Guest post by Stephen Walker, owner of Signature Villas Orlando
There are always advantages and disadvantages to buying an Orlando vacation rental home that is already under management with bookings in place, which we refer to as “turnkey”. Being in the business I get a first hand insight to what really goes on with booked properties and I want to share with you some of the most important things you should know before you buy one.
New vacation home owners don’t usually buy homes that don’t have a rental history though they should and the ones that do usually end up staying with the current property management because they are so lost in the buying process that they take the easy option. They figure, “Let’s stay and see how it goes”. In today’s market a lot of the owners who are selling are doing so because they can’t afford their home and there are very few that have made a large profit for numerous reasons. A couple of these reasons are that a high percentage bought at a ridiculous price during the boom and have enormous mortgages. Then there are the owners who bought one and just left it up to the management companies to fill and took no active involvement at all.
So what does all this have to do with changing management companies when you buy a turnkey property, you may be asking. If the management company is reputable, they should have a complete history of the home that they can readily provide to you before you purchase so you can get an idea of the type of numbers the home was brining in. It’s just the same as asking another management company to do a rent comparison of an equivalent home in the same area. That’s exactly how realtors price homes. Be careful as it is very easy for the property manager to put in what I like to call “ghost bookings”. What are ghost bookings? Well, they are false bookings that are made by the management company to entice the new owner to stay. This is a very dangerous game to play but there are many that do it, including a couple of large property management companies who shall remain unnamed.
Another common myth that new owners also believe is that keeping the old management company will be cheaper, but they’re often dead wrong! You’ve bought your first new vacation home and spent i.e. $300,000 on it and now want to save money? It’s one of the worst decisions I see new owners make. The answer to the problem is so simple and so easy that you will kick yourself. . . Ask your Realtor! Yes, it’s that easy (assuming your working with the right Realtor). Why is it that easy ? BECAUSE YOU MUST TRUST THEM OR YOU WOULDN’T HAVE SPENT $300,000.00 ON THEIR RECOMMENDATION!
If a realtor works for a property management company then they are obligated to their own company. But if you ask that same realtor who else they recommend I guarantee all they will say is ‘”We don’t really recommend other companies blah blah blah”. So they’re not the best realtors to ask and you probably shouldn’t be working with a Realtor who is also working for a management company! There are some realtors that will give you four or five management companies and this alone is great but why that many?? Lack of faith maybe? Diversity? Who knows. . . So which realtor will direct you to the best management company? I would say the one who only recommends a couple that they are not working for. Why is that you may say? A truly honest management company will really only take on homes that they know they can book. I myself try to stick with certain areas and styles of homes like Windsor Hills and Reunion. Some others may deal with town homes and condos better, I myself turn down nearly all town homes and condos as I struggle to book them. So a Realtor who directs you to one good manager has a lot of confidence in that company (assuming it’s not because they are accepting an under the table kick back) and knows what their specialty is.To be honest, it’s in your Realtor’s best interest because they really don’t want you harping in their ear every month about how you’re not making money or how all the bookings that were there have canceled (GHOSTS).
We hope you enjoyed this guest post by Stephen Walker, a local Orlando vacation home property manager. To learn more about Stephen and the services he provides please visit his website at www.SignatureVillasOrlando.com.
We hope to earn the opportunity of helping you achieve your investment property goals this year in 2012. For a free, no obligation investment property consultation with our Director of Sales- Lisa Arcia, please contact us directly at 866-422-6191 and if you have enjoyed this article please consider subscribing to our blog and stay updated on future information.