Urgent advice needed before I buy property for my family
Question: Any one out there who has some insight on hotel/condo please email me and tell me if this is a wise choice. pitfalls, etc. My situation is that I would like to buy a condo in orlando becuase I will be taking my family there a few times a year to go to disney etc. From what I have learned, the management rents out my room and gives me 60% of the nightly rent to me.they handle everything. The hotel is in the heart of many popular parks with free shuttls to the parks.I just call a week in advance if I want to stay for free. The owner tells me that he doesnt make positive cash flow, but almost breaks even every year. he gave me the amounts he made from rent alone and that would be a small bit short of my monthly mortgage+ins, etc. The problem is he sais he bought the condo for about the same price he is selling it now after 9 years or so. I am wondering why the price of the property hasent gone up more than a few thousand in 9 years. I would expect it to go up at least 20 or 25 % in that long of a time. Please advise.
Answer: the price of investment property is not based on the same measure of value that a primary house is based on. In the case of a rental unit, which is what you are looking at, the price is determined by how much rent it will support. If the price has not changed in 9 years, that means that rents have not risen in 9 years, or the vacancy rate has not risen in 9 years. The most likely reason is that there is too many units in the area, or the local tourism is down from some earlier point in time when this unit was built.
This deal almost sounds like a sucker play to me. If everything goes just right, you almost break even. If anything goes wrong, you have all the risk. But since there are only 52 weeks in a year, you have no upside to reap during a good year. The management company gets paid for any rentals that do happen, and they take none of the risk of a downturn in rentals.
In addition, there is some tax law that results in different and less favorable tax treatment on a unit that you occupy more than 2 weeks during a given tax year. If you use the unit the way that you are planning to above, you are going to miss out on the tax advantages of owning investment property.
My advice is to carefully consider the cost of staying in one of the resorts at Disney. Chances are it isn’t that much when compared to the property tax and upkeep you will pay on this condo deal.
After you make your plans to stay at a resort or local motel/hotel, then consider the pros and cons of owning property in the area as a totally seperate deal, independent of whether or not you are going to visit the Orlando area each year.
Related Posts
Filed under: Advice Needed
Leave a Comment
XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
TrackBack URL | RSS feed for comments on this post.