Countryside advice literally, for they said the best way of capitalising on rentals was to create our own website and to then network to friends and family.
Graham and Simon from Florida Countryside suggested that we may wish to consider handling all of the rental bookings ourselves, although this we were dubious about, for initially we employed someone to do this.
However we soon realised that their advice to look for renters as paying real dividends was extremely sound.
When we employed the management firm to handle bookings alongside ourselves we achieved around 40 weeks of bookings albeit we had to pay the management firm a 25% finders fee and they controlled the amount of rental income generated.
When we proceeded to our own efforts, thereby switching management firms to a maintenance only programme, we actually achieved around 44 weeks of bookings and our own efforts increased our revenue around 25% to 30%!
We still use the same management firm today and the response to our promotions is incredible enabling us to now make real money!
Our management firm meet & greet our tenants when required plus they maintain the home to an exceptional standard.
Our involvement saves us a fortune for the potentially high rental booking cost does not exist anymore and we are assured that our home is always fully booked, 48 weeks in this last year"
Mark & Kerry have become so successful at DIY rentals that they now help other homeowners by setting up and running a Florida property rental booking site www.supremefloridavillas.com.
Here Florida homeowners can list their property free of charge with only a £15 per week payment applying for any confirmed rental bookings that are achieved through the site.
You can obtain a free DVD "The definitive guide to buying in Florida" from Graham by visiting his website www.floridacountryside.com.