Mulling a FL vacation rental purchase


Thinks s/he gets paid by the post
Mar 7, 2004
Others in my family have recently purchased condos in Florida (due to the current favorable real estate prices currently) which they are planning to use as second homes.

As I was looking at some Naples, Florida real estate sites, I'm wondering if it might make sense and if the time is right to purchase a Florida condo to use a rental.

From checking, it appears as though there's a healthy seasonal rental market (many rent for 3 consecutive months for $2500-3000/mo for a >1000 sq. ft. 2 bedroom/2 bath unit). Most of the ones I checked are already rented for this upcoming winter season.

The area is a quieter location appealing to senior adult couples rather than partiers.

Two BR condos in well-maintained communities that sold for $250K- $350K (in the super-frothy real estate market) just a few years ago can be found for $100K-$125K (with some digging). Taxes, insurance and condo fees seem 'reasonable'.

I'm guessing that real estate values in desirable areas of Florida will, once again, begin to appreciate.

Best case scenario: The rental income to covers all the expenses (and then some) and Naples real estate begins to appreciate.

Worst case scenario: I end up with a second home in Naples.

Any suggestions, words of caution, things I should consider? (Full disclosure: I've never been a landlord and I live about 1400 miles away).

I would say it depends on you. We had a vacation home 2 hrs away and it became a burden. We felt compelled to use it and found the only time we went was to do maintenance . We didn't rent ours out so that's one big difference. I have zero interest in owning a 2 nd property ever again. Let alone working as a landlord.
I would say it depends on you. We had a vacation home 2 hrs away and it became a burden. We felt compelled to use it and found the only time we went was to do maintenance . We didn't rent ours out so that's one big difference. I have zero interest in owning a 2 nd property ever again. Let alone working as a landlord.

Since it would be a condo, no exterior maintenance would be required on my part. (Just paying the special assessments if the expenses are above and beyond the condo fees.)

There's large number of rentals condos in the area, so finding a local person to clean and a handyman to maintain whatever is needed on the interior should not be a problem.

IRS rules would prohibit personal use more than 14 days or so, if I intend to claim this as a rental business.

Most snowbirds will live in their condos in the winter season. The fact that the dates are blacked out on VRBO does not mean that the condo is bringing in rental income.
My DW bought a vacation rental, 1700 sq ft 3bd/3bth Pacific ocean view Penthouse 8 years ago for similar numbers. It has generated 2k-3k a month year round and paid for itself in 4.5 years. Since the Financial crisis it has quadrupled in value and Americans and Europeans are still buying. We had considered another one, but the returns would only be about 8% a year and she can get more than that in a CD.
consider the financial situation of the condo association. if there are a lot of foreclosed condos or owners that just walked away, or are not paying their dues, you could get into a bad situation. I was raised in Naples 58-74 and loved it. now it is much bigger and the traffic in the winter is very congested. good luck
some condo associations limit the quantity of units that can be rented in a complex. might be good to verify if affording to keep it longterm will be contigent on some kind of rental income
I think it is probably a good time with the low interest rates to start investing in the hard hit areas as long you have a long term perspective 5 years and probably 10 years before you may see an increase in price. On the other hand rental income should more than cover expenses unless we have another economic crisis.

BillNova and Web diva suggestions are right on the money. You'll want to do some serious digging into the financial situation of the condo associations as well as the CCR (i.e. rules) regarding rentals etc. Also in a situation like this where there is likely to have been a foreclosure or short sell, you want to make sure that title company has a high rating in the event of a future problem with the title. Unfortunately now days a good rating for a title insurance company is A-
We had a condo on Ft. Myers Beach back in the early 90's and did well on the rentals. I worked for a realtor who also had the condo rental business. I'll have to say that the rental business was very above board and very professional. They also ran the cleaning service so the rental was easy for us to operate. You could always count on Dec thru Mar as being fully occupied. We were getting $3000/month back then. It covered our expenses for the year so it was paying for itself. We sold it in 1995 for $135K and since then has tripled in value. Wish we had never sold it.
My DW bought a vacation rental, 1700 sq ft 3bd/3bth Pacific ocean view Penthouse 8 years ago for similar numbers. It has generated 2k-3k a month year round and paid for itself in 4.5 years. Since the Financial crisis it has quadrupled in value and Americans and Europeans are still buying. We had considered another one, but the returns would only be about 8% a year and she can get more than that in a CD.

Where do you get CDs earning >8%?
I appreciate all the feedback and cautions to verify regarding the condo assoc. itself and their CCR and rules regarding rentals, number of short sales/foreclosures, etc.

clifp: How does one find the high-rated title companies? (And now I'm curious, what if someone had purchased property that was title insured (by a low-rated title co.) only to find out years later that the title was not 'clear'. What then happens?)

If I were to purchase, I'd likely plan on holding the property for many years. I'm in my early 60's and come from a long-lived family, so the time horizon could be several decades or more.

please read the below link that I pulled together for the Cape-Coral/Fort Myers City Data forum.

Cape Coral/Fort Myers FAQ - MUST READ FOR NEWBIES! (Miami: rental car, low income) - Lee County - City-Data Forum

The key thing about second homes is resisting the urge to buy before spending time initially renting in order to get the inside scoop, HOA issues, city/state budget issues, best time of year to buy and so on.

In South Fort Myers, which is really North North Naples, I know some who do well with VRBO, but this is in the context of significant personal use as well. For those not using the property, they tend to lease on an annual basis unfurnished to locals.

Those attractive monthly rental rates are mainly January-March, with November, December and April being iffy, and most units sitting empty May-October. They really roll up the sidewalks in Naples specifically out of season - the restaurant strip is largely closed up in summer last time I was on 5th Avenue in July.

For a 12 month rental investment, I would lean more toward Orlando as near as possible to Disneyworld etc. Better yet, buy a triplex within 5 minutes of your house and self manage if you want to become a landlord.

Another combo is dentists, doctors and businesspeople who use one unit and own other units in the development for investment purposes, but they come down a lot to keep an eye on things and deal with problems. There are always problems and no free lunch. There is still a lot of peak purchased underwater inventory working through the system.

I am in one of the few developments that has continued to build out through the crisis. I would suggest anyone interested in the South to check out Paseo Fort Myers, which is very unique. I have no personal financial axe to grind on this...I am a retired pubic servant who is very passionate about Florida and our winter second home lifestyle.
When we're in Florida, one of our "fun" things to do, is to look at properties. Not for buying, though from time to time we think about moving from our mobile home park, and just find it interesting to stay on top of what is really happening to values and in general, to try and look ahead three or four years... guessing which corporations will make it, and which will fall by the wayside.

We haven't been into the "condos" as much as the single home retirement corporations... Many common concerns, mostly involving the financial status of the corporation, whether homeowners association or private corporation.

Friend Rita bought into an upscale condo... beautiful, but not cheap. Even with a review by a lawyer of the corporation books, she had an early surprise one week after purchasing... $10,000 for unexpected repairs to her second story porch/patio, then a month later a $7,000 assessment for her share of a new roof.

Florida has a Homeowners' Association Law/Statute 720

and here is a listing of Associations in selected Florida Cities.
Florida Homeowners Associations and Neighborhood Associations

I would suggest that anyone who is considering retirement in Florida, become familiar with the laws and rules governing the relationships with the corporations.

This is not intended to scare anyone away, but to help understand how important it is to know... upfront. IMHO, much much different than the laws that I recall from living in NY, (Saratoga), Mass., R.I., Ill., Maine, or New Hampshire.

The "Prospectus" is the contract with HOA's, and the strange part of this is that so few first time owners even recognize that it is the legal document that spells out the specifics of their rights and responsibilities.

We live in Leesburg... less traffic, and a little lower cost of living (goods and services).
Last edited:
We keep thinking of making the 'buy' jump in the Lauderdale area. One of the things that scares us off are stories of condo assessments.

Many of the condos in FLL are getting near the 50 year old mark and we've heard of annual assessments of $20K, $30K and up for new elevators, seawalls, roofs etc.

Anyone had any experience on this?
After 10 years of looking DW and I are of the firm opinion that renting in FL is still a better deal. Flexibility and no obligations are the key. We've always been cash purchasers of what we wanted but there are too many variables for us to consider a purchase, even at bargain prices.
one pattern I have noticed is bigish rational money that makes decisions based on spreadsheets, often ends up renting rather than buying, in Florida

often there are more subtle issues in aspect that we did not anticipate is the importance of social intensity in Florida neighbourhoods for the retired or snowbirds or second homers, and there is an element of being a second class citizen or perceived as transient, if you are renter.

the females of the tribe may resent living with another person's decorating decisions, if you are renting furnished, and decorating a second home is part of the financial victory lap experience

a key factor for us was the belief in investing in things you are going to control and use, and buying property cash with a multi-decade planning horizon is a good way to legally hide money from the taxman and so called financial advisors or fraudsters.
Nice to hear from you, omni. I don't have words of caution about the subject of your post. However, since you have never been a landlord (like me) I guess in your shoes I would prefer to stay away from any real estate investing. My 2 cents only, sorry i cannot be of any help.
omni550 said:
Any suggestions, words of caution, things I should consider? (Full disclosure: I've never been a landlord and I live about 1400 miles away).

Below is an excerpt (from 2010) of a blog that I follow; it's from "Larry's Take on Cocoa Beach Real Estate"; blog link also attached.

I like this guy's blog - it has lots of good info and a low BS factor. It's message on the OP's question is: it's harder than it looks to make the numbers work. Although Larry is speaking about Cocoa Beach, I expect the message applies to multiple Florida locations.

Larry's Take on the Cocoa Beach Florida Real Estate Market

Positive cash flow, does it exist?

I get tons of calls and emails from people looking for a "deal" on a beach property that will generate positive cash flow and offer a get-away spot for occasional trips to Cocoa Beach or Cape Canaveral. There is a pretty narrow set of requirements for realization of positive cash flow. Let's do some simplified math to help us narrow our search. Say we're looking for a condo in the $200,000 range. We'll assume a 30% down payment (Fannie Mae requirements for 2nd home condos) on a 30 year mortgage at 5.5%. Our fixed monthly costs will be (estimates but close to reality);

property taxes__ 250
condo fees_____ 350
utilities________ 130
insurance_______ 70

That means on this condo the buyers will need to net $1594 per month after management for all 12 months of the year. Subtract a couple of months for personal use and the net bumps to $1913 a month neccesary to break even. Without even looking for examples I can tell you that there is not a single $200,000 condo anywhere on the beach that will bring $1913 per month rent year round even if it were possible to carve out 2 months for personal use and rent the other 10 months. Does this mean there are no cash-flow possibilities? No. If there were no mortgage in our example the numbers would slide into the relm of possibilty but we're still faced with the impossible task of renting 10 months while carving out two months for our own use. In this case, with no mortgage, the only realistic possibilty is to not use the unit ourselves and have a long-term renter paying at least $800 per month, a very feasible scenario.

The biggest (but often invisible if you don't ask) fly in the ointment for investors exploring condo investment is rental restrictions. I have written about this before. In a nutshell, Cocoa Beach and Cape Canaveral, unlike most Florida coastal communities, have very few condos that allow weekly rentals. Most here restrict rentals to at least one month and some have as much as a one year minimum rental. Even with a one month minimum, an owner is faced with the daunting task outside of the main snowbird season of January through April of finding tenants who want to rent for at least one month. Our summer and fall guests are primarily vacationers who are here for one or two weeks. That reduces the options to finding a long-term renter which kills the idea of occasional personal use of the unit. The obvious best solution to this dilema is a weekly rental unit.

Let's explore the same scenario as above but with a weekly rental unit in the $200,000 range like Chateau, Ola Grande or Cape Winds. The units that are selling in this price range in these complexes are renting in the $600 to $900 per week range. It quickly becomes obvious that the no-mortgage scenario is only going to require about 50% occupancy to net enough after-management cash to break even. With no mortgage, positive cash flow is a very real possibility with halfway decent occupancy. Expect to pay more (20 to 40%) for good short-term rental management. Good long-term management can be had in the 10 to 12% range. If an owner is able to and does their own management the possible returns for weekly rentals become quite attractive. The other obvious plus of the weekly rental units is that owners can chop out a few weeks here and there for themselves without destroying the income stream.

For buyers who don't want or need personal use of the unit, one other way to tilt the odds in their favor is to find a unit at a price far below the assumed $200,000 purchase price. In our first scenario, dropping the purchase price significantly assuming the same desirability of the unit, the numbers begin to shine a little brighter even with a mortgage and a long-term renter. There are some other tweaks that will change the numbers like condo fees and utilities but those differences aren't big enough to change the tone of our hypothetical purchase.

As a potential condo buyer, your takeaways here are;

All other things being close to equal, a well-managed weekly rental unit will always generate more income and offer greater flexibility for personal use.
If you do stick with longer minimum rental buildings, don't think that because January through April rents and demand are high that you'll be able to find monthly renters the rest of the year. If you do, consider yourself lucky.
Be realistic with your expectation. Only considering positive cash flow scenarios might mean never using your unit yourself or could have you looking at units you don't like. The benefits of owning a condo that you use occasionally that is slightly negative on cash flow might make sense.
Ask your buyer's agent about rental restrictions. Not all of them will go out of their way to tell you why your dream of income/personal use won't work in many of our complexes. Many of them have never stopped to even think about the implications of restrictions.
And lastly, if you don't have to have the income, you'll probably enjoy your time here more in a longer-term building without all the transients. It's all about what you want and need.
Be careful about hoa fees, they will and do go up. Also don't just look at what the potential rent is, look at what if someone trashes the place, $$$$$$$, think party animals, and lots of booz. I was a landlord for 40 years, maybe that's why I hate tennants. Also if it's a rental unit you will have to have different insurance not homeowners. Insurance in Fl is high, very high. As mentioned before how soluble is the hoa. I suggest you rent there for a month and see what's going on in the building and the area. Sleep on it and look at the positive and negative side of this purchase. If you buy it you own it and it may not sell fast if you want out.
A friend of my family's had a rental place in a affordable blue collar area. They had a problem tenant who was finally evicted by the property management company. Prior to the tenant leaving, they poured used motor oil, a carcinogen, all over the walls and floors. The cleanup was to cost more than the house was worth. (This also happens in meth lab type situations.) Not sure what this friend ultimately did...jingle mail, bulldoze, or what.

This is not the norm for landlord experiences for sure, but nevertheless things like this do happen. So far, I have not see returns on rental real estate that make it worth it to me to take that risk over REITs.
Top Bottom