Condo. How much is this really going to cost?

Question

Hi,

This is my first post on this forum so I’d like to say hello to y’all. I am a native German and live in Greenville, SC w/ my American wife and three kids. We just started looking into buying a condo at the beach.
Just to give you a heads up. I am in the beginning of the beginning of hopefully becoming a landlord.

Here is our plan.
We would like to buy a condo in the Myrtle Beach area that we would like to rent out occasionally. I don’t really want to rent it out to one person that lives in it full time because I’d like to go to the beach and stay at our condo whenever we feel like it. I think we’d probably go down once a month for the weekend and maybe a little more during off-season. So that leaves plenty of room for renting it out throughout the year.

I’d like to know what expenses I’d have to expect that I might not even be thinking about yet. I want to do my homework before we really do anything.

We found some nice condos for about $85.000 that would really fit our needs. 3 bedrooms, close to the beach, community pool.

If we would put 6% down, the monthly est. mortgage would be roughly $360. The monthly fees in that apartment complex are $200.

[b]Expenses:
$360 Mortgage
$200 Fees
$60 Maintenance/Repairs on Average per month
$??? Property taxes
$??? Home Insurance

[/b]Earnings:
$??? Rent per week on average.

Could anyone possibly fill in my blanks and let me know what other expenses we’d have to expect? I could ask so many more questions but I’d just like to get a conversation started first.
Thank you for your help. I appreciate it.

Jeff Bridges · Answer

A couple of issues I noted that you will need to revise in your estimates. 6% is not a realistic down payment for investment rentals (especially for condos). Most lenders will likely require 20-25% down for investment condo rental so readjust that aspect and reassess if this is realistic. Management: driving on both ends of each short term rental along with cleaning and maintenance multiplied by 10-15 rentals a year might get old for you. If its next door, then no big deal. If not, the money saved in DIY might be a big sacrifice for your sanity. yes they usually charge 10% of the rent, but you will need to check your expenses appropriately (or buy a more reasonably priced condo). Profit: Some people can make a tidy profit with vacation rentals and pay-off their entires years expenses with a couple a rentals a year while others lose big time. You need to decide what your expenses are WITH management fees OR not renting it out to anyone as a full year summer house for a worst case scenario. Just be conservative and decide if the effort, money, headache is worth the price. Schedule: You have to decide if you are willing to allow it to be rented labor day, july 4, etc to maximize profit while accepting off-weekends for summer vacations with family. these weekends might even determine whether you break-even annually or not. Make your calculations with these dates in mind. Be realistic what sacrifice you want. On top of all of this, you have to be prepared to see if it will be rented at all outside the summer months or even the holiday weekends. Good luck...

Account Closed · Answer

Well it depends , I have someone who is responsible for turnover, cleaning and check-in, while I handle bookings, billing, and all the administration. I got lucky and found a recent retiree who I can pay less than a company because of the small amount of duties of the job, and they really just need extra money on the side as opposed to a full paycheck. Because my VR is on the other side of the country this is a necessary expense for me. Also you really have to factor in the cost of furnishing and rehab, it is A LOT. If you want to get a good price for renting it is going to cost you quite a bit. Don't judge it based on what the cost of rehab is for normal rentals it will be at least twice that. I have had no trouble making a profit while using a service but you have to be very conservative in all your calculations. Do what other people have said look on VRBO, HomeAway, Flipkey, etc. at not only what people are charging in your area but their calendars too. Also it is definitely not as easy as just going at the beginning of the week and leaving at the end, people will have questions, complaints, request all sorts of things they wouldn't ask a normal landlord about because they want vacations to be perfect, so any small problems have to be fixed immediately so as not to cut into their perfect vacation time. This is not meant to sound negative but just make sure you are aware of all the facts before jumping in it's not as easy as it sounds, and definitely more work than long term rentals.

Jane Kent · Answer

Hello Thorsten (and Xing...fellow NC-ers!!), It is now one year later and I'm curious if you progressed. I'm in Apex myself and understand the lure (and value) of Myrtle Beach!!! Like you, I want to take down the kids on a weekend here and there. I am in your position now, My price point is nearer 75K with 20% down, and perhaps an efficiency as I hear ROI is better. It seems Myrtle Beach prices are good...did you end up with a condo hotel? Thanks for any update!!!

Xing Zhu · Answer

Tax rate is the same for 2nd home and for investment. Low rate only applies to your primary residence. Parking should be included, no additional cost. Furniture is included in sales price for condo hotel units. For condos of other types, it is your decision on how much you are willing to pay. HOA (and what it covers) pertains to a particular condo and is usually provided in the listing info.

Account Closed · Answer

1. Your down payment will be at least 20% unless you have something else lined up. 2. How much this will cost depends on how nice you want the condo to be and how competitive you want to be. 5. This insurance has to be specifically for Renting it out, costs a bit more. 6. More than usual, like I said people don't want a hair to be out of place. and to add onto Jeff Bridges list 10. Where is the renovation fee, if you really would like to make this a place people want to rent you will have to do some sort of rehab upfront. Also, are you required to register as a business, I've never done work in the area but you are required in certain jurisdictions so check that cause that can be a large expense too.

Jeff Bridges · Answer

9. Utilities- Short term guests will require basic cable TV at the minimum. You should also expect to provide wireless internet (as your competition will likely offer this as well). Finally, any utilities not covered by HOA such as electric will need to be incorporated into expenses. estimate $100-$200. 2. Since your intent on managing/ cleaning the place yourself- Cleaning supplies costs & make sure to add costs for 2-3 sets of bedroom sheet sets for each bed so that you can take home a dirty set to launder after the previous rental.

Thorsten Ziehme · Answer

Thank you for your replies. I am working on a list of expenses that we'd have to expect. Could you please add to this list or give my advice on additional details? Here is what I've got so far: 1. Down payment (How much should a expect for a condo at the beach as a second home in percentage?) 2. Interior (Sofas, beds, etc.) 3. Mortage 4. HOA fees 5. Home Insurance 6. Maintenance/Repairs 7. Taxes (8. Parking)

Xing Zhu · Answer

The most desired condos there are oceanfront. Most of them are condo hotels. The income is low but you don't need to do any work. Just call them when you want to go there. If your unit is out and it is not in a hot season, they may let you stay in a similar unit. I remember in the past some developers had arrangement with their banks that if you bought from them, you got a low rate loan.

Xing Zhu · Answer

For nonresidents, the property tax rate is about 1.4% plus a funny tax on your furniture etc., which costs you about 200 dollars a year (you even need to file a small return for it). For daily rental you get 50-60% split on the revenue. For weekly rental you get 80% split on the revenue. My own experience there is only with daily rental from which the income is very low (about 3%) because of high POA fee and high tax rate. I heard from a friend that weekly rental generates a lot more income for him. He said, a 3 beds SFR a couple blocks from the ocean generated more than 2 thousand dollars net income per week for him in the summer. Since the revenue varies considerably for different properties there, you better ask a rental management company there to estimate the revenue for your particular unit. Either way, most income is from just a few months in the summer. This situation differs a lot from Miami. You need to check what HOA (POA) covers. Since your HOA due is low, I guess it doesn't include cable, internet, telephone. A high fee resort POA typically includes these. Weekly renters don't view themselves as tenants, instead they view themselves as guests. They demand a lot more. It is not easy to manage weekly rental on your own. For example, if a guest says one of the TV sets is down, are you going to drive there to put a new TV in the unit for him?

Xing Zhu · Answer

First, hurricane is not a big problem in Myrtle Beach as the concavity of the coastline there. A condo building also has a master policy for insurance, which should be included in HOA. For rental purpose you need to have an HO6 policy, which should cost you less than $300 with minimal liability and then you link it to you umbrella policy for a small fee. The property tax there is high for you and low for primary residents. I don't remember the exact rate though. I am busy now and when I get time I'll give you more information.