Hilton Head Short Term Vacation Rental (Eventual Second Home)
John SmeltzerPro Member
Investor · Gibsonia, PA · Member since 2017 · 45 posts · 23 votesHilton Head Short Term Vacation Rental (Eventual Second Home)
Most Popular Reply
Real Estate Agent · Hilton Head Island, SC · Member since 2016 · 1 post · 3 votes
8yI concur with your analysis and thoughts about the cash flow scenario is challenging with a modest downpayment. We own a rental home in Sea Pines, and two in North Forest Beach, and my wife operates a Vacation Property Management and Real Estate company here on Hilton Head. So I have experienced these economics from our personal homes, as well as we have worked with buyers to purchase their rental \ future second home. With the assumption you can afford a property that is in a ideal rental area (meaning relatively close to the beach (PD or Sea Pines, Forest Beach) so the rental potential (weeks rented and rates), and you plan to live there one day with a sufficient down payment, having pay down the mortgage over time is reasonably good model. It will not typically turn the ROI as other residential or real estate investments, as the property is too expensive, plus the additional costs you don't have in most of the country - wind\hail insurance for example. If your heading down this path, I think the best course of action is to find a home and location you prefer, allocate the cash to fix it up so its very nice (floors, bathrooms, kitchen) and furnish it rental style furnishings which could be another discussion altogether, i.e. -not cheap, but fabrics that can cleaned easily. Ride the rental train and enjoy the home in non peak rental weeks, and when you ready to move here full time, send all of the furnish to the second hand store and buy your 'forever' furnishings. The last rental tip is making your home dog friendly will offer much greater rents than a non pet friendly home. Here are links to the aforementioned properties if you are interested in looking at the rental details for an example of different home sizes, locations, etc.
https://www.palmettosands.com/hilton-head-vacation...
13 Replies
- Morgantown, WV · Member since 2017 · 22 posts · 19 votes8yI’ve done the same searching except have concentrated in the Palmetto Dunes plantation. Same song different verse. I was thinking that breaking even could be a win bc we would pay down the principle with other people’s money and have a nice place my family could visit a couple times a year. Prices are high and expenses are crazy. Ultimately decided I would invest my money elsewhere and use built up net worth to purchase a home on HHI when the time comes to retire.
- Investor · Gibsonia, PA · Member since 2017 · 45 posts · 23 votes8y
@Ryan Tyree Thanks Ryan. I am considering your approach as well. I would even be okay if the cash outflow was largely offset by equity buildup. Even that is hard to find.
- Investor · Salt Lake City, UT · Member since 2016 · 6 posts · 1 vote8yJohn, the biggest expense is Property management. Usual 60/40 split in my areas. This can be a deal breaker with a large mortgage. I have chosen to work with an internet company that markets my units on multiple platforms for a 10% fee. They provide partners on the ground for management, etc. Of course, you still will have to pay Cleaning fees and transient room tax but your NOI is much better. Also check out J Massey at Short Term Rental Mastermind and Richard Fertig at Short Term Rental University. You tube and Facebook
- Investor · Gibsonia, PA · Member since 2017 · 45 posts · 23 votes8y
Thanks @Diane Valencia I will definitely take a look. I'm guessing a lot of people have success using your approach.
- Real Estate Agent · Hilton Head Island, SC · Member since 2016 · 1 post · 3 votes8y
I concur with your analysis and thoughts about the cash flow scenario is challenging with a modest downpayment. We own a rental home in Sea Pines, and two in North Forest Beach, and my wife operates a Vacation Property Management and Real Estate company here on Hilton Head. So I have experienced these economics from our personal homes, as well as we have worked with buyers to purchase their rental \ future second home. With the assumption you can afford a property that is in a ideal rental area (meaning relatively close to the beach (PD or Sea Pines, Forest Beach) so the rental potential (weeks rented and rates), and you plan to live there one day with a sufficient down payment, having pay down the mortgage over time is reasonably good model. It will not typically turn the ROI as other residential or real estate investments, as the property is too expensive, plus the additional costs you don't have in most of the country - wind\hail insurance for example. If your heading down this path, I think the best course of action is to find a home and location you prefer, allocate the cash to fix it up so its very nice (floors, bathrooms, kitchen) and furnish it rental style furnishings which could be another discussion altogether, i.e. -not cheap, but fabrics that can cleaned easily. Ride the rental train and enjoy the home in non peak rental weeks, and when you ready to move here full time, send all of the furnish to the second hand store and buy your 'forever' furnishings. The last rental tip is making your home dog friendly will offer much greater rents than a non pet friendly home. Here are links to the aforementioned properties if you are interested in looking at the rental details for an example of different home sizes, locations, etc.
https://www.palmettosands.com/hilton-head-vacation...
- Evans, GA · Member since 2018 · 13 posts · 9 votes8y
Very interesting discussion. My wife and I were thinking of doing a similar route in the future, and good items to consider! We love Hilton Head.
JT
- Member since 2023 · 1 post · 0 votes3y
Hi there, it sounds like you're in the process of making a big decision about purchasing a second home in Hilton Head, and I can definitely understand the appeal of having a vacation home in such a beautiful location. As you mentioned, one way to help offset the costs of owning a second home is to rent it out when you're not using it.
Regarding your search for properties in Sea Pines Plantation, I would definitely recommend looking into Hilton Head vacation rentals in other areas of the island as well. While Sea Pines is a beautiful and popular area, it may be harder to find a property that breaks even from a cash flow perspective given the high demand and associated costs.
There are many other neighborhoods on Hilton Head that could be worth considering, such as Palmetto Dunes or Forest Beach. These areas may offer more affordable and diverse rental options that could potentially help you achieve better cash flow, while still providing access to all the great amenities that Hilton Head has to offer.
In terms of finding a good property management company to help you rent out your second home, there are many great options to choose from. You may want to consider reaching out to a few different companies to get quotes and compare services, as well as asking for recommendations from other property owners in the area.
I hope this helps, and best of luck with your search for the perfect Hilton Head vacation rental!
- Real Estate Broker · Hilton Head Island · Member since 2020 · 43 posts · 25 votes3y
Hi John,
I live in Sea Pines and am a local realtor & short-term rental specialist on the Island. I have several STRs on Hilton Head & in sea pines and believe I can add significant value to your search, acquisition, & rental success.
Sea Pines is fantastic but there is a premium on the land here due to the brand name. With that being said you just need to find the right property purchase & cash flow-wise, which is doable.
My favorite ROI area on Hilton Head is Forest beach due to lower purchase prices than SP, no POA fee & so many amenities being close by(60 shops & restaurants, 14m Celebration park, 3 miles of beach). My 6 bedroom in forest beach was purchased for 850k, put 400k into it, appraised for 2.7m & will do over 275k in 2023.
Here's my HHI STR page on my site that will dive a little further into my philosophies of how to be successful with STR's on HHI. https://www.findhiltonheadreal...
Would be happy to hop on a call to discuss further.
Cheers! - 3yBryce CutlerPro MemberInvestor · Wynantskill, NY · Member since 2013 · 180 posts · 77 votes
HHI is a similar future goal for me. We purchased in Myrtle due to affordability but would like HHI ultimately. I have read a little about STR regulations in HHI, does anyone have details about the local regulations there?
- 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
@John Smeltzer if you're buying a Class A property, at retail prices, it typically takes 3-5 years to cashflow.
Logical Property Management4.9458 Reviews - Real Estate Broker · Hilton Head Island · Member since 2020 · 43 posts · 25 votes3y
Quote from @Bryce Cutler:
HHI is a similar future goal for me. We purchased in Myrtle due to affordability but would like HHI ultimately. I have read a little about STR regulations in HHI, does anyone have details about the local regulations there?
The town recently put in a few over arching rules, As well as an STR permit for $600 per year. This will never affect the number of rentals or have a cap associated, its to hold owners that self-manage are accountable for code issues, trash on street, and noise issues.
- 3yBryce CutlerPro MemberInvestor · Wynantskill, NY · Member since 2013 · 180 posts · 77 votes
@Brandon Greenplate thanks for the info. Reasonable regulations are a good thing. I appreciate the input.
- Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes3y
Quote from @John Smeltzer:
I'm looking to purchase a second home in Hilton Head (preferably Sea Pines Plantation) to be used when I retire in 10 years or so. For now, the property would be rented out full time to help cover the costs. Looking for advice if anybody has done this and how they approached it. Based on the properties I've evaluated, it's hard to find a property that breaks even from a cash flow perspective after all expenses (including property management) with a 30% down payment.
From a pure investment perspective, I would choose to put money elsewhere. However, the desire is to have a second home there. I've only looked in Sea Pines Plantation but maybe there are other parts of the island I should consider if it makes more sense from an investment perspective?
I lived there for a year, way overpriced, too much traffic and all the restaurants are terrible. Try going to lunch on a Tues at 2 , cant get in anywhere, and its not worth the wait. We moved North to Murrels Inlet, much more potential and MUCH better overall living experience, Hated Hilton Head. If you are committed the living, there. We have a buildable lot in Old South Golf course on the 9th fairway. Only 1 mile from Hilton Head, very nice and quiet area, only about 30 homes in the subdivision Articular plans included, PP 110K,
Good luck
Join the conversationCreate a free account to reply, vote on answers and follow this thread.