Are Vacation Rentals for Sale in Orlando a Good Investment?

Vacation rentals for sale in Orlando are affordable, but are they profitable? Let’s find out in this Orlando rental market breakdown.

Table of Contents

1. Is Orlando a Good Place to Buy Vacation Rentals?
2. How to Find Vacation Rentals for Sale in Orlando in 5 Steps
3. 8 Best Neighborhoods in Orlando for Vacation Rentals

Orlando was all over the news in 2021 because of record-breaking rent hikes. In some neighborhoods, rent increased 60% year over year. For landlords, it is a strong signal that the real estate market is booming in the area, and the competition among tenants is growing.

It makes for a perfect time to enter the market as real estate prices may not yet catch up, creating an opportunity for profit. However, doing so depends on a couple of assumptions.

The rent should keep growing or at least won’t go back down. The price for real estate should not have risen to the point that it makes cash on cash returns negligent. An average real estate investor without a solid knowledge of the market won’t be able to tell what the future holds based purely on the current trend.

What you need is knowledge about the past developments in the real estate market in the area, the context to understand why the current growth is so high, and expert opinion on the matter. You’ll find all of them and more in this breakdown of the Orlando, Florida rental market.

You’ll also learn how to find the best vacation rentals for sale using Mashvisor and what are the best neighborhoods to invest in according to the platform’s market data for August 2022.

Is Orlando a Good Place to Buy Vacation Rentals?

Orlando is a city that combines the potential for both traditional and Airbnb rental markets. Like many other cities in Florida, it attracts people with its pleasant weather, which lasts most of the year.

Florida is also a state without an income tax, which makes take-home pay a bit higher. Together with the cost of living slightly lower than average, it made Orlando grow 2% year-on-year. The number of residents in Orange County, where Orlando is located, increased by about 25% over a decade (2010-2020), compared to the 7% national population growth.

Orlando also makes for a great rental market as only 37% of homes are owner-occupied, according to the US Census Bureau estimates. But it’s not only viable for traditional rentals. The city offers a lot to vacation rental owners, as well.

Tourism in Orlando, Florida

Orlando is immensely popular with tourists of all types. For starters, the city is home to one of two Disneylands in the US. The Walt Disney World complex attractions near Orlando include Magic World, Animal World, and Disney’s Hollywood studios. The complex attracted 20 million visitors in 2019.

Even though the number fell to six million in 2020 due to lockdowns, it is projected to bounce back. Orlando is also home to Universal Studios Resort, Epcot theme parks, and a number of water parks. The abundance of attractions makes Orlando the capital of theme parks in the US.

As recent statistics show, the number of visitors to Orlando seems to have improved. In 2021, 59 million people visited Orlando and neighboring areas, according to US News and World Report. The numbers are still lower than pre-pandemic levels but are a considerable recovery for just a year.

Of course, some, if not most, of the tourists are going to stay at hotels, but there will still be plenty of customers for Airbnb hosts.

Rental Market in Orlando, FL

Orlando is a great place to live. It’s rated by Forbes in the top 30 US cities to do business, and its job market is doing pretty well. It shows almost 4% year-over-year growth, low unemployment numbers, and a steady increase in wages.

The cost of living is slightly below the national average, and the median house price was slightly below the national average in 2020. However, Orlando is a highly sought-after place to live, constantly seeing a boom in both house prices and rent.

Last year, from April 2021 to April 2022, the median price of a house for sale in Orlando, Florida rose almost 30%, according to Mashvisor data. That’s primarily due to high demand and a lower-than-average supply of homes for sale in the area.

For investors who were early, it means a decent appreciation of assets. However, those who are only weighing in on entering the rental market of Orlando may encounter a higher barrier of entry.

Another thing that may be troubling is that the price may be overvalued due to a temporary trend, and property purchased now will depreciate.

Airbnb Regulations in Orlando

When it comes to the legal regulations of Airbnb in Orlando, it’s not the easiest place to work. Not that the state of Florida places hurdles on the landlord’s path; it just requires businesses to register.

Florida’s law requires any vacation rental operation to obtain a license, even if it’s owner-shared lodging. If you own multiple properties in different states, they bring about additional costs.

Additionally, you need to consult a local lawyer to make sure that the rental you’re purchasing is in the correct zoning. Otherwise, you won’t be able to rent it out legally.

That said, most areas with a lot of Airbnb listings for sale are generally safe to work with—you can pull all the relevant data from Mashvisor.

Related: Is Airbnb a Good Investment Considering All of the Regulations? 

What Experts Say About the Orlando Real Estate Market

The most important question investors are asking is, “Will Orlando housing prices go down?” And here, there are a couple of disappointing predictions.

As of July 2022, the price of Orlando area housing fell 1.6% compared to the previous month, according to data from the Orlando Regional Realtor Association. The decline is mostly due to an increase in supply. The initial fast growth was caused by a lack of Orlando houses for sale, but the real estate market is starting to respond, having grown the number of homes for sale by 10–20% in different areas.

The number of homes sold also fell since last year. A Florida Atlantic University (FAU) study shows that homes in Orlando are overvalued. However, FAU economist Ken. H. Johnson, Ph.D., says that prices are unlikely to collapse. Johnson warns against engaging in bidding wars and contributing to overpricing Orlando houses for sale.

So if you’re a cautious investor, it’s best to wait a couple of months before making the final decision to see if the prices do fall a little. If you’re eager about getting into Orlando real estate, you need to find investment homes with a good ROI and run precise calculations to see at what price you should stop bidding.

How to Find Vacation Rentals for Sale in Orlando in 5 Steps

Finding a good deal on a house for sale in an overpriced market can be challenging. Here’s a quick guide on finding profitable Orlando rentals in 2022.

1. Find the Right Neighborhood

Buying the perfect home in the wrong neighborhood spells trouble for your bottom line as a host. Finding the right neighborhood first is the right strategy. Airbnb guests tend to look for the place closest to attractions and places of interest, not the prettiest-looking house in the city.

But sometimes, even proximity to the right places doesn’t do the trick, especially if you don’t know the city well. There may be a hidden caveat like a super loud highway that scares off guests. You’d be better off trusting the data.

Airbnb Occupancy Rate

The first thing you want to look at is a high Airbnb occupancy rate. If rentals in the neighborhood are occupied 60% of the time or more, the odds are the place is popular with tourists. The specific reason doesn’t really matter; the most important thing is that your vacation rental has a better chance of getting booked.

You can see Airbnb occupancy statistics on every neighborhood in Orlando and all of Florida on Mashvisor. When browsing in the map view, turn on the Heatmap filter to show a comparative chart of occupancy rates right on the map.

With the key data before your eyes, you can look for neighborhoods that are near prominent places or those with better occupancy statistics.

Number of Airbnb Listings

Next, you want to find an area with a medium to a high number of Airbnb listings. Places with few listings may be less popular unless the prices are much higher. In this case, the vacation rental may be too expensive for you.

Speaking of which, price is one of the most important criteria in a neighborhood. You want a vacation rental property that produces a good return on investment, so finding places where rentals are relatively cheap compared to Airbnb rental income is vital.

You can see an estimated Airbnb cap rate and Airbnb cash on cash return on each property you see in the Mashvisor search, so that won’t be a problem. Shoot for the highest figures with property prices within your budget, and you’re all set.

Finding an area with more than the average number of vacation rentals for sale may give you a bargaining chip as supply is high.

Safety of the Neighborhood

The last check you want to run is safety. A neighborhood with a high crime rate is probably not the best place to buy a rental. It is not just due to the potential loss of customers but also because your property may get damaged.

2. Find Vacation Rentals

With the area of the search ruled out, you need to compile a list of properties you could invest in. Prepare a list of several properties, not just one with the single property you initially fell in love with.

It’s too easy to like a house so much you end up overbidding on it and reducing cash on cash return. So find plenty of options.

Here’s a quick checklist for great vacation rentals to make it to your list:

• Is within your budget
• Looks good in the photos
• Preferably furnished and with good renovation
• With good infrastructure around it
• With decent ROI projections

Add the properties that fit all of the above criteria to the list. Then, prepare for the next step, which can take quite a while.

3. Estimate the ROI

Mashvisor does show an estimated cap rate and cash on cash return in the search section. You can come up with much more accurate figures by using Mashvisor’s real estate investment calculator.

The calculator works by combining data points gathered by Mashvisor, like Airbnb occupancy rate and average nightly fee, with the numbers you provide. They can be your total cash invested, renovation and furnishing, and your mortgage terms.

Being precise with revenue projections is crucial for any vacancy rental. It’s even more important for a slightly overpriced market like Orlando, FL. Plenty of out-of-state investors are willing to pay top dollar for vacation rentals in Orlando, so you can expect to compete with counteroffers.

Running the calculations with several bid ranges lets you see what price you need to stop for each property. Your goal is to maintain a positive cash flow and a good return on investment, so overpaying for a good house may be too risky.

Since it’s vacation rentals we’re talking about, add the upfront costs of obtaining a business license and stocking the rental with homecare items to the total cash investment. This way, you will see a clear picture of how much cash you put into the house and how much you get.

Play around with different scenarios—occupancy rate being lower or upfront costs being higher to see if the vacation rental you’re looking at holds up to scrutiny.

It can take some time, but in the end, you’ll be able to sift through results for sale that are not suitable investments.

Related: How to Maximize Return on Investment When Buying a Rental Property

4. Do Your Due Diligence

With a narrowed list of homes for sale, you can start getting serious about them. It includes both legal and physical inspection. Here’s what you want to know about your next investment:

• The seller really holds the title to the home for sale
• The seller can sell the home on their own or can obtain a permission
• The home listed for sale doesn’t have any unknown outstanding debt on it
• The home doesn’t have undisclosed structural damage
• The neighborhood meets your expectations

You may want to hire a professional to help you with most of the steps in this process.

5. Place a Bid

After finding a few homes for sale that check all the boxes, go for it and make a bid. Keep in mind that Orlando is a hot real estate housing market at the moment, so any rental for sale may attract a long list of bidders.

Keep your financial calculations handy, and don’t overpay if the price makes the cash flow negative.

Want to see how the process of finding your dream investment works? Search for Orlando vacation rentals on Mashvisor.

8 Best Neighborhoods in Orlando for Vacation Rentals

If you’re not sure yet where you want to start looking for homes for sale in Orlando, consider the eight neighborhoods below. They’re sorted by vacation rental cash on cash return in descending order, according to Mashvisor’s data as of August 2022.

1. Colonialtown North

• Median Property Price: $555,514
• Average Price per Square Foot: $338
• Days on Market: 48
• Monthly Vacation Rental Income: $4,140
• Vacation Rental Cash on Cash Return: 4.05%
• Vacation Rental Cap Rate: 4.11%
• Vacation Rental Daily Rate: $143
• Vacation Rental Occupancy Rate: 53%
• Walk Score: 71

The Colonialtown North neighborhood is a bit removed from Orlando downtown, offering great infrastructure and views. It’s on the pricier side of the town but promises one of the best cash on cash returns due to higher rental income.

2. Lawsona-Fern Creek

• Median Property Price: $615,890
• Average Price per Square Foot: $341
• Days on Market: 102
• Monthly Vacation Rental Income: $4,123
• Vacation Rental Cash on Cash Return: 3.64%
• Vacation Rental Cap Rate: 3.70%
• Vacation Rental Daily Rate: $140
• Vacation Rental Occupancy Rate: 51%
• Walk Score: 52

Lawsona-Fern Creek neighbors Colonialtown North and shares closeness to nature and infrastructure. It does offer a slightly lower return on investment as houses for sale here are a bit more expensive.

3. Lake Weldona

• Median Property Price: $389,900
• Average Price per Square Foot: $232
• Days on Market: 113
• Monthly Vacation Rental Income: $2,493
• Vacation Rental Cash on Cash Return: 3.64%
• Vacation Rental Cap Rate: 3.71%
• Vacation Rental Daily Rate: $139
• Vacation Rental Occupancy Rate: 51%
• Walk Score: 31

Lake Weldona houses two parks and borders a third. It’s also the most affordable neighborhood on this list that offers a cash on cash return of over 3%.

4. Bel Air

• Median Property Price: $472,600
• Average Price per Square Foot: $332
• Days on Market: 59
• Monthly Vacation Rental Income: $2,914
• Vacation Rental Cash on Cash Return: 3.44%
• Vacation Rental Cap Rate: 3.53%
• Vacation Rental Daily Rate: $138
• Vacation Rental Occupancy Rate: 51%
• Walk Score: 45

A close neighbor of Lake Weldona, the Bel Air area is a bit pricier, so it loses to it in terms of ROI. It doesn’t lose in the quality of housing and cash flow, though.

5. Colonialtown South

• Median Property Price: $472,690
• Average Price per Square Foot: $353
• Days on Market: 38
• Monthly Vacation Rental Income: $2,987
• Vacation Rental Cash on Cash Return: 3.33%
• Vacation Rental Cap Rate: 3.39%
• Vacation Rental Daily Rate: $139
• Vacation Rental Occupancy Rate: 53%
• Walk Score: 84

A close neighbor of Colonialtown North, rental properties in Colonialtown South offer a lower median property price and much lower rental income. They still produce a cash on cash return of over 3%.

6. Lake Davis-Greenwood

• Median Property Price: $454,294
• Average Price per Square Foot: $327
• Days on Market: 14
• Monthly Vacation Rental Income: $2,674
• Vacation Rental Cash on Cash Return: 2.67%
• Vacation Rental Cap Rate: 2.76%
• Vacation Rental Daily Rate: $141
• Vacation Rental Occupancy Rate: 50%
• Walk Score: 24

As the name suggests, Lake Davis-Greenwood is incredibly green, being home to three parks with lakes. Property prices in the area may prove a bit too high for an outstanding ROI, though.

7. Lancaster Park

• Median Property Price: $691,633
• Average Price per Square Foot: $326
• Days on Market: 98
• Monthly Vacation Rental Income: $3,362
• Vacation Rental Cash on Cash Return: 2.62%
• Vacation Rental Cap Rate: 2.65%
• Vacation Rental Daily Rate: $142
• Vacation Rental Occupancy Rate: 51%
• Walk Score: 40

 Lancaster Park is one of the most expensive neighborhoods on this list, which doesn’t make it all that affordable for many investors. However, homes for sale in the area are likely to appreciate in price, so it may be a good investment nonetheless.

8. Lake Eola Heights

• Median Property Price: $596,100
• Average Price per Square Foot: $334
• Days on Market: 47
• Monthly Vacation Rental Income: $3,505
• Vacation Rental Cash on Cash Return: 2.24%
• Vacation Rental Cap Rate: 2.28%
• Vacation Rental Daily Rate: $137
• Vacation Rental Occupancy Rate: 52%
• Walk Score: 83

Lake Eola Heights offers the lowest returns on this list, but it’s still high compared to Orlando as a whole. The area is in a scenic place with good infrastructure and is priced reasonably given its location.

Want to see what properties are for sale in the high-profit neighborhoods above? Find them on Mashvisor.

Is Investing In Orlando, FL Worth It?

So what’s the bottom line? Is it worth the risk of investing in vacation rentals for sale in Orlando, Florida? The answer largely depends on what kind of investor you are.

If you’re overly cautious, you may wait it out. After all, the prices have been gradually declining for a month as the market adjusts to the demand. You may find rental property that’s cheaper in 2023.

On the other hand, if you’re not risk-averse with your investments and believe prices will keep soaring for another year, not buying now will be a mistake. After all, experts agree that a significant fall in prices is out of the question.

Whatever you do, don’t let the fear of missing out get the better of you. Always approach finding new rentals methodically, calculate ROI under a handful of scenarios, and don’t overpay.

Eager to see how Mashvisor can help you? Start out your 7-day free trial with Mashvisor now.