Seeking Charleston REI Tips: House Hacking & Investment Insights

[Kyle McShea]

Hey BP community,

I am brand new to REI and wanted to take the time to ask some questions to learn more about the market.

First and foremost I have been looking at properties in West Ashley & Johns Island to house hack.
- Looking for rental friendly area
- Want to be close to the beach / downtown Charleston
- I am more interested in Johns Island due to tax dollars being put into that area

#1 What does a good Charleston deal look like?

I have surfed the web and reviewed reddit posts, YouTube videos, talked with family members, and more and I've come down to this definition.

- 20% equity after rehabbing
- 4% Cash on Cash return
- 5% Appreciation rate

What are your thoughts on this base definition and how does it apply to Charleston? I understand the appreciation in Charleston over the last year was 9.8% so does that change the other pieces?

I've also noticed West Ashley / Johns Island struggles to reach the 1% rule.
Are others seeing this as well or should I find an agent who is in the loop w/ off-market opportunities?
Or would I find better opportunities to reach the 1% rule in areas like Summerville / North Charleston / etc?

#2 House Hacking Room Rental Rates (West Ashley / Johns Island)
I am looking to house hack and I would like to know what does the going rate for a 1 bedroom 1 bathroom usually go for?
I've seen a range of $1,000 - $1,300 based off Facebook Marketplace + Furnished Finder, but what are the numbers you are seeing?

#3 North Charleston areas to invest
I understand that Park Circle has been gentrified over the past couple years but it looks like it has gone through its up and coming phase. Does anybody have ideas to where other areas in North Charleston are gaining traction?

I appreciate any information / advice, thank you in advance!

[Sarah Kozlik]

Hi Kyle!

Welcome to the community! I highly encourage you to attend the next REI Central meeting on August 1st 6-8 pm at Palmetto Brewing Co 289 Huger St Charleston, SC 29403. You will connect with so many great people and get tons of tips and pointers. Please DM if you would like to chat further about your three questions. I'm happy to share my knowledge and expertise with you : ) .

Thank you,

Sarah

[Patrick Roberts]

Oh boy, lots to unpack here. 

#1 - Finding cashflow in charleston without putting 40-50% equity into the deal is like finding a needle in a haystack. As you've already observed, when you buy a $500k property and finance at 50% LTV to rent for $2,800/month, your Cash on cash is abysmal. Appreciation for CHS is projected at 4-5% as of now, but that's just a projection. It's literally just a guess as no one has a crystal ball. I don't think it's a bad guess, but I also wouldn't expect that to be realized with an investment horizon of less than 5-7 years. Same goes for finding off-market distressed properties to rehab. You can find some here and there, but adding 20% with a rehab will be tough. There are so many investors and wholesalers hustling here that these don't last long. Typically, distressed properties literally sell for Market Price - Expected Rehab Costs, so any equity gained is mostly sweat equity. Forced appreciation my be a option if you have the means.

#2 Househacking - I personally think this is the best path into investing for new investors in CHS. Room rental rates will vary with area, but I think $1,000/month is a fair and conservative estimation. Anecdotally for reference, a friend who graduated from the Citadel in 2020 paid $1k/month for a room in a house just off campus in Hampton Park Terrace (utilities included) around that time. Also, a six-room duplex near us was recently renovated and has an over-under layout with each room having an ensuite bathroom. The owner rented rooms for $1k each (I think that's what she told me) to young professionals working at MUSC right down the street and to Citadel students. This was in the past 3 months on the peninsula. 

#3 Park Circle has matured, but N CHS as a whole is probably still a good area with a long term horizon. A major Coast Guard base is being stood up in N chs on the river, the port facility is booming and expanding rapidly, and N Chs offers some of the only reasonably priced developable RE with short commuting distance of the peninsula, Mount P, and the beaches. My personal expectation is that N CHS continues to appreciate into a wealthy suburb/satellite over the next ten years. 

As @Sarah Kozlik mentioned above, REI Central is a great place to get further involved with the REI community. Each meeting includes info and market updates like what I've laid out above. There are a few other worthwhile REI meetups as well. Reach out if I can help with any info.

[Kyle McShea]

Hey @Patrick Roberts!

Thank you so much for the deep insights.

I just completed my third trip checking out properties in Charleston and your comment definitely helped me out with house hunting.

First of all, your comments in tandem to conversation within my network made me re-think of what exactly is my goal with real estate in Charleston?

I ended up with the goal of living in the area paying less than what I would pay for rent ($1700) while building equity on a property. My brother and I will be renovating the property we live in so that after living there for a year we have the freedom to sell the property, refinance and use that equity for a down payment in a different market we're interested in, or rent it out if its able to cash flow. Charleston RE market definitely not an easy market to start with compared to other markets I've been analyzing deals on. But Charleston is such a great place I am so much happier when I spend time there so lets do a house hack!

As for house hacking here's my strategy to find out what the property I live in COULD rent for ...
I will be posting it for rent at the highest price and work my way down after 3-4 days of it being posted. I will start high and decrease in price until I find a tenant I would like to live with. A property I am putting an offer on tomorrow has an upstairs section I conservatively think I can get $1500 for (master bedroom + small bedroom OR bonus room for office), then two bedrooms downstairs for $1,000 each. Therefore, $3,500 a month. I am currently thinking about sleeping in the detached garage & converting it to a live-able space or sleeping in an office space converted to a bedroom on the first floor. Not sure yet but this property is cool and who knows I think I could cash flow on it because monthly costs are looking like 3200.

Appreciate your lengthy response! I'll be sure to say hi to you on August 1st !!

[Patrick Roberts]

Quote from @Kyle McShea:

Hey @Patrick Roberts!

Thank you so much for the deep insights.

I just completed my third trip checking out properties in Charleston and your comment definitely helped me out with house hunting.

First of all, your comments in tandem to conversation within my network made me re-think of what exactly is my goal with real estate in Charleston?

I ended up with the goal of living in the area paying less than what I would pay for rent ($1700) while building equity on a property. My brother and I will be renovating the property we live in so that after living there for a year we have the freedom to sell the property, refinance and use that equity for a down payment in a different market we're interested in, or rent it out if its able to cash flow. Charleston RE market definitely not an easy market to start with compared to other markets I've been analyzing deals on. But Charleston is such a great place I am so much happier when I spend time there so lets do a house hack!

As for house hacking here's my strategy to find out what the property I live in COULD rent for ...
I will be posting it for rent at the highest price and work my way down after 3-4 days of it being posted. I will start high and decrease in price until I find a tenant I would like to live with. A property I am putting an offer on tomorrow has an upstairs section I conservatively think I can get $1500 for (master bedroom + small bedroom OR bonus room for office), then two bedrooms downstairs for $1,000 each. Therefore, $3,500 a month. I am currently thinking about sleeping in the detached garage & converting it to a live-able space or sleeping in an office space converted to a bedroom on the first floor. Not sure yet but this property is cool and who knows I think I could cash flow on it because monthly costs are looking like 3200.

Appreciate your lengthy response! I'll be sure to say hi to you on August 1st !!

Garage ADU is the way to go if you're able to make it work financially. I think ADUs for househacks are the future for young professionals, and most of the conventional/govt lending guidelines were updated late last year to support this.

Hit me up at REI central in August (no meeting this month). Reach out in the meantime if I can help with anything.

[Jacob D Adamczak]

@Kyle McShea 
Question:

#1 What does a good Charleston deal look like?

- 20% equity after rehabbing
- 4% Cash on Cash return
- 5% Appreciation rate
Appreciation in Charleston over the last year was 9.8% 

Answer: If you are doing a heavy value add, you can certainly build 20% equity. I am buying flips at 70%ARV -repairs although I am looking at on market and off market deals and sorting through a lot of junk deals on a daily basis. I have built up a portfolio of (20, but 19 in CHS) rentals that I have a min 12% cash on cash return and 25% equity in. However, I started in 2019. It was easier then, but not impossible now. I am hitting those numbers now on a current project thats a very heavy value add multifamily in North Charleston. North Charleston is where I am finding you are most likely to find a cash flowing rental as it has a stronger rent to price ration than most other areas in town, unless you are open to STR's. I like to think of appreciation as icing on the cake. However, my next buy will be downtown or in surrounding areas in the city of Charleston as they have historically seen more appreciation, or to think of it differently, the 9% appreciation will result in a bigger increase in my net worth on a 500k property than a 200k property if the rate is the same. I also wont get to cash flow immediately on this like I have on my North Charleston rentals but am at the point that I'm trying to build a mix of both types of property.

I've also noticed West Ashley / Johns Island struggles to reach the 1% rule.

This is correct, direct to seller is the best way to find this or its pretty rare without a large downpayment or STR.

Are others seeing this as well or should I find an agent who is in the loop w/ off-market opportunities?
Or would I find better opportunities to reach the 1% rule in areas like Summerville / North Charleston / etc?  

I am an agent as well and would be happy to chat :)

#2 House Hacking Room Rental Rates (West Ashley / Johns Island)
I am looking to house hack and I would like to know what does the going rate for a 1 bedroom 1 bathroom usually go for?
I've seen a range of $1,000 - $1,300 based off Facebook Marketplace + Furnished Finder, but what are the numbers you are seeing?

A: This is pretty accurate from what ive seen, parking, access to a private bathroom are two factors that can help you push rents as well as the updates in the house. The higher you go, the more likely that they can afford a studio or 2 bed and dont need to rent a room.

#3 North Charleston areas to invest
I understand that Park Circle has been gentrified over the past couple years but it looks like it has gone through its up and coming phase. Does anybody have ideas to where other areas in North Charleston are gaining traction?

A: I don't see that Park Circle is done growing.  I think similarly about hanahan, west ashley, and Johns Island. Would be happy to chat to go into more details about subdivisons.

All in all, I think a house hack in a good area of town is a great bet to get started. I house hack now and its my favorite thing to help clients find.

[Troy Gandee]

@Kyle McShea Like @Sarah Kozlik said, you should definitely join us at REI Central if you plan to get more involved in the investing space. We meet monthly and have 3 sub-group meetings the rest of the month for our annual members.

@Jacob D Adamczak has helped a lot of people purchase house hacks. He's a fountain of knowledge with this strategy if you need more assistance.