All Forum Posts by: Michael Keffer

We can use income filed under Sched E once it shows up on a tax return.  Bonus depreciation doesn’t count against your income calculation.

The Hilton Head Island real estate market for 2023 was similar to what happened in many real estate markets. Overall there were less real estate transactions than in 2022, but the price of properties continued to appreciate. In our local MLS the year over year appreciation was a little over 5%. Some areas of Hilton Head saw a higher increase in value. Inventory continues to be low, although it is higher than it has been in 3 years. Currently we are sitting with 3 months supply of inventory for all properties. The condo market has almost 4 months supply and the single family home market has 2.4 months supply. Days on market for properties has increased by about 40%.

The condo market is one we are still watching closely. Prices are continuing to stay strong. It seems most of the HOA's have figured out the insurance issues from the past couple of years and have leveled out their HOA fees and insurance assessments. The higher HOA and insurance fees have made investing in condos more complicated and not look quite as appealing, but there are still condos that can be purchased and an owner should be able to cover the cost of ownership.

Single family homes continue to be the most desired investment on Hilton Head Island. Values continue to go up, and demand is high. Sea Pines and Palmetto Dunes continue to bring the highest price points, but the Forest beach area is also a strong area. The days of double digit year on year appreciation seem to be behind us, but 5-8% each year is still above the national average. From an investor point of view for return on investment single family homes continue to be the best bang for the buck.

Rental demand was off by about 10% for the year. Rental prices on the other hand have gone up a little bit. Most investors we represent had at least a 5% increase in rate. The summer demand is still strong. The key is figuring out how to get people to rent the unit in the off season.

Outlook going forward:

It seems the Fed will lower interest rates at their March meeting. The mortgage interest rate should continue to drop over the next couple of months. Nationwide a 1% rate drop in mortgage interest rate (So that means a rate of under 5.75%) will bring 5 million new Buyers into the market. Locally interest rates have less of an effect on the market than they do nationwide with the majority of transactions being cash. Interest rates do effect the condo market a little more, so it seems the price point of condos will not be going down anytime soon. I would say real estate values will continue to go up between 4-6%. While rental demand is going down, there continue to be more people purchasing properties for personal use in turn causing there to be an overall shortage of rental units available in season.

Hilton Head Island continues to be one of the most consistent markets for investors to get a safe return. The lack of inventory. The community understanding Short Term Rentals are needed, so they do not create overreaching rules and regulations. The fact that the island is basically built out, so there is not an opportunity for large new developments. All of these factors help keep this area a safe place to invest.

Investment Info:

Townhouse buy & hold investment.

Purchase price: $575,000
Cash invested: $40,000

The "Top 4" Wealth Generators:

1. Appreciation Value Buy - (instantly valued higher than my purchase price) - VERY RARE FOR HILTON HEAD!
2. Cash Flow - Have the ability to cover my mortgage with extra cash in my pocket. One of the highest demand areas on HHI for renters both short & long term.
3. Tax Benefits - Can deduct most of my mortgage interest while building wealth.
4. Loan Paydown/Equity Growth - Grow equity for "free!"

I spent 5+ Years in Rental Management before Real Estate.

What made you interested in investing in this type of deal?

The value is continuing to increase on Hilton Head, but with buyers sitting more on the sidelines with interest rates, deals are being done in this market that can only be done right now. Negotiations are on the table, and even though a interest rate of 7%+ rate is hard to initially stomach it made sense. Buy now, instant appreciation with value continuing to rise, cover my expenses, and refinance down the line when the rates do drop, having already secured myself a valuable property!

How did you find this deal and how did you negotiate it?

I found it through MLS. It came active on a Thursday, and I was the first agent in the door to preview it. Knowing how quickly great deals are bought in this market, speed wins, and after a follow-up showing the next morning, I put in an offer on Friday. I knew other agents, customers and clients, would also see the potential in this deal, so I had to come in strong with a clean contract. Even at a full listing price it was still worth 50-75k more! Beat (3) other offers the same day.

Michael, not sure if you bought this property at $832k but I live down the street. You could get $4,500 per week for this property for 10 weeks. The value on the Nubble is very stabile, no issue on appreciation over the years. The winter rental is tough, but at $2,200 per month for 8 months you'll find some people to rent it. We rent our own house over the summer for the 8 weeks the kids are out of school and live in a small cottage in wells for 2 months. My wife's family used to rent their properties in OGT for 3 decades and recently sold them. If you need any help with property management I can send you some management companies local to York.