Area Real Estate News & Market Trends

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June 24, 2021

What To Know Before Purchasing A Vacation Rental Property in Myrtle Beach

What To Know Before Purchasing A Vacation Rental Property in Myrtle Beach
From: Jonathan Edumund

I have a ton of clients that come to me looking to purchase investment properties in the Myrtle Beach area. A lot of them don't understand the rental industry in the Myrtle Beach area. Because of this, I felt it necessary to post our first blog article pointing out key items you need to know before you purchase an investment property in the area. Now, most of the items on this list are referring specifically to "short term" rental investment properties. These mostly consist of oceanfront/view condos and homes. 

So to start off, let me explain why I'm focusing on short-term rentals also known as vacation rentals, and not long-term investment properties. Most investors want one thing, a quick and large return on their investment. Being that a yearly lease on a condo might be $800 a month for a two-bedroom not on the beach, why purchase that when you can buy something closer to the beach that rents for $1,000 a week? Now there are instances where I recommend long-term over short-term rentals, it just depends on your expectations as an investor. I will have another blog up soon specifically labeling the pros and cons of short and long-term rentals. So if long-term rentals are the route you're looking to go, disregard this post and check back for my "Short Term vs. Long Term" post.

So without further ado, here are the things you need to know before purchasing a short-term rental property in Myrtle Beach and surrounding areas.

1. Location, Location, Location!

So the most important thing when purchasing any property is location. We all know that. But there is more regarding the location that you need to know before purchasing a short-term rental. You can't just buy a condo in any neighborhood and start renting it out weekly. It has to be in what's known as the short-term rental zone. This means that it's in a location that is known to be suitable for short-term rentals and is allowed by the HOA. Check with your Realtor or ask us about any property you think may be in a good location for short-term rentals and we can all check for you.

Also, location refers to the location of the actual unit inside of the building. There is a huge difference between an oceanfront property and an ocean view property. Don't think because the building is oceanfront that the unit you like has an amazing ocean view. A lot of ocean view units are side views and don't have the views that ocean fronts have. They also rent for less. Keep this in mind when looking for a property! A lot of investors don't see the unit in person before purchasing since it's mainly for rental purposes so have your Realtor at least check it out. Bad views=bad income.

2. HOA Fees

This is probably the first question I receive about any property investment or not. What are the HOA fees? This is very important!!! If you buy a property and the HOA fee is $500 a month, that's great but it might not be what you're paying each month. A lot of these ocean-front resorts include your homeowner's insurance in the HOA fee because it's cheaper when bundled together. But some don't include it in the fee. Most of the resorts do but there are a few that charge you in separate installments or that don't include it at all. Check with your Realtor, they will be able to tell you for sure after one easy phone call to the HOA. So check and see if it's included, not included, or paid in 2-3 installments over the year.

Also, see what else is included. A lot of the fees will include all of your utilities including electric, internet, water & sewer etc.. But there are some HOAs that make you pay your own electric and other utilities. So check around with different HOAs and see what ends up being the best deal for you. Because one thing is for sure, HOAs are a necessary evil and aren't ever going anywhere. Also, have your Realtor check for any special assessments that the HOA might be charging for repairs in the building or in common areas.

3. Taxes

This is a short but important point I need to hit just in case you're unaware. South Carolina gives tax breaks to certain people, but only as primary residents. As an investment owner, you are not a primary residence. You actually pay a higher tax for being an investor than you would on the same property if you lived there at least 6 months out of the year. Now taxes are cheap in SC compared to most places, so it's not a big issue that I run into. But you still need to be aware that your taxes will be higher than a primary residence and that it will also be higher in high-risk properties such as oceanfront condos or homes. You can easily check the taxes on any property if you have the tax map number. Ask your Realtor or visit the Horry County Property Tax Records for more info.

4. Who Manages My Rental For Me? 

I could write an article just on this topic alone, and I will. But I will touch a couple of key points for you now. MOST oceanfront properties have on-site rental companies that manage the units in that building. This is simply known as an On-site Rental Company. They basically operate like a hotel. There are companies out there called Off-Site Rental companies that have their own maintenance, housekeeping and can rent and market the unit for you. Because they aren't onsite and able to assist a guest at any time, they typically charge a cheaper fee of 10-20% gross profit. The on-site companies usually take between 40%-50% of the gross profit.

Now I'm sure you're thinking why in the world would I give someone almost half of my income to rent my property? The answer is simple and it has to do with gross vs net profit. Just because you're paying a higher fee doesn't mean you're getting less money in your pocket at the end of the day. On-site Company A might charge 45% split of your gross profit, but they are bringing in $40,000 in gross income, thus giving you a net of $22,000. Off-site Company A might only take 10% but they brought in $23,000 gross leaving you with a whopping 90%, $20,700.

Now more importantly than that, is what happens in some buildings when you use an off-site rental company. A lot of the onsite companies have a ton of walk-ins and phone calls to book a stay at the resort. If you rent through an off-site company, the on-site company blocks your room off and won't rent it to anyone who comes in the hotel or resort. That is only where they start to hurt you. They will also not allow guests of the owner to use the amenities of the resort, thus hurting the amount it can rent for. Yes, they can do this and yes they do it all of the time. And yes, that's why most people just stick with the on-site rental company. Not all buildings disallow amenities so check with your Realtor. Now I'm not saying don't use an off-site company, I'm saying weigh the different outcomes and see which option puts more money in your pocket. Remember that the on-site company also has an onsite maintenance and housekeeping staff. There are certain instances where I'd actually recommend off-site companies, and I'll talk about that another time.

5. Lending Issues on Condos

When you're looking to purchase an oceanfront condo or investment condo, I highly recommend paying cash if you can, and here's why. Oceanfront condos are known by lenders as a "Condotel." Meaning they are a condo that is in what they consider a hotel. Because such a high percentage of these units are investments and not primary residences, the units in these buildings are known as "Condotels" or "Non-Warrantable Properties." Because they are considered high-risk property and non-warrantable, a lot of lenders will not finance them. Local Realtors will know lenders to send you to so don't worry if you're financing a property of this type.

But it is a problem I almost guarantee you'll run across if you're financing a Condotel. Also, because it's an investment property, any property you purchase will probably require at least 20% down and have a slightly higher interest rate. Because of this, a lot of investors tend to pay cash to avoid these extra fees. But I do sell plenty of ocean-front condos to clients who need financing and they usually work out, just with a few more headaches. 

6. How do I know what units rent the best?

There are a bunch of things you can do to your unit to maximize profits. That I'll save for another time. To know which unit you should buy, you'll need a Realtor for sure. They can usually access the rental history and occupancy rates for any building that you're looking in. If they can't, well it might be time to switch Realtors. It's not easy to get the rental history on units but to purchase one, you have to have it! Ask your Realtor to get the gross and net income for the past 3 years on any property that you're interested in.

Also, get a list of expenses!!! If you don't, then you have to take the owner's word for the amount the unit generates. Make sure the expenses add up so you're getting the same net number the owner provided you with. Never take someone's word for it, get copies of actual rental documents. All rental agencies have to keep these numbers on file. Do the math with a small number of units you like best and purchase whichever one makes sense financially based on price/income. That number will ultimately be your rate of return. Try to find a property as close to a 10% annual return as possible.

Overview

Those are 6 key points I believe are most important before purchasing an investment property. There are other topics to discuss once you actually purchase the property. I will address that in another article. The best thing you can do is just ask questions. Ask your Realtor, ask the HOA, ask people staying at the resort. Ask questions so there are no surprises later. As I said before, I have a lot of investors that contact me about these types of properties so feel free to contact me directly. I hope this article was helpful and there will be more to come. So check back periodically and see what information has been added!!

If you have any further questions regarding an oceanfront property and short-term rentals, feel free to call me on my cell number below!

(843) 957-3872- Jonathan Edmund

June 24, 2021

Condo Vs. Home Short Term Rental Guide Myrtle Beach

Condo Vs. Home Short Term Rental Guide Myrtle Beach
From: Jonathan Edmund

 

In this article, I will explain the differences between purchasing a short-term condo versus purchasing a home. There are many factors that come into play and one isn't necessarily better than the other. It comes down to your expectations, the amount you are willing to spend, and how involved you want to be with your property. If you want more information on short-term rentals in general mostly condos due to their complexity, read my previous article "What to know before purchasing an investment property in Myrtle Beach." Feel free to comment and share!!

 

Short Term Rental Homes Vs Condos.

First, a short-term rental is defined as a rental that is on a weekly or monthly basis, also known as a vacation rental (Anything 6 months or longer is usually a long-term rental). A vacation rental property can be a home or condo and must be in what is called the "short-term rental zone." This means that the area it is located in is suitable for short-term rentals and that it is allowed. Typically anything on the east side of Highway 17 (ocean side) allows short-term rentals but not always. Ask us or your realtor and we can check and see if a property is suitable for short term. You can go the route of buying a home close to the ocean and renting it out short term or buy a condo and renting it out. Which route you go depends greatly on the funds you have and what you're willing to spend.

A home close to the ocean suitable for renting will usually be very large and able to sleep a great number of people, thus maximizing occupancy which is critical for short-term rentals!! A lot of beach homes that are rented out have anywhere from 4-8 bedrooms and 3-5 bathrooms and are oceanfront or walking distance to the beach. Obviously, a home close to the beach will be very expensive so if you have limited funds, you will have to go the condo route which is a whole different ball game. The great thing about buying a home over a condo if funds allow is that usually, beach homes don't have HOA fees or Home Owners Association Fees. The fees are typically high on ocean-front condos and always go up not down. Not having that fee at all is a huge plus and is one reason many investors choose homes over condos.

Also, since you're not in a building that has a management company in a place like many oceanfront properties, you can pretty much use any management company you want or self-manage if you have the time to do so. The management fees for a home are also usually less than the onsite management fee of a condo. Usually anywhere from a 10-20% management fee which they take out of your gross income. Each property management company differs in their rates but you want to find the best one for your property. I'd rather pay 20% to a company that will market my property well and keep it occupied more often than pay 10% to a company that doesn't market it well and keeps my property vacant more often than not. So shop around if you choose not to manage yourself or ask your realtor for recommendations. Two main things that determine how much you can charge for a short-term rental are occupancy and amenities. The more amenities you have, the more you can charge. The more people you can sleep, the more you can charge. Homes win at occupancy, and condos win at amenities typically.

Now that you understand the gist of a short-term home rental, let's talk about condos. If you've ever stayed at an ocean-front resort with a check-in desk that seemed like a hotel, it actually may have been individually owned condos that the company onsite just manages and runs like a hotel. If you have been to Myrtle Beach and stayed oceanfront, chances are high that's exactly what you stayed in unless you were at a well-known hotel chain like Hilton, Mariott, etc. Basically, people buy condos in a building that is managed by what they call an "onsite rental company." This company charges a rental split, usually between 35-50%, and manages the property, markets it like a hotel would, and has onsite housekeeping, maintenance, and room service much like a hotel. You also have HOA fees that you have to pay that usually include your homeowner's insurance, and some if not all utilities and access to the resort's amenities.

You're probably already weighing out the pros and cons in your head of condos versus homes right now. So let me list them before I go further. Homes you don't have HOA fees, but you will pay your homeowners insurance out of pocket and not in a bundle package like with a condo. HOA fees on an ocean-front condo almost always include the home owners insurance but ask your realtor to double-check this! But, HOA fees never go away so that's a plus for homes. Also, you noticed the high management fees for an onsite rental company. Another plus for homes. But there is a convenience you have with condos where everything is taken care of and included for one fee and you don't have to go out and look for everything. With condos, you will have onsite maintenance. With homes, if you manage yourself you will have to find someone to fix issues when they arise, and believe me, they will arise! If you use a property management company with a home, they contract out people or have their own maintenance to fix issues but they aren't onsite obviously so guests will have to wait until the maintenance person shows up to have anything fixed. With a condo, they are always onsite ready to fix any issues that come up just like a hotel. Also, taxes are most likely going to be higher on a home than on a condo for obvious reasons, especially when taxed as a second home or investment property (6%).

So now that you understand the differences, you probably want to know why you would go the condo route at all with such high rental splits as well as HOA Fees. Well, there are only two reasons, money, and convenience. If you don't have a substantial amount of cash ($500,000) or more to buy a home or can't finance that amount, you probably won't be able to get home and will have to pursue the condo route. Just finding a home close to the beach for the price above or lower is highly unlikely which is to be expected. And if you don't have the time to self-manage or deal with an offsite rental company which is what you're using with any home, a condo may be a better route to go due to the all-inclusivity of condo rentals.

The reason condo HOA fees are so high (usually $500-$1,200 a month) is because the fee covers your homeowner's insurance, your internet, cable, electric, water & sewer, trash, and access to all resort amenities. If you had all of those things in your home, you might be spending around that a month anyway because I promise you, your guests could care less how many lights are left on as they come and go while on vacation. So to have that all included and not worry is "convenient." The reason the rental splits are so high with onsite rental companies like mentioned above (35-50%) is simple. They know they can charge it and get away with it. It sounds horrible, but they are sometimes a necessary evil. These rental fees are taken out of your gross income just like with a home. They include the marketing of the unit, having 24 hour onsite services like front desk, room service, maintenance, and housekeeping as well as access to the resort amenities. So if that isn't worth 35-50% of your gross income to you, you can try using an offsite company to manage your unit.

But wait, can't you only use an offsite company for homes? 

No, you can use an offsite company to manage a condo unit in a building that has an onsite management company in place. NOT ALWAYS, so check with your realtor. But most of the time, you can use an offsite company. But there is a catch sometimes. Of course, there is right? First off, if you use an offsite company to manage the unit in a certain building, the onsite company located in the building will not rent your unit out at all. This means that any direct call-ins to the resort will never have access to your unit whatsoever. They also lose access to onsite services like housekeeping, maintenance, etc. You can probably see how that could cause problems. Also, SOME BUT NOT ALL onsite companies will not let your guests use the resort amenities (pools, gym, lazy rivers, etc.) if you rent through an outside rental company. Who wants to stay at a resort where you can't use the pools at the resort? So that's where the "necessary evil" comes into play. Not all resorts do this but it is imperative that you check and make sure before you purchase any condo. Also, an offsite company from my experience usually generates less gross income for your unit because it's just tough to compete with the actual onsite company.

The best way to see if you should go onsite vs. offsite with a condo is seeing what similar units "net" with onsite and offsite in the same building. Onsite company A might generate $40,000 a year but after expenses, you only walk away with $10,000 whereas with offsite company B, they might only generate $30,000 a year gross but you walk away with $15,000 in pocket due to less fees. It's recommended that you find a good realtor to run these numbers for you due to hidden costs you might not find on your own!

I mentioned that Occupancy and Amenities play a huge role in what you can charge for a property as far as renting it. Resort-style properties typically have a whole different feel than homes and a lot of people prefer that. You have lazy rivers, multiple pools and jacuzzis, water parks sometimes, gyms, and onsite restaurants. Unless you plan on adding all of those things in your home and I know you don't plan on it, that is a huge plus of the resort-style condos. When it comes to occupancy though, most resorts have 1,2, and 3 bedroom units. Well, some families come down in large groups or students come down from college in a group of 20. Or a family of 10. You can't always squeeze them in a 3 bedroom condo. A home works perfect for them and $3,000 a week doesn't sound expensive when you split it 15 ways.

Realistically, a home is usually going to bring in more gross income annually. It just will due to occupancy allowance alone. But if you can get 3 condos for $200,000 a piece and make the same amount of money as 1 $800,000 home and save yourself $200,000 grand, why not? It really just depends on your expectations and what you can spend. If you have unlimited funds to spend and want to buy a home, that's a great route. If you have $200,000 and want to get a condo that will make less money but a similar return on investment, you're still doing well. If you don't know which route to go or are torn, contact me and I can explain in more detail the pros and cons of each and help you decide.

I will end the article on this note. If you have enough money and can go the home route, I recommend it. If you still want to have a great investment property but don't want to spend a substantial amount of money, first read my article that I mentioned at the top of the page as it explains condos in great detail. If you still want to go the condo route after reading it, contact me and I can guide you in the right direction from there. Although there are pros and cons of both, they both can be great income producers and I wouldn't shy away from either one. It really just comes down to your personal situation and what you feel more comfortable with, what kind of return you expect, how much you are willing to spend, and how hands-on you want to be. I mentioned that you could self-manage a home above if you wish. Just in case that's the route you want to go, you can self-manage a condo as well. But check with the onsite company and make sure they don't have any restrictions if you choose to do so or it will impact your income!

I hope this article was helpful, and check back later as I will have an article up comparing long-term rentals vs. short-term rentals in case long-term is a route you're interested in as well. Thanks for reading!

 

June 24, 2021

How Do I Find The Best Agent To Sell My Home in the Myrtle Beach Area?

How Do I Find The Best Agent To Sell My Home in the Myrtle Beach Area?
From: Jonathan Edmund

Over the past few years, I have been primarily a buyer's agent meaning that I focused on working with buyers instead of sellers. Within the past year, I have decided to focus more on helping sellers due to a few different reasons. 

1. Being from the area originally, I know the area well and understand the market making it very easy for me to adapt to working with sellers.

2. Being primarily a buyer's agent, I know what buyers look for when making home purchases so I know what to have sellers do to their homes to maximize showings and thus, bringing a qualified buyer quicker.

3. I realized that with the large pool of buyers that I work with and come into contact with, I could probably sell a lot of the homes that I have for sale to buyers I already have ready to purchase. (And I have been doing this)

4. From my experience with buyers, I know where most of the buyers in this area come from which in turn, helps me market any home I have for sale better and the homes I market are in front of the most eyes possible. That's the key to selling a house. Make sure you have it in front of as many eyes as you possibly can.

When I first started working with sellers, I kept getting asked this one question on almost every appointment. "Why would I put my home for sale through your company when I can put it for sale with this company over here with a name everyone knows and who has more agents working for them?" I soon realized that many sellers don't understand how this business works. Most agents that I know of are all independent contractors. Yes they have to hang their license with a company, but they operate individually. What this means is that the sale of your home is dependent on the individual work of that agent, not the company the agent works for. A real estate office may have 50 agents working for them but that does not mean those 50 agents are trying to sell your home.

Another way to prove this point: When you were looking to purchase whatever home you are thinking about selling, did you buy the home because of the company that had the home for sale or did you buy the home because you were able to find it online or in an ad, and liked the home? Chances are you didn't buy the home because ABC Realty Company had it for sale, and you probably didn't even know what company had it for sale when you found it. You liked the layout, upgrades, location, etc. and you made the purchase.

The reason I have explained my experience above is for one reason. I want to educate sellers about how real estate sales work so they are not taken advantage of, and can make the best choice when choosing an agent to sell their home. I'm not saying you shouldn't go with a big company to sell your home, I'm saying what matters is the agent you choose, NOT the company they work for. I know the reason you came to this article is probably because you are thinking about selling your home and were hoping this article could alleviate the pressure of figuring out which agent you should choose. So below are the things you should look for in an agent and questions you should ask before choosing the agent.

Qualities You Should Look For In Your Agent

1. Customer Service: This job is more about customer service than about selling. If you feel the agent you are meeting with is more worried about just getting the home sold than serving your personal needs, they are probably not the right agent for you. Yes, you want to sell your home, but you want to make sure you have an agent that will act in your best interest, and assist you throughout the transaction and be readily available when you need them or have questions. You don't want an agent that will meet with you once and pawn you off to their assistant once you are their client.

2. Honest Pricing: This quality is of huge importance if you want your home sold. If you are asking $200,000 for your home and an agent comes in and provides proof that your home may not be worth that much and gives you a number and reason why that should be the number, don't shy away from this agent. Shy away from the agent that comes in and tells you everything you want to hear just to get the contract signed. Instead of saying, well ABC company told me I can get $200,000 for the home, ask the agent who was honest with you if you can at least try to start around $200,000 and see if you get any bites, Then you can adjust from there. Chances are the agent that told you "Yea, we can get you $200,000 no problem" isn't being honest and is just trying to build inventory. You'll be getting a call every now and then from them trying to get you to drop the price some until they sell it. They don't want that contract to expire so they will hound you to drop it to where they can sell it. I can't stress the importance of picking the honest agent. In the long run you will have much less hassle and they are usually easier to work with in all aspects.

3. Marketing: This is the most important quality because how an agent markets your home determines how quickly it sells, and maximizes the amount of money you get for your home. A good agent should be able to list to you the sites they use to market, how they go about their marketing and what areas they focus their marketing in. I can't go into too much depth on this without giving away my marketing techniques. But you are free to contact me directly and I can explain this in more detail. But your agent must be a master of internet marketing or not enough eyes will see your home, thus putting you at the mercy of an agent with limited marketing ability. Times have changed, newspaper ads and flyers aren't the best way to get eyes on your home anymore.

Questions To Ask Agents You Interview

1. What do you use to take your pictures?

         -This seems like a weird question to ask right off bat, but I promise you this is huge. You won't believe how many buyers I have worked with that I've sent homes to and they call me back and say, "Hey Jonathan, I got these list of homes but half of them I can't tell if I like them or not because the pictures are blurry or it's really dark in the house." Guess what, they never end up looking at the homes with pictures that aren't high quality. YOU DO NOT WANT TO MISS OUT ON SHOWINGS BECAUSE SOMEONE WAS TURNED OFF BY YOUR HOME ONLINE! The owner of my company was a professional photographer before entering real estate so we have high definition Nikon cameras with expensive flashes that will light a home up and take immaculate high definition photos. Don't get this confused with an agent that uses photoshop. You do not need photoshop to take high quality photos and photoshop can be very misleading. You want people to be able to see the great details of your home, but you don't want them to see something that looks great and it not be the same in person. 

2. How do you market my home to the most buyers?

       -This is also very important because you can take great pictures all day, but if nobody sees them does it really matter? Please ask all agents exactly what they do to market your home. This is the only way it will sell. If anyone could just sell a home by putting out a sign and throwing it on Zillow, Realtors wouldn't have jobs. There is a marketing plan that every agent should have when selling a home. Agents should be doing paid marketing not just using free sites. That gets some eyes on your home but not enough. 

3. Do I deal with you directly throughout the transaction?

      -This question isn't important to some people. I know most of my clients like that they have my direct line to reach me whenever they have questions or need anything. There are agents out there that will sign paperwork with you and you won't hear from them again. They should be giving you updates periodically and giving you feedback on the showings on your home. Based on the feedback, you and your agent can make a game plan on how to proceed to get your home sold. Don't be pawned off to some assistant who knows nothing about your home. Deal with agents who want to earn their paycheck and work with you throughout the process of selling your home and are there to answer questions you may have.

4. Why should I sell my home with you?

      -This is probably the most important question to ask. If an agent can't tell you why they feel they are the best person to sell your house, are they the best person to sell your house? All of the other questions listed above and the qualities to look for in an agent are the answers to this question. If the agent you are interviewing meets the criteria listed above, they probably are the best agent to sell your home. But to give you an example, I will now tell you why I feel I am the best agent to sell anyone's home!

Why I Am The Best Agent To Sell Your Home

The main reason I feel I am the best agent to sell your home is for one, I am a buyer's agent. Most people say well, I have been meeting with seller agents why would a buyer agent be the best person to sell my home. Well what are you looking for, a buyer right? If you have an agent who has worked with buyers consistently, that probably means at any given time, they probably have someone looking in the price range of your home. Guess who's home they are showing to their buyers first when that buyer is looking in the price range of your home? YOURS! For one, you make more money if you sell your own home so why not show it to your buyers just in case. It just makes sense. So picking an agent that specializes in working with sellers isn't necessarily your best route. If you have an agent that has walked through homes with buyers, chances are that agent knows exactly what turns buyers off from homes and can keep that from happening to you. And believe me I've heard every reason why someone didn't like a certain home.

I also believe I am the best agent to sell anyone's home because I am from Horry County originally. I have lived in the North Myrtle Beach/Little River area my whole life. I went to North Myrtle Beach High School and Coastal Carolina University. I'm about as local as you can get and know the whole county like the back of my hand. Believe me this helps when marketing your home to a potential buyer. I focus on customer service, not how much money I will make or how many homes I can have for sale at any given time. If an agent tells you that they or their office have 30-40 homes for sale right now, you should ask them why so many are for sale and not under contract or sold. It's about quality over quantity. I want to sell homes and make my clients happy. Sure I want to make money as much as anyone else, but not at the sacrifice of my clients feeling like they were taken advantage of or are not happy.

Lastly, I feel that my marketing plan to find buyers is the best and when it comes to marketing a home for sale, not many people compete with me. Ask me where and how I market my homes. To top it off, I don't rob people on commission rates. I structure my commission much differently than other agents and my company gives me free reign to negotiate my commission with any seller, which is something a lot of agents don't have the power to do. 

This is an example of what you should look for in an agent. If you are looking to sell your home, please give me a call. I won't take much of your time and can explain how I operate and why I am the best agent for you. More importantly, if you don't use Wave Beach Realty to sell your home, I hope this article at least helps you find the best agent for you and that you are comfortable and satisfied with the agent you end up using. Thanks for reading and check back for more informative articles in the future!

June 24, 2021

Investment Properties, Condo Rentals, Vacation Homes, 2nd homes, Weekend Getaways HOA FEES, Rental Information

Investment Properties, Condo Rentals, Vacation Homes, 2nd homes, Weekend Getaways HOA FEES, Rental Information

From Robert Ward  WaveBeachRealty.com

There is a lot to know about purchasing investment/rental properties at the beach and I will do my best to assist you every step of the way.

Here are a few things to look for with investment/rental properties. The first thing is the price, of course. Then Location Location Locations,  the rental history, the taxes, and then the monthly fees. HOA fees are not all created equal! They are determined by the location of the unit in the building (View), what floor its on, the square footage of the unit, how many Amenities the resorts provide, and one of the biggest things is the Insurance on the property (Building and Flood if needed) These are the main things to look for.

Please Note:  The HOA Management has nothing to do with your Rentals Management Company they are two separate entities do not confuse the two. 

Your Rental Management Company:  Onsite or 3rd party Rental Company you choose and hire to manage your Property/Condo. If you hire a 3rd party Rental Management company there will be onsite Amenities your tenants may not have access to such as No front desk assistance, No onsite check-ins, waterparks, onsite housekeeping, onsite maintenance,  so be sure to ask these questions when considering any Rental Management Company. There are some resorts that require you to use the onsite rental company so be sure to ask.

Once you pick a property you need to talk to the onsite rental company of whoever you choose to manage your rentals before you purchase it and ask about the Rental Management Commission or The Split as we call it such as 60/40, 70/30, 85/15, etc,  (Make sure to ask about this) Because it may or may not cover everything on the rental side. 

The owner will have fees to pay out of their side of the Commission/Split such as the daily/weekly cleaning service, Owner Departure Cleaning Fee, yearly deep cleaning, required Landline Phone, City/County licenses, Credit Card commission, Travel Agent Commission, Annual Maintenance. fee,  Miscellaneous fee,  Replacement fees, Hospitality fee, So make sure you understand what the Rental Management’s commission covers and what you as the Owner will be liable/responsible for paying. Ask for a list of all the charges that you may encounter with a rental agreement. Make sure to ask about the limit of the owner's use and fee for the owner's exit/daily cleaning if you intend to occupy the property for any personal use. 

The HOA Management:  maintains the property Building Structure, Parking lots, Pools, etc, They are hired by all of the Homeowners (you).   

When you see a Condo Listing and the HOA fees are low compared to other listings, Instead of getting excited you need to ask Why? What does it not cover?  Sometimes the HOA fee will not include things such as insurance so then there will be a yearly assessment fee.  Now that's not always a bad thing because what they do is, shop for a better rate every couple of years so they can adjust the assessment fee up and down when possible rather than just picking a number and raise the HOA fee. The insurance is usually pretty stable. 

You also need to contact the HOA contact person when you purchase a condo. Remember You Own It and you do have to pay all the expenses just like owning a house it does not matter if you are on the 1st floor or the 10th there is a roof on top of the building that belongs to every owner!  Remember it is in your Deed when you purchase this type of property that every owner is liable for such repairs and expenses for the whole resort property know as Common areas, not just the inside or your condo. When a resort is in need of any type of repairs such as a new elevator or a roof if there is not enough money in the HOA reserve account the owners have to pay for the repairs just like a house it's yours so you have to keep it up. The cost is divided among the owners, with large repairs most of the time they set it up for payment/assessments over a period of time. Always read your documents and make sure you understand them before purchasing any property. The HOA (Home Owners Associations) which you are a part of, and you have a vote/say in all matters. Get involved with your HOA, go to the meetings, and voice your opinion...... But understand this the majority rules. So if you don't play well with others then this may not be for you! 

 HOA Fee MAY OR MAY NOT  include all of the items below they are not just limited to this list, every Resort/Property can be different.

Electric Common     (Street Lights, Hall Lights, etc, Common areas Only )
Trash Pickup
Elevator Service      (make sure to look for this if not you may be climbing stairs, any building with 4 or more floors should all have an Elevator, 3 floors or less may or may not have an elevator)
Pool Service
Landscape/Lawn
Manager
Security
Rec. Facilities
Legal and Accounting
Electric In Unit      (Inside your condo)
Internet Access
Phone                   (Land-Line may be required in rental units)
Insurance             (only covers the structure and outside it does not cover anything inside the condo)
H06  Insurance     (This covers inside the condo from wall to wall inside the condo and you can cover your content, liability insurance) 

With any property you purchase Expenses are not just limited to this list, like owning any property such as a house, condo, townhouse, or land there will be things to maintain over the years and you as a property owner will be responsible for your part. 

To calculate your ROI (Return on Investment)  You will need to calculate the Net Income amount for the year and the Cash Purchase Price Plus Out of Pocket Closing Cost Amount.  If you are financing the property your Initial investment amount will be your (Out of Pocket Cash Down Payment Amount  Plus Out of Pocket Closing Cost Amount)  If you will be financing you can calculate 2% of the total purchase price to Estimate your closing cost or contact your lender for the exact amount... Then you can calculate your ROI Per year from the Net Income.

Calculating your ROI will only be correct if you know All Expenses for the year,  your Initial Investment Amount & the exact Closing Cost amount.

__1 NOTE..... Rental properties typically always show GRI (Gross Rental Income) Not Net Income Big Difference......Keep this in mind when you are running your numbers!

 __2 NOTE….The Real Estate Property Taxes are Never included in your HOA fees! SC Real Estate Property Taxes is paid in Arrears---at the end of the year they are assessed.

 There are no resorts that include ALL/Every one of these expenses with the HOA fees.  It is your responsibility to do your Due Diligence as a Buyer to verify all expenses before purchasing any property. Be sure to ask for and contact the HOA Property Management Companies and the Rental Management Companies before purchasing any property.

You also need to seek professional Accounting/CPA Tax advice before purchasing any investment properties. 

 

If you have any further questions regarding an oceanfront property and short-term rentals, feel free to call me on my cell number below!

 

910-840-2287 Robert Ward

July 31, 2017

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