… and is it worth it?
“Will I make a profit” is a question we’re often asked when potential Florida rental owners quiz us about what it’s like to own a villa in Tuscan Ridge, Orlando.
After 3 years of strong rentals and some great feedback, by the start of 2016 we had lost around $19k but invested around $13k on large one-off repairs such as AC and a pool heater. Our fourth year has brought no large expenditure so we are finally on track to break even on paper for the first time and return a profit.
So will I make a profit then? Not unless you get up to forty weeks of rental.
The dreaded tax form
We’ve done pretty well out of our rental in all honesty. Here’s some stats:
- 2013: 35 weeks ($107 average daily rate)
- 2014: 36 weeks ($122 average daily rate)
- 2015: 45 weeks ($118 average daily rate)
- 2015: On track for 41 weeks but the GBP FX crash has had a big impact
Large one off expenses
- 2013: $6k (pool heater)
- 2014: $1k (renovations, pool pump)
- 2015: $6k (air conditioning)
- 2016: $1k (renovations, pool lights
Profit (or loss)
- 2013: -$15k
- 2014: -$8k
- 2015: -$500
Our figures include items such as mortgage costs but not the villa depreciation on the US Tax return because this isn’t a real expense in respect to book keeping (they claim it back as capital gains when you sell).
On average a villa will cost an average of $2k per year in what I call “one off” costs. Even in years where nothing goes wrong, an AC unit will eventually fail after 10 years so you want to even out your predicted costs.
So in 2015 you can see that with an exceptional 45 weeks of rental we lost $500, remove the one off cost of $6k and allowing for an average of one off large expenses at $2k per year this equates to a profit of $3.5k. Roughly speaking you’ll therefore need 40 weeks of rentals to break even. Our 5 extra weeks brought us a small profit of $3.5k.
Forty weeks to break even. Seriously?
Not exactly. Not all rentals are equal. We include our maintenance trips to Florida in our expenses, and our mortgage. Take either of these out of the equation and you’re making money. If you don’t have a mortgage on your property you’ll make money at anything more than 35 weeks of rental. And if you don’t need to travel out to maintain it then it’s about the same although you’ll spend a lot more money on handyman charges.
So is it worth it? Yes.
Cue cringe-worthy picture of us jumping in the air in Tuscan Ridge.
If you put the effort into your rental and enjoy it at the same time then yes, it is worth the effort. With 40 weeks of bookings you can eek out a long term capital investment that is just about paying for itself and that you can enjoy too. Be aware that you’ll need some serious energy to do this – up to half a day a week set aside to managing the property, marketing, and rentals.
So will I make a profit? It’s not likely unless you find a popular community such as Tuscan Ridge, but you will enjoy it as a place to visit and have fun! Once you stop enjoying your home, I would suggest it is time to call it a day and cash in your investment instead.