Resort Community vs. Non Resort Community | Which Is The Right Choice For Me?
Vacation rental homes are a relatively new concept for most of the world and around the United States. Within the past 10 years, the world has seen an explosion of vacation rental inventory through the efficiency and mass marketing success of online travel agencies such as Airbnb and VRBO. However, Orlando had an established vacation rental market, even before the online travel agency boom. There were communities already established that would allow for this type of rental through travel agents, property managers, and individual property owners. Many of these early communities had 3 to 5 bedroom single family homes, each with a private pool, but no real community amenities. They were a place to stay, close to Disney with more space than a hotel room, but less cost than staying on Disney property.
Since the massive growth of the vacation rental market, Orlando has seen growth in a new product, resort style vacation rental communities. Resort style communities often offer a community pool with slides and a children's play area, a tiki bar, clubhouse with a game room, movie theater, convenience shop, and are almost always gated, with a security guard 24/7.
These resorts are now the top option among travelers to the Orlando area, but they're not always the number one choice for property owners. In this article, we'll dive into the pros and cons of the different communities, while also explaining the difference of cost of ownership and rental revenue differences between the two options. Our goal is to help a vacation rental buyer determine which of these two options fits their investment guidelines best.
Resort Communities
Pros: It's easy to find many pros to vacation rental communities, and we listed many of them earlier in this article. They're guest favorites with tons of amenities for guests, and provides the dream resort style vacation that vacationers are really looking for. This not only increases the volume of travelers interested in booking your property, but also carries a higher nightly rental rate as a result of this demand. Resort communities may also have ties with entertainment venues and other things for guests to do. They also may have ties with booking agents or take booking injuries directly for homeowners to benefit from.
Cons: All of the resort amenities do come at a price. The major downside to resort communities, is that it's difficult for many to afford them. The prices of the homes are higher than comparable homes in non resort communities, raising the barrier to entry. This of course increases the annual property tax payment, thus effecting the annual cash flow. We'll get more into the cash flow later in this blog. Similarly, the HOA fees are higher than non resort communities, again having an impact on the cash flow from rental revenue.
To summarize rental income, resort communities will always achieve a higher rental revenue. A 4 bedroom in a non resort community may achieve an annual rental revenue of $30-$35,000, while a 4 bedroom in a resort community can achieve close to $50,000 in rental revenue (nightly rate x number of nights booked). Again, that's somewhat offset by higher costs such as property taxes, and HOA fees. To see a true breakdown of rental revenue and expenses, contact us to receive a free cash flow estimate.
Non Resort Communities
Pros: Non resort communities are still a great option for many home buyers. Some golf communities may suit a golfing family better than a resort community. There are a number of golf communities that have a clubhouse for golfers, driving ranges, and pristine 18 (sometimes more) hole courses. Some families may be looking to get into a property affordably as well. The non resort community is a perfect fit for those on a tight budget as cost to purchase is lower, HOA fees, and property taxes, are all lower as we mentioned previously. There's also lots of room to update and redecorate older homes in non resort communities to your liking, or to maximize for rentals. Lastly, there are less restrictions with non-resort HOA communities. If a family wanted to rent a non resort property as a short term rental for a number of years, then switch the property to a long term, or more traditional rental with no problem. Some short term communities pose restrictions on occupancy and what you're allowed to do with the property. Lastly, these communities are usually located a bit closer to Disney, than some of the resort communities! Not only is this great for travelers looking to visit Disney, but resale values should continue to rise as travel to Orlando also rises, and as annual visitors to the Disney area also continues to increase.
Cons: We discussed a few of the cons before, but just to quickly recap: Non-resort communities do not rent as well as resort communities, and there is an obvious difference in the level of enjoyment that a guest or homeowner will experience during their stay.
Again to see a true breakdown of rental revenue and expenses and get a detailed comparison of a non resort property to a resort style property, contact us to receive a free cash flow estimate today!