The costs of ownership
What are the costs of owning a vacation home in Orlando? If the purchase is being treated as a straight investment, a reliable total figure for the costs of ownership is a necessary step in estimating whether the home will be able to generate sufficient rental income to offset these costs. Even if the home is being purchased solely for family and friends, with little or no rental income anticipated, you will want to know up front how much cash you will need to put into the home month by month during the period of your ownership.
The ongoing costs of ownership can be considered under three headings. Firstly, fixed costs that will be incurred irrespective of the level of occupancy of the home. These costs include property taxes, home insurance, HOA dues, for example. Then there are running expenses that may depend on how the home is used. These include utilities such as electric and water, cable and internet services, lawn and pool care.. Some of these services may be covered by the HOA dues. Finally there are management and maintenance costs, which ensure that repairs, replacements and upgrades are done to keep the home up to standard.
One cost that is not covered here is the monthly mortgage payment if the purchase is financed. The capital repayment part of the mortgage isn't strictly speaking a cost, since this in effect puts added value into the home's equity, so it will be recovered when the home is later sold. Interest on the mortgage can be considered as a cost of ownership, though, and should be added to the total cost if it is applicable.
The following estimates will broadly apply to any new home on any new vacation home community irrespective of type and size. There will be some variation within the range of figures I am using, but in general the bottom line will be reliable enough.
Property taxes and CDD fees
Property taxes are based on the tax assessor's view of the value of the home, which in turn is based on the purchase price. A typical townhome would be expected to have a property tax bill in the region of.$4,000 a year. A $500,000 single family home will be around $6,000, and larger homes up to $8,000. Some new communities additionally have a CDD (Community Development District) fee, which can range from under $1,000 to about $3,000 per year. This fee is usually collected with the property taxes
Vacation homes are usually insured as rental properties, as that gives the owner coverage against third party claims by renters in addition to the usual coverage. Most owners will use this type of insurance even if they intend to use the property only as a second home. This specialist insurance typically costs between $800 and $2,000 per year depending on the value of the home.
Most new resort communities have total HOA fees between $275 an $450 per month. The higher fees are for townhomes and condos, because the HOA is responsible for roof insurance and maintenance of the roof and the exterior of the building. The lower HOA fees may not include both cable TV and internet service, which would put an additional cost onto the running expenses below.
Electric and water, and occasionally gas for pool heating. These primary utilities will cost between $250 to $500 per month average year-round, depending on the style, size and occupancy level of the home. Townhomes will be at the bottom end of the scale, especially if they don't have a pool. Pool heating will be extra, but this additional cost is usually passed on to the renter, so is excluded from the costs of ownership.
Cable/internet and phone (if required) are In most cases included in HOA fee, but some owners pay for broader add-on services.
Management and Maintenance
The cost of end-of-rental cleans, typically $75 to $125 depending on the size of the home, are excluded from the costs of ownership, and are taken off gross rental income.
Management companty fee will be $100 to $150 per month..Lower fee companies tend to charge for minor extras, so use the higher figure.
Pool maintenance, typically around $125 per month for an average pool/spa combination. Perhaps $100 for a smaller pool.
Lawn care is included in all resort community HOA fees to ensure that lawns are uniform.
Miscellaneous maintenance, deep cleans, licenses, household item replacement, allow $150 to $250 per month, depending on the size of the home.
A summary of total annual costs to set against target rental income is shown next.