3 Steps to Earning a Passive Income From a Rental Property in Orlando

Owning a rental property in Orlando is one of the most effective ways to earn a passive income and put some extra money in your pocket. Whether you’re an accidental landlord or an experienced investment portfolio holder, investing in and owning rental properties in Orlando is a proven method to generating a solid income and building wealth.

However, there is a difference between generating an income and generating a PASSIVE income, and the difference is in how you choose to operate your property. If you choose to self manage the property yourself, you will be generating an income. If you choose to hire a professional property manager, you will be earning a passive income with no stress and almost no time dedicated to running the property.

What is a Passive Income

A passive income is an income earned with minimal work involved or through an established business that you are not directly involved in operating. One of the most lucrative ways to earn a passive income is through rental property investments, and a highly populated city like Orlando is the perfect place to do so.

So, how exactly do you earn an income through a rental property without having to do anything yourself? As an Orlando property manager, I’m here to guide you through all of the steps to earning a passive income from a rental property in Orlando!

1.) Choosing the Best Orlando Location for a Rental Property

The first step to take towards earning a passive income from a rental property is to find the best location for your investment. The success and experience of your rental property is significantly influenced by its location as renters are typically keen to certain aspects of the neighborhood they live in. 

The Orlando Metropolitan Area is a unique location, being one of the most popular tourist destinations in the world, a thriving business hub, and a continuously developing and expanding region. The Orlando Metropolitan Area comprises four counties and three main cities: Orlando, Kissimmee, and Sanford. Your return on investment and demand of rental properties will vary depending on the location you choose.

Some essential aspects to should consider when choosing a location for your Orlando rental property are:

• Proximity to amenities such as schools, parks, shopping centers, and public transportation
• Safety and crime rates in the neighborhood
• Rental demand and vacancy rates in the area
• Property appreciation potential and historical trends
• Neighborhood demographics and target tenant market
• Accessibility to major highways, employment centers, and entertainment venues
• HOA regulations and fees
• Future development plans and infrastructure projects in the area
• Overall neighborhood vibe and community atmosphere

Each of these factors will influence the experience you have, the ability to rent your property quickly, and the likelihood of attracting and retaining reliable tenants. Examining each aspect may seem like a daunting task, however, conducting the proper research will play a pivotal role in earning a continuous passive income, and long term value of your rental property.

Combining my property management experience at The Listing Real Estate Management with the essential aspects to consider when purchasing a rental property investment, I’ve compiled a list of the top five areas to invest in Orlando to earn a passive income. 

The Top Five Areas to Invest in Orlando:

1. Winter Park
2. Windermere
3. Winter Garden
4. East Orlando 
5. Oviedo 

Each of the locations provide a blend of amenities, vibrant and desired neighborhood atmosphere, and potential for property appreciation and building wealth. These essential factors make these five areas the top locations for a promising passive income investment.

If you are new to the area and would like to know more about prosperous Orlando investment locations, our team here at The Listing can point you in the right direction. We are no stranger to Orlando geography and the impact it has on the success of rental properties!

2.) Property Selection and Investment Strategy 

Once you’ve narrowed down your desired location for a rental property investment, the next step is to find your perfect investment property. There is a lot to consider when choosing the specific property you want to purchase. 

Property Type

There are a variety of investment property types including single-family, multifamily (duplex, triplex, quadplex) condominiums, and townhomes. Although the multifamily sector is one of the hottest in the country, all residential investment types tend to thrive in Orlando. 

At The Listing Real Estate Management, we manage single-family, multifamily, condominiums, and townhomes in Orlando. With world renowned attractions and a constant influx of people, rental properties are in high demand no matter the type. With the right resources and property management company, each investment type can earn you a passive income.

Fixer-Upper or Turn-Key

Another essential factor to consider when choosing an investment property to earn a passive income is whether to purchase a fixer-upper or turn-key. A fixer-upper is a property that is older and cheaper but has the potential to be transformed into a modern, desirable property. A turn-key property is typically more expensive upfront but requires minimal work and is already in livable condition. 

There are pros and cons to both fixer-uppers and turn-key investments in regards to earning a continuous cash-flow and passive income by renting out your property. The amount of money and time you are willing to spend between the purchase of the investment and renting it out are significant factors in determining whether to choose a fixer-upper or turn-key investment. 

Pros of a Fixer-Upper:

Lower Purchase Price: 

A fixer-upper will have a lower purchase price than a newly renovated or more modern home. This gives you flexibility to invest in an Orlando rental property at a “discounted rate”. Less money will have to be spent on a down payment, or upfront. By securing a home with a lower purchase price, you can expedite your return on investment and earn a passive income.

Appreciation Potential: 

Renovating and fixing your home to be more attractive or modern will significantly increase its value. As a newly updated property is considered more desirable by many renters and buyers, the appreciation rate will likely be higher, increasing your return on investment over time.

Customization:

Purchasing an investment with the intention of remodeling or updating it means that you have the ability to customize the space to your liking or, more specifically, the preferences of Orlando renters.

Increased Cash Flow:

Renting out a home with new renovations, appliances, and curb appeal will allow you to charge a higher rental rate than that of an older and less desirable property. Higher rental rates result in an increased cash flow and passive income.

Cons of a Fixer-Upper:

High Renovation Costs:

Although the initial purchase price may be lower than more updated comparable properties in the area, the renovation can end up costing a significant amount of money. Depending on the condition of the home, renovating a fixer-upper can potentially end up costing the same, or more, than purchasing an updated home. If you are willing to put a lot of money into the home to make it custom to your standards, then the high renovation costs will be worth it.

Delayed Income:

If you are looking for an instant income or quick turnaround from purchasing a home to renting it out, a fixer-upper will not be the best investment decision for you. Renovating a home can take months and will surely delay the process of renting.

Higher Risk:

A fixer-upper can cause a larger risk than purchasing a ready to live home because they sometimes come with surprises. Investors often meet unforeseen circumstances during the renovation process which can cause a delayed turnaround and an increase in costs. 

Pros of a Turn-Key

Immediate Rental Income:

Unlike a fixer-upper, the turnaround from purchasing to renting out your turn-key property can be immediate. With the help of an Orlando property manager, you can find a reliable tenant and start generating a rental income within a short period of time.

Passive Income Stability:

After purchasing a turn-key home that needs little to no maintenance or renovations and hiring a property manager, you can start to earn a true passive income. As there will be few additional costs after purchasing the property, your return on investment can be generated from the first month of ownership. With your property manager overseeing all daily operations of your rental property, the money from monthly rental payments will be going right into your pocket with no stress or hard work on your part.

Less Time and Effort:

As mentioned above, a turn-key property requires minimal time and effort put into rehabbing the property. In some cases, you may even purchase a fully furnished unit, which allows for a speedy turnaround time. Without the headache of repairs, installing new floors, or ripping down walls, you are saving a significant amount of time and increasing the rate of return on investment.

Lower Risk:

In addition, purchasing a turn-key property poses a much lower risk than a fixer-upper can. With a turn-key property, you know exactly what you are purchasing and there is no mystery or risk associated with how the finished product will turn out. When purchasing the property you have the ability to assess market trends and determine an approximate rental rate. 

Cons of a Turn-Key Rental 

Higher Purchase Price:

Being that a turn-key property is ready to live in, the purchase price will be higher compared to a fixer-upper. 

Limited Customization:

When purchasing a turn-key property, there is limited room for customization in comparison to the potential for customization in a fixer-upper. 

Lower Appreciation Rate:

Although a turn-key rental will still appreciate over time, the appreciation rate of a fixer-upper will be faster because of the change from an old, unlivable property to a renovated property where the value increases immediately. 

3.) Hire an Orlando Property Manager

The final and most important step in earning a passive income from an Orlando rental property is to hire a property management company. A property management company is a group of experienced professionals who take over all daily operations from start to finish and enhance the overall success of your rental property. 

Hiring a professional and experienced property manager will take your time-consuming and potentially stressful rental property experience to a successful and prosperous venture. With the expertise and knowledge that a property management team holds, you can assure that your rental property will thrive and generate a substantial passive income.