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’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.
@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.
John, 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
Thanks @Diane Valencia I will definitely take a look. I'm guessing a lot of people have success using your approach.
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.
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.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.