7726 W Sand Lake Rd, Orlando, FL 32819

How Short-Term Rentals Work

It’s no secret that Florida’s tourism industry is a multi-billion dollar business, and with that investors flock to the city to cash in on the short-term rental market. Groups of visitors often find it more cost-effective to rent out an entire home rather than paying premiums at the hotel — saving both budgets and gaining increased comfort and privacy. Yet I’ve found that so many potential investors don’t take advantage of the opportunity for lack of knowledge on how owning a short-term rental property would work. I’d love to get on a call with you and explain in detail, but this blog post can be a great start for those hoping to test the waters of investment properties.

Before we go on with the workings of a short-term rental property, here are a few things you should know:

  • Short-term rentals are closely regulated by the County. They are only allowed in certain areas to help manage the high tourist population. Typically, Osceola County and parts of Polk County permit short-term rentals. As a general rule, Kissimmee and Davenport have the highest concentration of permissible short-term rental communities in Central Florida.
  • Amenities make the property! Resort communities with diverse recreational features are often the ones who perform best among the rest.
  • Tourism in Florida is a year-round affair, with tourists flocking from every corner of the world. Still, you can expect high season to be from the mid-December to about April and surges again from July and August.
  • Short-term rentals can help you maintain the state of your home. Since guests are only present in the home for short periods of time, you are better able to monitor your home and fix any issues as they arise.
  • The potential for income in short-term rentals are higher than fixed-term leases. A real-life example: in a 3/2 condo at a popular resort community, the internal rate of return for a short-term rental program after a 3-year hold is 12.36%. In the same condo, placed under a 12-month lease, the internal rate of return is calculated at 10.34%.

Managing from afar

For locals, owning a short-term rental investment property can be a bit more manageable and profitable by their own accords. Still, a great majority of these homes are owned and managed by out-of-state, sometimes even out-of-country investors. How do they do it? Through the use of property management companies who specialize in short-term rental properties. Their job is to take away the stress and hassle of dealing with the ever-changing bookings and concerns of your guests. Some things you should find out when shopping around for the right property management company:

  • Great property management companies will syndicate your property listing across a variety of booking platforms (Airbnb, Homeaway, VRBO, and more) for maximum exposure.
  • They will arrange the cleanings after every check-out, cleaning fees will usually be passed on to the guests.
  • A good property management company will generally have a history of acquiring a 70% or more occupancy rate for your property dependent on location, community, and time of year. This is a sign of good marketing.
  • Some companies will book an owner’s fee when either yourself or guests you’ve procured stay at the property. Some may charge a small flat fee or a % of the booking.
  • An administration fee is charged on a monthly basis, ranging from USD 100-300. Additionally, commissions between 15-20% are also charged on bookings procured by the company.
  • Some companies will cover minor repairs with an on-staff handyman. Inquire about fees for having such repairs done and to what extent you are responsible.
  • Most companies may handle the typical bills of the unit (water, electricity, etc).
  • Discover how funds will be paid out to you. Most are able to do direct deposit.

In the end, owners have found much profit in owning short-term rentals, not only in passive income, but also in appreciation of the property. Shopping for the right investment property goes beyond the superficial aesthetics of what may look good, and requires thought into the numbers that verify its validity as a good investment choice. If you’re looking to invest in property here in Orlando, I would love to schedule a call with you and find the appropriate properties you may consider investing in. Backed by experience and investment logic, you can rest easy in knowing you’ve made the right choice! Let’s get the conversation started, contact me below:

Leave a comment

en_USEnglish
pt_BRPortuguese en_USEnglish