GUARANTEED RENTALS   =  SHORT TERM RENTAL PROPERTY
 
 
 

You are considering buying short term rental property as an investment and the property management company, builder, developer, estate agent, or real estate agent is offering "guaranteed rentals".

The theory is that if you plan things carefully and have your home marketed correctly, rental income will reduce your ownership costs, mainly the mortgage, and may actually exceed the costs - leaving you in profit.

On guaranteed rental income schemes be careful - check just what is being 'guaranteed'.

Some 'guarantees' are based on weeks' occupancy - not income - and achieve high occupancy by renting out at very low rates. A property management company may count bookings the owner has personally taken as if they had taken them. You do the work, they take the credit.

Some builders and management companies offer guaranteed rental programs. These include a minimum income for the year or a minimum number of weeks booked for the year. What you aren't told is what the income will be for those weeks or what the agent will rent your property out for.

When leafing through glossy brochures - web sites - video tours etc., remember you need to compare properties in Florida with like for like, not those you are familiar with in Britain - generally Florida properties cost less far less.

Orlando has literally hundreds of management companies offering their services to short term rental property villa owners. They vary from the large companies with hundreds of homes on their books to the small husband and wife teams with just a few homes.

Florida Mortgage Corporation strongly advises, if you decide "not" to secure rentals for the property yourself, that you thoroughly investigate any proposals presented to you.

  •       Many "guaranteed rental" schemes are exaggerated, untested and flawed – some are based on the premise that the client pays a higher price when buying the house.
     

  •       Many guaranteed rental schemes take an extremely optimistic view of continued growth in the Orlando holiday market. If there is a reduction in the stream of overseas visitors to the area-who is going to pay the guarantee?
     

  •       Has the Company adequate reserves? If you have to resort to law and sue, who will pay your legal costs? Will the Company still be in business and the million dollar question – How do you intend to recover your monies through the Florida judicial system?
     

  •       If a large travel company cuts back on its block booking; can the company "making" the guarantee provide contractual and financial evidence that they can and will cover the losses to fulfill guarantee obligations?
     

  •       What happens if there are problems with the management company and your service bills do not get paid? In Florida, a property lien can then be applied against your house.
     

  •       The concept of guaranteed rentals as described in various web sites, brochures, may be misleading. Check how guarantees work in the event of adverse publicity in a particular location or a fall off in visitor numbers - another reason by the way one should never depend on a single rental market ie Brits, but require a diverse range of markets.
     

  •       The terrorist attack on 9/11 was devastating to the Orlando area. Few visitors and many "empty" short term rental properties. It took quite a (months) while to recover.
     

  •       What about hurricanes? Yes, Orlando has been struck by hurricanes.
     

  •       What about an economic recession? The major hotels and motels in Orlando have deep pockets and can easily slash the cost of a hotel rooms to attract visitors on holiday.

 

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