Investing in a Myrtle Beach condo? Advice? (fit in, renters)

[canudigit]

But you really don't get into it for the profit, anyone will tell you that. If you're looking strictly at profit, then buy apartments that rent to full-time, year round tenants. The expences incurred by owning a beach condo give it a low profit margin. You have to look at long term gain in terms of resale price and the fact that you have a place to stay whenever you want to go to the beach.

I just now made our monthly HOA payment. It was about $60 more than the rent check that we received this month, and this is a 9th floor unit with a fantastic ocean view in a seven year old, upscale resort (granite countertops. stainless appliances, designer carpeting, etc.)in a quieter, residential section of Ocean Blvd.. And, it has been rented solid since late November, when it was only open for a couple of days. That's how the math works during the winter months when rates are lower and most places are rented by the month to snowbirds. During the peak summer months the rent check exceeds the HOA payment by quite a bit, but then you have to A.) build up your account from when you were operating in the red during the winter months, B.) pay yearly fees for things like air conditioning maintenance, new bedding, etc. and C.) save up for property taxes which are due in January during, yep, lower rent snowbird season. The money coming in looks awfully good on some realtor's ad, but the money going out is, for some reason, not so prominently displayed, lol.

We have owned regular rental property in our home state for many years, that is where we turn a good profit. We bought the condo strictly for the long term appreciation and to have a place for our family to stay at the beach. We will use it in a few years when we become snowbirds also, and then the profit will be even lower, but by then we'll be able to afford the difference more easily and won't need to rent it out as much.

[otterhere]

The only problem with investing in regular rental property in your home state -- where you don't plan to stay -- is being unable to liquidate when you want to in order to move to the beach! In this sluggish market, you could be stuck with a property for years longer than you want to be (and with all of the headaches that come with hands-on landlording). That's very disappointing to hear; all of the people on "Beachfront Bargain Hunters" act like it's an easy buy (the initial purchase price is all that's ever discussed) and, if the husband gets his way and they rent it out occasionally, that would be gravy...

[canudigit]

Yeah, well HGTV isn't exactly real life much of the time, like on "House Hunters" how the couple have a set budget and then the realtor shows them a home that is, like, $80,000 above their budget and says something like, "I know this is above your budget, but it's got everything you're looking for!" Then at the end, 80% of the time the couple will buy that house, and those of us back here in "real life land" are blinking and going, "Hey...wait a minute...how did they just decide to go way over their budget?"

I've seen several episodes of "Beachfront Bargain Hunters" and you're right, they only focus on the purchase price and how happy the buyers will be in their new property, never a word about expenses, HOAs, property taxes, or replacement fees when tenants don't take care of the place. That would spoil the dreamlike atmosphere of the show. Reality isn't always pretty.

I have often wondered how many of the buyers on those pie in the sky HGTV shows end up in foreclosure shortly thereafter. Maybe they should have another show: "House Hunters: Foreclosure" and show an update on all those people who went way over their budgets somehow without a second thought. LOL.

BTW, in our case, we have no desire to move to the beach full-time, so having rental property here is no big deal. Our kids are very happily settled here and life is way too short to move away from them full-time, and we have gorgeous weather from April-October, plus, even though we own a condo there, we have never been to MB during the summer season but I have heard over and over at least fifty reasons why we would not want to be, so snowbirding seems like the perfect solution for us. We just have to wait a few more years until we're done working at our jobs, then we'll be in MB every year from January through March. Can't wait!

[NCBND]

It's always easy and fun to be a buyer hence the unlimited material available for TV fodder in a materialistic society. Real estate, auctions, picking, collectibles, name your poison. The gritty part of the deal is operating and selling stuff which doesn't get quite as much exposure.

[otterhere]

I'm well aware of that, since I've been a landlord for eight years (blood, sweat, and tears)...

But I'm desperate to find the right investment now because, as much as I suffered for it, I DID make a profit at it!

It would be silly to buy something here, where I don't plan to stay, that I may not be able to unload when I retire in a couple of years (plus, I still have TWO properties here; one of which is my personal residence and the other of which I'm having trouble selling already).

My plan was to RV for a couple of years to determine where, on the ocean, I really DO want to retire but, in the meanwhile, make a profitable investment in a beachfront condo I could rent out to vacationers (for big bucks, I thought) and use occasionally myself. Any suggestions for Plan B???

What about a conventional rental in a beach "city"? Sarasota or Pensacola come to mind...

Waiting is not an option with $250k making less than .25% interest.

Thanks for any and all input; I'm really "all at sea here," so to speak...

[SandyJet]

I have a beach place, but big difference is I live nearby. I have a regular winter tenant who rents it below market rate every year from mid Sept to Mid June. First you get a discount on rent in winter, second since I have a great married couple with no kids who keep it spotless I discount a second time as less headache.

Guess what I could rent to someone with kids, dogs, bunch of single people, do cheap Air BNB stuff all winter and make more some years and get killed other years when my place is wrecked.

I do not use a realtor, I do not have a handiman and I do not have a maid. So far this year I have not been to place once. Last winter just once for repairs I did myself when tenant called.
The winter tenant coversyear round expenses plus every summer I try to do one upgrade to unit out of profits. This year new washer/dryer. Last year I re-stained deck, year before new dishwasher.

Plus they never mention in condos as well as bungalows the HVAC/Water heater is your responsibility. A new water heater is like 2k, a new energy star HVAC with Airhandler installed around 10K. Water heater lasts 5-15 years. HVAC 15-20 years.

Also on beach front bargains they forget about Cost of Funds. Lets say you buy the place 300K cash. Well the risk free rate on a 30 year investment muni is around 4% tax free. So right off the bat you are walking away from $12,000 a year interest. So your really need to clear around $1,000 a month greater than break even.

[otterhere]

But I can't bear to invest in the stock market (and really know nothing about it); real estate is in my blood.

4%???

[SandyJet]

Originally Posted by otterhere

But I can't bear to invest in the stock market (and really know nothing about it); real estate is in my blood.

4%???

The entire 20th century 1900-1999 stocks returned on average 10.4% a year a much much better investment than Real Estate. However, Stocks have ups and downs.

Lets say you bought a house cash in 1954 for $13,500 today it would be worth 500K.

Lets say 1954 you bought $13,500 in stock it would be worth around 3.3 million today.

Even better example a condo near me went condo in 1979 and units cost 45k. Today they are worth 300K. Lets say you bought it cash.

Well a 30 year US Treasury bond bond paid 16% interest, in 1979. Think about the buyer in 1979 was betting the condo would increase greater than 16% a year for 30 years in row.

That said in low interest rate environments where stock markets are fully valued and you have money in cash earning nothing yes Real Estate is a Great Investment!!!!!!

But March 2009 when the stock market was at all time lows and long term investment grade bonds in the panic were paying 12%, not so much.

Pretty much investing is a three legged stool, stocks,bonds and RE for three main investments. Stuff like commodities, savings accounts, checking accounts etc is not where the bulk of your growth potential is.

One guy I met who is very very rich and old told me once a year he invests. He literally just looks at his brokerage account once a year. If Long term Investment Grade Munis or Treasuries are yielding greater than 5% he buys that, if less than 5% he buys S&P fund. He never sells and has been doing it 40 years straight.

However, RE is more exciting, nice to have something physical to look at and no one has a clue he even has money. He just has an account statement. Human nature we like to have something.

[sixburgh90]

Originally Posted by canudigit

When we bought our beach condo in MB, we had to pay cash because no one was lending for rental condos at the beach. It is a safety net for the bank, because a lot of people get into this because they want a place at the beach and don't realize the expenses that are involved and then it turns out that by the time they pay all of their monthly fees there is little or nothing left over for the loan payment, hence, foreclosure.

We have been able to keep our condo because we do not have a loan payment. During some months, such as the leaner winter months when rental rates are lower, our income is less than our cost. We make it up during the summer, but overall, this is not something to get into if you expect to pocket a chunk of money each month or have to be able to make a mortgage payment with the rental income. Virtually all beach condos have HOAs, and they are often all inclusive and not cheap. Ours is currently $905/month. That's the HOA fee that we pay to the resort, but then the rental management company also gets 35% of the rental income. A lot of people don't realize that there are two separate entities that must be paid in order to maintain a beach rental, unless you plan to attempt to rent it yourself, which I would never want to do. Then you would be dealing with the headaches of having to advertise, having people back out at the last minute, nonpayment of rent, destruction of your property, etc. Our rental company covers all of that for us, so for saving us all that trouble, I think 35% is fair enough. Because of them, our unit stays rented the entire year except for a few days in the late fall around Thanksgiving and the weeks when we are there using it ourselves.

Thanks

So with likely having someone new renting each week... If they destroy the property and the deposit does not cover all of the damage... will the management company take them to court for you each time?

Also, I see a handful of oceanfront places listed for around 50k (obviously older) and others listed for 100k+, but the HOA fee seems to be similar for all of them. Am I missing something? I am thinking maybe the older places also charge special assessments that I am not seeing on my end? I am just wondering why the places are so cheap and thinking I am obviously missing something.

[Harpaint]

I wouldn't own rental property unless it was close enough for me to manage and check on. In my experience, management companies do little more than collect rent, and they charge a hefty fee.