Will my vacation home make me money? (12.12)
That is a how long is a piece of string question because it depends on the specific vacation home, it depends on the who the owners are, and it depends on who the management company is. My rule of thumb, and a really good way to look at it, is the number one benefit of owning a vacation home is basically having a beautiful home in Florida that you can use, your family can use any time you like and have someone else pay for it. And I would probably say 65% to 70% of our clients that’s their goal, it’s not about the money they are going to get from their vacation home, it’s all about getting the great use out of it for family memories and with a little bit of luck it appreciates over time and you’ll make a little bit of money out of it and basically after x amount of years you have a vacation home that somebody else has paid for. That is really the goal. If you start going into the making money part of it then you start running into situations where the improvements need to be a certain value point so you can get the revenues back. Yes, we have clients that make quite a lot of money on a vacation homes, but I would say the vast majority of our clients are pretty much the “break evens”, many of them are quite happy. They don’t want to run a lot of people through their vacation homes so they don’t rent it out that much. It’s probably one of the things that people don’t understand about the business of vacation homes, is not everybody is trying to make money! A lot of people are very content to have that great facility just when they want it and somebody else is paying the majority of the costs and fees. They are absolutely delighted and if you are one of them I’ll tell you that is probably the best place to be when looking at Orlando vacation homes.
What Monthly or Annual costs can I expect?
The base costs are going to be your property taxes, paid every year, you’re not going to get away with that – that’s a given and an amount I would suggest for a standard 6 bedroom, $500k – $600k house is probably around $5000 to $6000 per year and that is one of your biggest costs. Property insurance, you must pay that of course give or take $1500 to $2000 if you take out an umbrella policy on top of that which is really important to do and is probably a few more hundred dollars on your policy. Of course, you’ll have your power bills, and that depends on the size of the house and how much it’s used but you’re probably looking at few hundred dollars a month and on top of that you’ll have your homeowner’s association fees. Nearly every location has fees, and they vary depending on what the amenities are – the more amenities the more the homeowner’s association fees. The fees are spread across all the homeowners by an equal amount and that covers things like the garbage, gated security, the clubhouse facilities, the pool, the landscaping – all of that is paid equally by all the owners and that varies and again depends on the location, but you are probably looking on average at a resort at $450 a month and that is really the bulk of the running costs. The other side of it is your property management fees and commissions and on top of that any extra maintenance, or any furniture updates or themed rooms etc. and those might be every few years. You might want to do some standardization also like clean the air filters, shampoo the carpets and that kind of stuff but again those are all kind of minor stuff. So that is the bulk of it.
What is the difference between a resort and a community?
That is a good question, a lot of people see just houses and what you find is there are major resorts, and what is a major resort? We associate a resort with generally a gated, manned security post, so there is someone there when you drive up and you don’t get in until you’ve talked to somebody, and you are supposed to be there for a reason which is great, and a lot of people love that and rightly so. When you get inside the resort it’s beautifully manicured grounds, well looked after with a clubhouse with facilities like a pool, maybe a restaurant etc. etc. so it’s real full-service resort and you can spend a lot of time there. A lot of people don’t even leave the resort because of everything that is going on in there. So that’s a resort and then you can get tweeners which are bits and pieces, like gated with some kind of clubhouse and facilities and a pool which are in-between a resort and a community. Then you have base communities which are communities where you can drive through the streets, it’s not gated, doesn’t have any facilities but you can buy those houses and rent them out. So you have resorts and communities and then a little bit of tweeners which are in-between!
Where should I buy?
First, you have to buy in the short-term rental zone so that is the Southwest Orlando area. If you are buying a vacation home and you intend to rent it out, you must stay in that triangular area Southwest of Disney world. As far as specific locations you know, people call us up and say “what is the best place to buy” and the analogy I use for people is, it’s as if someone called you up and said “I want to know the best car to buy” and well that depends, do you have a big family and need an SUV? Do you want a sports car etc. and it’s a little bit like that to a certain extent so where you should buy is going to come down to what you are actually trying to achieve. If you are looking more to invest or if you are looking more for a family or price point so there is a lot of things that go into that. Generally what I am going to tell you is you want to buy in a resort that is in my opinion. If you are going to buy a vacation home here in Orlando then get in a resort if you possibly can. I think the benefits of a resort outweigh a community or a tweener in-between so I would stick to the resorts, unless there is something specific you want in a community or location. With the older resorts all the way up to the latest resorts – that gives you a pretty good spread of house sizes and prices so there isn’t really a reason not to buy in a resort unless there is a house or a situation that you particularly want. You have to buy in the short term rental zone, and I would suggest you buy in a resort.
Are there any hidden fees? (20:39)
Not really, the only thing I would suggest that might be a hidden fee are costs that you will incur throughout the period of ownership, if something breaks, if you have to paint the property etc. That’s all the kind of maintenance that people don’t really talk about very much. There may be some additional fees with management companies and credit card fees is one of them for example and nobody really talks about that but some management companies – if they are taking a lot of credit cards they might charge you a 2% on a deal on a credit card and that is possibly a hidden fee, but generally we know what all the fees are and we’ll let you know what those are up front. We’ll certainly know what’s going to come up and wallop you and get you landed with a huge bill. Actually let me reiterate that because you can get what is called special assessments and it’s very rare, so what is a special assessment? Let’s take a situation where something happens to the resort and everybody has to pay for it, so for example the road needs to get paved or something breaks and it’s an expensive item and they don’t have enough money in the reserves for the Homeowners Association to cover that then what they might do is they might put a special assessment so they might ask everybody for $200 or $400 broken down into increments – every home owner will have to pay their share. I wouldn’t say it’s a hidden fee it’s just something that can come up and it’s very very rare that I can actually remember a situation where off the top of my head where special assessments come in but they do happen so there is really no way to protect yourself from that.) It’s just stuff that happens – with a really old resort you might want to bear that in mind with something that is 15 or 20 years old and you can ask or have your realtor ask either the Homeowners Association or when you buy a property one of the things your realtor is going to get is your HOA Disclosure and on the HOA Disclosure it will actually have the information for someone at the Homeowners Association. I would always recommend, even though that HOA Disclosure has the costs etc. on the disclosure, it’s probably worth giving them a call anyway and introducing yourself and say you’re thinking of buying a home in this resort, are these fees right, I have a piece of paper that says the fees are $400 a month, is that right and what does that include, and have you got any special assessments coming up? They are duty bound to give you all that information so you will actually have the tools to check all that yourself. That is probably as hidden a fee as I can come up with on short notice!
What is the Capital Contribution? (22.35)
Capital Contribution – that is part of joining the Homeowners Association and most Homeowners Associations have a Capital Contribution fee and what does that mean? Well, it’s to save the cases of special assessment although not all communities have them, but most of the bigger ones do. When a new person buys a property in a resort there is a joining fee that is called the capital contribution and it can be a couple of hundred dollars and I’ve seen them as much as $3000. Emerald Island resort for example is a $3000 Capital Contribution fee and that is the highest one, normally they are about $1000 or $1500 so what does that do? Well, what they do is they put all that into a pot and that is what we were talking about earlier if they don’t have the reserves to cover something they’ll come to you in a special assessment. The capital contribution they get for every new buyer goes into that pot therefore they don’t have to come for a special assessment and that is one of the reasons why we don’t see a lot of special assessments because the capital contribution fees for new buyers cover that. It’s only if something is over the top of that you’d get a special assessment but yes, that’s a really good question. So nearly every resort has a capital contribution fee and that is a cost that is incurred at closing as part of your closing costs.
Can you help us sell our property?
Yes, of course! We are a full-service brokerage at the Jerry Barker Group, and we are a very small brokerage. We never went out to be a big agent brokerage, we decided we wanted to stay small. We want to be able to help specific clients individually and take really good care of them, rather than just have them work with agents that we don’t know what they are doing or saying on a day-to-day basis. One of the nice things about that is we can really control the quality and when I set out to start this company about 13 years ago, that is one of things that I wanted, I wanted to educate the client, control our product and make sure that people who are entrusting us with half a million dollars from the other side of the world, knew everything that is going on and had all the necessary information. It’s completely transparent, I think that is exceptionally important. And at some point, when you go through the lifespan of a owning your vacation home you are probably going to want to sell it and we can help you do that. My wife Alyssa is both the broker of the Jerry Barker Group and the listing agent, so you’ll deal directly with Alyssa for the listings and she’s fantastic. She can go through all that detail so if you do want to sell a property then you can reach out to us and Alyssa will go through everything you need to know about selling your vacation home. She’ll make that process smooth and easy and enjoyable. You get the best of both worlds when you have Ali and I or Roger (and Roger is right here behind the camera making sure everything goes – he’s waving to you right now!) and the three of us help people buy and Alyssa helps people sell. That’s our team right now!