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 )
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)
Legal and Accounting
Electric In Unit (Inside your condo)
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