In the Orlando housing market, the gap between mortgage payments and rent payments has widened. Instead of a mere $20 as recorded in January of this year, mortgage payments average at $1,200 and rent averages at $1,050, according to Orlando-based FBC Mortgage. Even with this information, a potential homeowner or tenant may still remain undecided on whether to buy or rent a home in Orlando.

When you purchase a home, the freedom of moving on your own time vanishes. Granted, landlords require a tenant to sign a lease agreement, but it’s easier to not renew a lease than to undergo the process of putting your house on the market, hiring a real estate agent, and hoping to receive an acceptable offer in time if you’re on a deadline.

On the other hand, owning a home provides the security of home ownership and can be beneficial if you are starting a family. Before making the decision to buy a home, consider your plans for the next five years. If they involve marriage, children, or a long-term career in the same area, home ownership may deliver the best option for you. However, if you foresee a possible job relocation or aren’t quite ready to settle down, renting a home in Orlando provides the safer, more flexible option.

Whether you choose to rent a home or to rent out your home to other tenants, Rental Home Management Services in Orlando is here to take out the frustration and make the process as easy as possible. The satisfaction of our tenants and homeowners always comes first. Call us at 407-261-5610 to get started today!

Previously, I discussed advantages of buying rental homes and paying with cash. To further that discussion I offer this analysis:

Total purchase expense: $140,000.00

Rent amount: $1350.00 per month

Cash Purchase

Annual rent at $1350.00 per month                                 $16,200.00

Vacancy and collection (9%)                                          $ 1,458.00

Effective gross income                                                  $14,752.00

Less operating expenses:

Taxes                                                                         $ 2,000.00

Insurance                                                                    $ 1,200.00

Maintenance and management costs                                $ 2,950.00

Pretax cash flow:  (yield 6.1%)                                      $ 8,602.00

Mortgage Purchase Option 1

(Principal and interest $749.69

70% loan to value mortgage

15 year term, 4.5% interest)                                           $8,996.28

Cash flow income or loss:                                                 $394.28

Mortgage Purchase Option 2

(Principal and interest $535.50

50% loan to value mortgage

15 year term, 4.5% interest)                                           $6,426.00

Cash flow income or loss:                                              $2,570.28

My personal belief is that many people who buy a Central Florida rental home do not compare the numbers to ensure that there is a possibility of positive cash flow. Also, they may not plan for the upkeep and professional maintenance of a home that will be required during long-term ownership.

As I have stated previously, I believe that Orlando real estate is a wonderful vehicle in which to grow wealth over time, but only if adequate property research is completed and an appropriate deal is made during the purchase of the property.

As always, this is my opinion. I welcome yours.

Rental Home Management Services is proud to help the Central Florida community by matching single family rental homes with tenants, collecting rent payments for property owners, and arranging all maintenance and repairs through our professional property management services. To learn more about how we can help you, call us today at (407)261-5610.

A problem that conflicts many hopeful investors is how they should buy their Orlando rental home property. Which is a smarter decision, cash or mortgage?

First, start off by asking yourself this: What can you afford to do? Is your income high enough that you can afford to pay the mortgage and upkeep on your investment property in addition to your own living expenses? If you aren’t able to collect rent for three months, would your credit suffer?

Most economists and financial wealth managers would counsel you to have at least a dollar amount equal to six months of your total monthly expenses saved in cash before you think about investments.

Now, ask yourself this: Do you have additional cash saved to invest in a Central Florida rental home without a mortgage? A couple benefits of paying cash for a home include:

• There is no monthly mortgage to pay whether the rent is received or not.
• It is easier to fluctuate the rent amount with the periodic market rent and still enjoy a positive cash flow.

Consider paying cash for the property, place a qualified rent paying tenant, and then replenish your cash with a low loan-to-value ratio loan. Your interest rate as an investor will probably be lower than if you obtain financing without the rental income. The loan will also likely be easier to obtain because your single family rental property will already be showing a steady income stream.

Wealth through real estate is grown over time. If you pay cash for the properties, it might take you longer to obtain the number of properties you desire in your portfolio.

However, consider this: if you own three rental homes—free and clear—and you have a positive cash flow of $8,000 per year for each property, you are clearing $24,000 a year. If you are buying $120,000 worth of properties, you can buy one every five years. You’ll also certainly have less stress because you will not be worrying about being able to pay for maintenance, property management, or that roof that really needs to be replaced.

Now, imagine that you went the mortgage route. If you buy three properties with a 75% loan-to-value ratio, let us guess that you will make 25% of that number, or $2,000 per property, or $6,000 per year. It wouldn’t take many unexpected expenses or prolonged vacancies to lead you to a negative cash flow situation. If your loans are for fifteen years on these properties, it will be a long time before you are in the same position as the person that paid cash for their single family rental properties.

As always, this is my opinion. I welcome yours.

At Rental Home Management Services, our team of professionals is dedicated to minimizing your stress while maximizing your return on investment. To learn more about how Rental Home Management can help you, give us a call today at (407)261-5610.

If you’re asking yourself “When should I invest in that rental property?” what are you waiting for? Now may be the best time to buy!

Prices in the Orlando Metro area are 67% below their peak, so the prices on single family homes may not get better than they currently are (according to some economists). Experienced investors already know that trying to time a market may mean that they miss the best opportunities. But, even if the price on the home you want to buy does go a little bit lower over the next few months, how much are you earning now? Probably next to nothing at all!

Taking that money that is just sitting there and making a 6%-7% yield on a Central Florida rental home just makes sense (this is an estimated yield on a cash purchase with a professional property management company handling the leasing and management of the property—the yield is higher if you decide to manage it yourself).

Even if you plan on leveraging the purchase, when do you think interest rates will be lower? Maybe next month, but maybe never!

So, find an investment property at a price that you are comfortable with. Do your research and know the potential rental rate and the positive aspects of the property that will cause today’s prospect to rent your home.

If you wait, the prices may go up, along with interest rates, and you will have a harder time finding the perfect deal.

In 2004, my husband and I decided to start purchasing rental homes. We bought two single family homes (with cash) early in 2004. We have enjoyed a steady rental income from these properties since that time.

The prices skyrocketed in 2005, 2006, and 2007. We did not buy any properties because the cash flow just wasn’t there due to the high prices of real estate during that time. As you may know, prices soon fell faster and came down more than they went up during those three years. In 2009, we were able to purchase another Orlando rental home (again with cash) that currently rents for over $1,500 a month. Yes, the price of that home has fallen a little more, but we collected $18,000 a year in 2010, 2011, and will again in 2012!

So, now is a perfect time to buy a rental property in Central Florida. To learn more about the Orlando real estate market and why you should invest in a single family rental home, give the professionals at Rental Home Management Services a call today at (407)261-5610.

Continuing on with the theory that Central Florida real estate is still a good investment that will generate wealth over time, the decision must not only be what to buy, but also where to buy it.

If you are planning on investing within a reasonable market area close to where you live, study that rental market. Ask professional residential property managers about the real estate market where you are looking to buy. Don’t rely on sales professionals to provide you with the rental estimate! Sure, they are the best at guiding you to a good sales price, but probably are not well-versed in the rental market.

In the Metropolitan Orlando area, I recommend studying the zip codes that provide a higher price per square foot in a rental market analysis. Look for the best price on a single family home that will generate a rent rate that the median household income can cover (as stated in my previous post, Orange County is $1,350 per month, and Seminole County is $1,550 per month). By studying the area like this, you will be marketing to a large number of people who can afford your rental home. For every $100 per month you are over what the median household income can afford, you are shrinking you pool of potential applicants. This is especially important in our current economy, with households stretching every dollar they have to make ends meet while still providing a quality home to live in.

Once you find a potential single family rental home to purchase, consider what the neighborhood looks like. Will your renter be proud to rent this property and ask friends over for get togethers? Is the curb appeal positive? Can the curb appeal be improved with nominal dollars? Does the property allow easy access to shopping, schools, churches, and access roads?

Consider taking some friends to the property (those honest ones who will look you in the face and tell you the truth no matter what) and ask they if they would rent this property for your prospective rent amount. If they say no, ask why. You may learn a valuable lesson as to how others view the property. It’s certainly better to find out before you buy rather than after!

As always, this is my opinion. I welcome yours.

For years, Rental Home Management Services has been helping to take the frustration out of managing and searching for a Central Florida rental home. Whether you are an owner or a tenant, we are here for you. To learn more about our services, give us a call today at (407)261-5610.

Previously, I told you that I still believe investing in Central Florida real estate is still a good way to accumulate wealth over time. But, the decision of what to buy is very important—not just any old residential property will do.

First, study your market area or ask an investment professional for advice. If you research how the Orlando rental market behaves before you invest in the property, you won’t be surprised.

Studies are showing that the demand for rental properties is high, but the inventory is relatively low, thus causing monthly rental amounts to rise. Additionally, people moving out of their current rental home due to a foreclosure or short sale typically rent another single family home; they do not move into an apartment or condominium. Further, new Central Florida residents are renting their homes before they decide to purchase one. Why? Two very important reasons for this are:

• They are not sure where they would like to live.
• They believe prices are still going down and interest rates may go lower (I do not necessarily agree with this logic, but it is what new residents believe).

The median household income in Orange County is approximately $48,500 annually. In Seminole County, it is approximately $56,000 a year. As such, the rental amount a household in Orange or Seminole County would most likely pay would be $1,350 and $1,550 monthly, respectively (calculated by dividing the monthly household income by 3, making the rent about 33% of the monthly household income).

In the Central Florida real estate market, you can find a three bedroom/two bath/two car garage home for between $140,000 and $170,000. Let’s take a look at the cash flow for a rental home with a total cash purchase expense of $140,000.

Purchase expense                                                                 $140,000.00

Annual rent at $1350.00 per month                                            $16,200.00

Vacancy and collection (9%)                                                    $  1,458.00

Effective gross income                                                             $14,752.00

Less operating expenses:

Taxes                                                                                    $ 2,000.00

Insurance                                                                               $ 1,200.00

Maintenance and management costs                                           $ 2,950.00

Pretax cash flow:  (yield 6.1%)                                                 $ 8,602.00

This is a yield of 7.1%. Where else are you getting a return of 7.1% after expenses right now?

As always, this is my opinion. I welcome yours. Before making any sort of investment, make sure you contact a professional financial advisor.

At Rental Home Management Services, we are dedicated to helping new residents find their perfect Central Florida rental home. To learn more about the services we offer, give us a call today at (407)261-5610.