Profitable Niches – Lifestyle Investing

You may have heard that it’s bad to mix business with pleasure. But, when it comes to lifestyle investing, part of the fun is owning property in a place you love.

Yes, it is possible to make lifestyle investing make sense for you … as long as you follow some important guidelines to line up the numbers, location, and opportunity.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your vacation ready host, Robert Helms
  • His in dire need of vacation co-host, Russell Gray
  • Guest, Nick Rohrbach, from The Grove Resort and Spa in Orlando, Florida

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Why a lifestyle investment might be a good fit

Life is too short to be involved in an asset class you don’t enjoy. Too many times in real estate, we get hung up on the ROI and let it rule the day. Lifestyle investing spices things up by adding personal enjoyment and personal use into the mix.

With the right strategy, you can tap into a FANTASTIC opportunity for growth. Premium properties fetch a premium price from renters and vacationers. Of course, you’ll also be able to enjoy the property with your family and friends.

We’ve all been on vacation and experienced that “I never want to leave” feeling. But remember, just because a place is nice to visit doesn’t mean it makes sense from an investment point of view. Here are a few recommendations to keep in mind.

 

  • Know the market

 

As with any real estate investment, your research into the market will be worth its weight in gold. This is especially true for lifestyle investing where the durability of rent, the ability to fill occupancy, and the property’s long-term profitability will be the difference between a fun investment and a bust.

With a good location, property, and market your investment has the opportunity to weather downturns. People in higher income brackets can afford to go on vacation even if the economy is down.

 

  • Bring on a stellar management team

 

The difference between a fun, hands-off lifestyle investment that you’ll love visiting and a drag is a good management team. Property management comes at a higher cost than single-family homes … sometimes upwards of 50 percent … but it gives you peace of mind AND access to amenities that delight and excite high-end vacationers and renters.

Your management team will handle all the bookings, and they have access to wholesale outlets such as Travelocity, Hotwire, Priceline … all the big names people use to get their vacation rentals.

And bonus! When things break, they fix them.

Opportunities abound in Orlando

Orlando, Florida, is the #1 traveled to place in the world. Thanks to Disney World, Universal Studios, and a THRIVING convention market, there’s no end of things to do for business travelers and families. And did we mention it’s a no income tax state?

We could go on and on about the many reasons why Florida is a consistently hot market and one of our favorite places to visit:

  • It’s centrally located to beaches
  • It has access to direct flights out of many places from the beautiful Orlando airport
  • The weather and attractions are top-tier
  • Convention business is strong and growing

Nobody knows this better than Nick Rohrbach, our guest from The Grove Resort and Spa.

Beyond tourism, Florida has a vibrant, booming economy. “There are 19 [amusement or theme] parks in central Florida alone,” Nick says. “Medical City is booming, we have one of the largest universities in the country, University of Central Florida, and over 150 VA hospitals.”

Plus, unlike many destinations, Orlando is not seasonal. The average occupancy is about 75 percent year round. Even during the economic recession in 2009, average occupancy never fell below 60 percent.

All of these elements make Orlando a place you might want to keep your eye on.

Filling a niche in the lifestyle investing market

When you’re looking for a lifestyle investment, one of the important questions you need to answer is how a particular property sets itself apart from competitors.

Florida’s economy is one of the reasons The Grove is such a unique opportunity. Rohrbach explains that the project was originally built in 2007, 2008, and 2009, and all the units were sold to UK investors without closing on a transaction.

While all the units were structurally built, only 184 condos were completed. With some additional cash, amenities, and building out the insides, these units are essentially brand new.

The new ownership at The Grove Resort and Spa has a couple strategies to fill a niche in Orlando:

  • Amazing amenities including restaurants, 800 sq. ft. of convention space, and a newly opened water park.
  • Spacious condos with 2-3 bedrooms perfect for families.
  • Close proximity to Disney World … only 3 miles away!

For potential investors and owners, there are plenty of opportunities as well. The Grove has a stellar management company that keeps the property looking fantastic, takes care of you and any guests, and manages all the bookings, repairs, and maintenance.

“The key is really the management,” Nick says. “When you talk about having everything in place for lifestyle turnkey investing, you need that professional management so you don’t have to deal with anything. The guest experience is very important.”

Not only that, but The Grove is continuing to expand, with 878 total units coming online at completion. Only 450 rooms are available now, and they’re at 100 percent occupancy! As demand goes up, so will rates … and cash flow from a potential investment.

Make sure the deal works for you

Lifestyle investing can sound like a dream come true, but it still has to make financial sense for you.

Look at a market that appeals to you personally, and then start running some numbers.

For instance, syndication might be the right way to go. You could get creative and discover investment opportunities in a few locations so you’ll have access to a bunch of prime vacation spots.

Blurring the line between a pure ROI, detached investment and something you get to enjoy too doesn’t have to be out of reach. If the numbers, market, and property make sense, don’t be afraid to go for it!

Want to know more about turnkey lifestyle in Orlando, Florida, and things to avoid in the marketplace? Send an email to lifestyle@realestateguysradio.com. We’ll hook you up with a special report with all the details. 


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

11/3/12: Sharpen Your Pencial and Do the Math – Utilizing the Formulas of Real Estate Investing

“Do the math and the math will tell you what to do!”

Sounds good!  But how?

That’s the topic of this episode of The Real Estate Guys™s radio show!

In the studio behind the powerful platinum plated microphones:

  • Your calculating host, Robert Helms
  • Your full-figured co-host, Russell Gray

We know.  Math isn’t sexy.  It isn’t even real fun. And it sure doesn’t make for compelling radio.

Nonetheless, knowing how to do proper financial analysis is a fundamental, essential, mission critical survival skill for every income property investor big or small.  And we’d be remiss in our duties as world class real estate investment talk radio show hosts if we didn’t dedicate at least one show to this important topic.

So grab some refreshments (Red Bull, coffee, 5 hour energy, Jolt, etc) and grab your calculator, note pad and pencil and get ready for some (yawn….) exciting, useful, practical content!

In this episode, we identify 7 financial formulas which are essential for everyone who invests in income property, whether it’s single family homes, apartment buildings, strip malls, mobile home parks, office or industrial space, or even a parking lot.  If it generates cash flow, these are formulas you need to know:

  1.     Gross Rent Multiplier (GRM)
  2.     Net Operating Income (NOI)
  3.     Capitalization Rate (Cap Rate)
  4.     Before Tax Cash Flow (BTCF)
  5.     After Tax Cash Flow (ATCF)
  6.     Cash on Cash Return (ROI)
  7.     Internal Rate of Return (IRR), or as we like to call it, Total Return

We won’t clog the blog with the formulas and details.  If you want to see all that in written format, check out Chapter 9 of Equity Happens, our amazing and highly rated book on real estate investing (that was a shameless self-promotion, if you didn’t catch it).

But before you play hooky and skip this episode, let us give you a few reasons you want to pay attention.

When you know how to do these formulas and interpret the results, you can tell if it makes sense to borrow to acquire the property.  You can tell if a market is over-heated or still has some upside.  You can effectively compare the financial return of any property compared to any other property as well as any other kind of investment.  And you can tell if someone is feeding you a big bag of cow chips when they hand you their pro-forma and tout their amazing “cash on cash” return.

So guzzle down some financial stimulus, and listen in as we show you how to sharpen your pencil and do the math!

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6/13/10: Determining ROI – Balancing Risk and Reward

What’s a reasonable return on investment in today’s market? As you might expect, the answer is, “It depends!”  Every investor must accept risk in order to attain reward.  Even doing nothing is a risk with its own reward.  The obvious goal is to achieve maximum reward with minimum risk.  Duh.  But what are the risks and how do you assess them?  What are the potential returns?  What’s about the not-so-obvious risks?  And what’s reasonable to expect in today’s economy? Tough questions!

Balancing in our chairs behind The Real Estate Guys™ golden microphones (actually, they’re black with smelly foam that prevents our P’s from popping too profusely), to talk through all of these perplexities are:

  • Your Host and mental gymnast, Robert Helms
  • Co-host and floor tumbler, Russell Gray
  • Chief spotter, the Godfather of Real Estate, Bob Helms

Real estate investing is as much an art as it is a science. There are so many different markets, sub-markets, product types and deal structures to choose from.  Beyond that, there are variations in economic conditions, seller motivations, tax laws, interest rates and on and on and on.  The types of returns which can be attained in a real estate investment range from bankruptcy (on the VERY negative side) to infinite returns (profit on nothing invested). We like the latter better, don’t you?

Recognizing that real estate investing is “non-traditional” when compared to the conventional approach of “work hard, pay taxes, live below your means and buy stocks, bond and mutual funds for the long haul” – we talk about the ranges of returns which are reasonable to expect when investing in certain kinds of real estate.  We also talk about how certain deal structures can really improve your ROI.

Another topic of discussion is the risks of investing versus those of NOT investing.  There is an adage which says that the more risk you take, the more return you should demand.  We agree with that one. Of course, it presupposes that you understand the risks and can factor them into your decisions.

There is another adage which says that higher returns mean more risk.  NOT NECESSARILY!  There are actually deal structures which REDUCE risk while INCREASING return.  So of course, we talk about those things because they are among our favorite benefits of real estate investing!

After this broadcast, we slipped off our leotards (sorry, bad visual) and headed for the showers (worse visual!), pleased with our performance.  Now we’re waiting for the judges (that’s you) to put up our scores.  We only ask that not take into consideration what we look like in our leotards.  And, that you remember to take us to the gym because, as you probably already know after the leotard visual, we REALLY need the workout!

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