Your Budget (And why you might want to revise it.)
Every once in a while, I will get a guest reply back to me in response to a quote that I have provided, saying that our rates are more than their budget.
This always leaves me wondering… “How did you set your budget?”
This is Part I of a two-part series on Budgeting for Orlando Vacation Rental Guests, and Owners. Part II explains why every Guest should Care.
Is the budget
1) an amount they can only afford to spend,
2) an amount they want to spend, or
3) how much they expect to spend?
If one thinks about it, none of these make sense. The only real way to establish a budget is to find out how much something typically costs and then that is how much you must budget for it. If funds are not available, it may be necessary to allocate them differently or save longer before going on the trip.
Your past history renting a Florida property may be misleading you!
Some long-term visitors to Florida think they know how much they should be spending on their accommodation – in other words, how much they should budget for it – based on what they have historically been paying for accommodations.
Many of these guests are forced to look for a new place to stay when the accommodations they previously stayed at has been sold, and are surprised when they are faced with spending far more than they’re used to.
But if you think about it, the fact that the place they used to stay at got sold is very likely a good indication that they weren’t paying enough for it!
People don’t get rid of what’s working
If the previous owner of the place where they stayed before was getting enough money to cover the cost of owning it, they very likely would not have sold it! If one already has a place in Florida and its costs are being covered by renting it out, then why sell it?
Florida properties are finally appreciating well right now, for the first time since the great crash of 2008, and it makes sense to hang on to one and enjoy further appreciation if at all possible. That doesn’t provide monthly cash income right now, but it does make for a better return over the long term.
If a Florida property is ‘too much work’ that’s another sign of not bringing in enough money, because an owner should always be able to hire someone to do that work for them. If not, then it’s back to square one; they’re not bringing in enough money to cover the cost of owning it.
Do costs of Florida properties really vary that much?
As far as vacation home rental rates being outside your budget, a Florida home is not like a restaurant meal, where the experience, input costs and retail charges can vary greatly. Almost all of the operating costs are fixed. And there is no room for negotiation either.
I don’t get to tell the insurance company, the taxing authorities, the banks (who all charge the same interest rates), or the utility companies what ‘my budget’ is. They simply don’t care whether I can afford what they charge. I either pay it, or I lose the home to someone else who will.
Another Florida home owner can pay far more for those things than I do with a bigger home, but you can’t really pay much less, unless you are talking about an apartment style condo, or a mobile home (or even a house without a pool, but that won’t even save you that much).
We charge guests basically what it costs to own and operate a 4-bedroom home in central Florida with a pool. Our rates vary throughout the year based on seasonal demand, but once it all averages out (which it always does), that’s what it costs.
We have absolutely no say about that.
Every other home and owner are subject to the same charges and rates. Taxes, insurance, utilities, maintenance… they are what they are. And it is only going to cost more later on.
If your budget doesn’t allow for that, then with respect, you need to change your budget, or not go to Florida.
That sounds rather harsh, and I understand that. But as owners and operators of Florida properties, it is how we have to deal with what we have to pay for. We must budget for what the various authorities and suppliers charge us. And we must charge our guests enough to cover those costs, or exit the game.
It is that simple.
Okay… if all owners and managers are paying the same operating costs, how come rental rates charged to guests vary so much? There has to be something else at play.
There is, and it’s the one thing that we have no control over. It is also so crazy that somedays it is hard to believe that it’s true, but it is.
You can read all about it in Part II: Why Rental Rates are so Cheap in Orlando, and why YOU should care