As great as the market near Disney World is, it’s also one of the most competitive ones out there, and it has a bevy of potential problems which have historically been the downfall of many ill-prepared real estate investors.
Specifically, some of the challenges associated with buying investment property near Disney World are:
- Properties are valued steeply
- Consumer expectations for lodging quality are high
- Short-term renting or lodging is the norm
- There’s a ton of competition both upmarket and downmarket
- Both appearances and marketing matter immensely
- Business decisions at Disney can change the market overnight
As you can see, the risk of overpaying for a property is quite high, and it’s no surprise why. There are plenty of investors in the market, and many are willing to get into bidding wars if they think a unit is located favorably and in a rentable condition. It’s not uncommon for people to bid up the price of a well-positioned rental by 30% or more out of a fear of losing out to a competitor. Major players are especially vulnerable as their ability to make all-cash offers over the asking price tends to make for sloppy due diligence practices which might reveal a lower valuation. And smaller businesses can typically only grow as quickly as the presence of appropriately-priced properties allows; there’s just no point in getting into a bidding war when it’s safer to wait for a new opportunity.
On that note, don’t expect anything good to stay on the market for long. If you can’t evaluate and move to close deals quickly, you’re going to struggle because the competition won’t have the same problems on average. What’s more, know that being in a rentable condition generally means being in pristine condition, so budgeting the time and money to make relatively small repairs is a concern.
People head to Disney World for vacation and they expect their lodging to be fresh, polished, and in a like-new state of repair. Even with units priced for the downmarket, there isn’t much tolerance for run-down locations. Having up-to-date appliances is something that I recommend as it’s generally better to avoid offering an amenity unless you can offer it at a high level. Expect to pay for regular cleaning and maintenance or face complaints.
Similarly, checking into a rental unit needs to be seamless and as frictionless as possible, so it might help to hire a property manager. This raises another issue, though, which is that operating your investment property near Disney World might be a bit too close to running a hotel for your tastes. It’s true that you aren’t obligated to buy an investment property with the goal of turning it into a profitable rental unit, but it’s the play which attracts most real estate investors to the area. If the idea of actively managing your rental like a hotel sounds like a nightmare, it’ll be a difficult market for you to participate in.
The other set of challenges stems from the fact that you don’t really control the single most important variable: Disney. If Disney suddenly decides to quit Orlando, you’ll be left holding the bag. Of course, Disney isn’t about to destroy its business, but it’s entirely possible that some of its new policies or initiatives lead to less (or more) inbound traffic to the region.
To put all of the above issues into context, overpaying for properties relative to their rental income is probably the most common and most damaging problem for investors. I’ll teach you how to avoid it in the next section.