Your Life in Property - Chapter 1

Orlando Property Marketplace

The Orlando region derives much of its economic power from tourism, business conventions, medial and hi-tech research and the "grey dollar" or those retiring to the warm climes from more northern states or from abroad. The property market has grown with the huge rise in population, up 30% in the last decade alone. Typical in this region have been gated developments and condominiums growing mainly to the south of the city and spreading at an alarming pace in the empty land. The city or downtown area is well-established with some property dating back 100 years or more, broken up only by the high-rise developments which seemed viable during the credit bubble.

Construction of property can be standard construction, or more rapidly built units from prefabrication section. Use of wood in structural elements is often seen.

During the credit binge, Orlando was front and centre, financing and constructing homes to service both the local and tourist market. Depending on location and subdivision, property soared 200-300% from 1995-2005, unheard of growth rates in this market which has no scarcity value and seemingly limitless land in which to develop. Commercial development went just as mad. Business plans for "strip malls", small malls by the road side took off. Some areas of the city boast 10 Taco Bell franchised outlets in a 1km radius. All sectors of the property market, even in downtown locations, could be said to be very over supplied.

To analyse what is left for investors let's look at distinct property types:

• One Bedroom Condominium
• Three Bedroom Vacation Villa
• Three bedroom Family Villa
• Two Bedroom Downtown Apartment

For each property type we will look at price histories and project forward using the commonsense approach of rental yield and sustainability, demand from population changes and long-term value.

One Bedroom Condominium

These vary from developments built in say 1960s-1990s servicing the local market in the main to developments built in the 1900s-2006 which were aimed increasingly at the second home and tourist market.

As an example of property in this sector, here is a 1-bed condo, 50 sqm and built in 2005. The list price is $41,000, the property being in foreclosure having reached a value of around $140,000 in the peak of 2006-07.

The property itself is in an area of good demand for long-term tenants, where a monthly rental of around $700 should be expected. Even after the home owners payment to the community and property taxes, a healthy yield. So what's the due diligence points here, the yield criteria being fully met? The points on rental stability based on demand and population are perhaps the first points to consider.

Three Bedroom Vacation Villa

Davenport, 2001, $95,000, peak 2006 Q4 of $257,000, 3 bed 2 bath near disney, 140 sqm

More of a risk here, as pointed out in the section regarding short term accommodation in this book. My due diligence would focus around the actual costs to run this investment and the realistic demand and occupancy rate that could be achieved through the year. Of course, occupancy rate will come down to your expertise with marketing the unit. If this is your "bag" and you can get the unit rented at a good rate for 35-40 weeks of the

year, then you have a viable investment with some private use options.

Three bedroom Family Villa

Good schools and residential location to south east of city. 2006. $120,000, $257,000 peak, 180 sqm 3 bed 2 bath no pool rental $1,100 per month

A really interesting unit here, a rare-breed of near 12% yield on a family property. The usual diligence is required, just to ensure your yield is real and you dont hold a big empty unit for much of the year. Basic research on these units carried out in Q4 of 2010 show that there are many cheap [$50,000 or less] family properties on the market, but rentals are hard. However, areas which have some "scarcity" value such as uniquely good schools or inability to develop

nearby offer great value and should be given consideration.

Two Bedroom Downtown Apartment

2007 build / 120 sqm / 2 bed / $190,000 today, $430,000 on completion was paid. Rent $1750 per month

I know this development personally, and saw the prices which were being paid "off-plan". Clearly, the fortunes of investors off-plan has been an unqualified disaster. What has not changed is the demand to live in such a building, it is out of this world in terms of fitting and services within the building. Rental demand is extremely high and worth research for cash investors.