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Short term rental platform Airbnb released its first financial results after going public (IPO). In 2020, the platform earned US$ 3.4 billion, 30% less than that reported in 2019, which was US$ 4.8 billion. The drop is mainly due to the pandemic, which slowed down the number of bookings on the site. However, the result still surprised the market, which expected a considerably worse scenario. The expectation is that 2021 will show a trend of resumption of bookings on the platform, now that more and more people are joining travel in the midst of the pandemic. The promising future fuels the desire of investors in search of income from short-term rentals.
Investing in vacation homes in tourist destinations, such as Orlando and Miami, is a safe and profitable investment. The city of Orlando, alone, received more than 75 million people in 2019, a number that proves the great demand for accommodation in the region. In 2020, the state of Florida benefited the most from vacation rentals during the pandemic. People from all corners of the country took advantage of the pandemic and the consolidation of remote work to spend long periods and even take up residence in the “Sunshine State”. As a result, the central region of Florida, where the city of Orlando is located, was one of the regions that received the most new Americans across the country, surpassing cities already known to experience population growth, such as Austin and Atlanta.
If you’re considering investing in Airbnb-oriented real estate, it’s important to consider a few factors. Read on to find out!
Pay attention to regulations in each region and condo rules
Before buying, try to fully understand the legislation on the practice of short-term rentals in the region. Your broker will be able to guide you in this regard. In Florida, for example, the practice has considerably different rules from one city to another. The Orlando area is traditionally geared towards this type of business. The city of Miami is more restricted.
In Miami most condos prohibit rentals for periods shorter than 3 months. Unlike Orlando, where there is specific zoning in the city that allows the practice, in Miami the rule is generally established by the statute of each condominium. The experience of the realtor is essential to know which buildings allow for short-term rental.
Miami recently received some launches in the Downtown area aimed at the practice of short-term rental. We’ll talk more about these ventures in the last topic.
Hire a property manager
You can even try to manage the vacation rental on your own and deal with all the bureaucracy of check-in/check-out, maintenance of the property, collection of values and preparation of the property for the next client. However, it is highly recommended that you hire an administrator to do this work for you. Rent management is practically impossible if you live in Brazil and your property is in Florida.
There are several advantages to hiring an administrator. In addition to not having management work, the administrator takes care of all the disclosure on rental platforms (Aibnb, Booking, Homeaway, etc.) and also of attracting customers. A reputable administrator also already has the title of “Super Host” on these platforms, which brings more authority to the advertiser and makes renting easier. If you are just starting out in the activity, it will take a long time to win this title.
We created an article explaining in detail the Total Rental Management. Check it out
Understand the concept of “Second Home” and “Investment Property”
In Florida the concept of “second home” brings some differences in relation to “Investment Property”. The rating, even, may impact interest rates for financing. Let’s see:
Second Home Property
The concept of a second home refers to a vacation property, where the owner and family spend seasons several times during the year. They may eventually rent the vacation rental property to third parties. However, the main purpose would be for your own use.
Buying property as a second home can be a good idea if you regularly visit a destination. With this, you will have less expenses with hotels and still be able to have more freedom in a property that is yours.
Investment Property
An investment-oriented property has a slightly different concept. The main objective here is not to spend seasons in a destination that you enjoy, but to earn income with rent, whether for short or long term. You can even spend a few seasons at the property, but not as often as a second home allows.
It is important to separate these two concepts well in order not to create false expectations regarding the return on investment. Clearly, the expected return on a property aimed at Second Home is less than that intended for investment, as in the first situation the property will be available for rent for a shorter period during the year.
A vacation home in Orlando is often purchased as Second Home. The owner, realizing the high return on vacation rentals, often chooses to buy a second home, this one for investment. It’s not uncommon for clients who are already in their fourth or fifth house, making Orlando homes an excellent dollar deal.
Stand out from the competition
Like any business, it’s important to differentiate yourself from the competition. Buying an inexpensive property, such as a few bedrooms, will place your investment in a category with many competitors. A house with more than 4 bedrooms in a luxury condominium will have fewer competitors. That’s why the bigger houses in Orlando tend to bring bigger returns too. Orlando homes with more than 4 bedrooms are generally the most recommended for rental income.
It is also important to analyze the condominium carefully. Is there a good infrastructure? Is it well located, close to the main attractions? These are features that set your property apart from the competition.
Hire an experienced realtor
Always seek advice from a good broker in the region you are looking to invest in. You won’t pay anything more for it. In Florida, the seller is the one who pays the broker’s commission. Some people have the false perception that if they buy directly from the construction company, they can get discounts or better prices. That doesn’t happen. Any discount that the construction company offers, the broker will also get it. In fact, it is much more likely that the broker will get better discounts and incentives, as he is familiar with all the incentive programs of all construction companies in the region.
The construction company will often try to “push” stranded units. While the broker will always indicate the best opportunities.
Prefer projects formatted for practice
We’ve talked a lot here on the blog about vacation homes for sale in Orlando. These are houses built specifically for the purpose of vacation rental. They are usually located nearby Orlando’s main attractions and theme parks.
In Miami, the market works a little different. There are no zoning such as the ones we see in Orlando, but there are condos built for the practice that allow Aribnb and other short-term rental activities. These are condos specially built and formatted for the practice making the operation more practical and efficient.
One example is Natiivo Miami, a tower originally developed in partnership with Airbnb. Each unit can be used as a full-time primary residence, but short-term rentals are encouraged, with staff managing the units and listings, handling guest issues and scheduling cleaning. The project is already over 65% sold.
Another launch, also in Downtown, formatted for short-term rental is the Legacy Hotel & Residences. The development is located inside the Miami WorldCenter, one of the largest mixed-use complexes in the world.
Interested in investing in Airbnb Florida real estate?
AMG International Realty is a full service brokerage firm in Florida. If you are interested in learning more about investments in real estate for vacation rentals, contact us right now and chat with me on WhatsApp: +1 (305) 318-6968 (Heloisa Arazi).
