The Real Estate Professionals at the Trembley Group in Myrtle Beach field almost daily calls from locals and nonresidents interested in purchasing a money-making piece of the beach – investment real estate in Myrtle Beach and along the Grand Strand. The Trembley Group Real Estate Professionals are experts in everything that’s Grand Strand real estate including long-term and vacation rentals. For most people, there is something really satisfying about owning a piece of real estate and having someone else making the mortgage payment. In Myrtle Beach and along the Grand strand, two distinct types of investment rental property immediately come to mind – short-term vacation rentals and longer-term rentals to college students.
Coastal Carolina University is a jewel in the Myrtle Beach crown. It is a public institution occupying 633 acres that was founded in 1954. Coastal Carolina has a total undergraduate enrollment of about 10,500, its setting is suburban, and the campus size is 633 acres. It uses a semester-based academic calendar. Coastal Carolina University’s ranking in the 2018 edition of Best Colleges and Regional Universities South, 52. It is ranked 19 for Top Public Schools and 2 for Best Value Schools.
Coastal Carolina University is located about 10 miles northwest of Myrtle Beach. The university offers more than 40 undergraduate majors and about 10 master’s programs, including an MBA program in the Wall College of Business Administration. CCU is also home to an Osher Lifelong Learning Institute, which offers hundreds of courses at multiple locations for community residents to attend during the daytime or evening. Outside the classroom, CCU students can get involved in more than 150 campus organizations, play at the neighboring Hackler Golf Course or check out the beaches a few miles away.
CCU enrollment is about 10,500 and the university only offers 4,600 on-campus housing units. That leaves a shortfall of almost 6,000 housing units that the private sector has to meet.
A rental house located near a college campus or a university campus is frequently a great investment. According to an analysis by RealtyTrac, the places where investors earn the highest yields on single-family rental houses are often cities and towns with a high population of college-aged residents.
University students provide a consistent source of demand for rental houses, pushing rents higher, which often leads to better yields for the rental houses’ owners. Across the country, giant corporations are busy building large, privately-owned student housing communities. But most students who live off-campus still rely on single-family rental housing – free-standing houses and condominiums.
The college student market can be very profitable, compared to non-college student markets.
Student Housing Challenges
Student housing presents a unique set of challenges for property owners, starting with the academic year. Nearly all of the leasing activity happens in the months before the start of the fall semester, so that a vacant rental house is likely to have a hard time finding student residents after that. Student renters may also be interested in shorter, nine-month leases. In addition, renting to college kids typically comes with higher turnover rate and higher maintenance costs compared to regular renters.
Investments in Student Housing
Housing markets with many college students tend to yield much higher returns for single-family rental housing, according to an analysis by RealtyTrac, which identifies student housing markets as counties where more than a quarter of the local population Millennials.
Towns and areas with many young residents tend to have strong gross annual rental yields, some averaging more than 10 percent. However, strong demand for student rental housing is not always enough to make up for the high price of buying a single-family investment property. Just being near Coastal Carolina does not guarantee a good investment. Some of the Carolina Forest areas, just a few miles down the road from CCU are ideal rental investment properties.
Some CCU student’s parents are doubling their investment in their child’s education by buying a two or three bedroom house or condominium, setting up the spare bedroom(s) for students, and letting a few fellow students help pay the mortgage. More than one parent told me that the rent from the spare rooms pay their child’s room and board.
Short-Term Vacation Rentals
For folks interested in owning beachfront property and renting the property to help with the mortgage, owning a oceanfront condominium may be exactly what they’re looking for in an investment! Rental income may cover more than just the expenses. Potential investor need to consider a few Myrtle Beach investment market fundamentals. Most vacationers are coming to the beach. Afterall, that’s part of the Myrtle Beach name. In fact, nine out of ten Myrtle Beach visitors prefer an Oceanfront Condo over a Golf Condo. Even visitors who visit Myrtle Beach for a golf outing prefer a great view of the ocean and beach. Many use the oceanfront amenities of the condominium complex – pools, hot tubs, tiki bar, or on-site restaurants – and are happy to make the short drive to their preferred course.
Those who like to play golf can play any of the area’s 100 golf courses. And when the game is over you can come back to the beach to relax.
Vacation rentals are a big Myrtle Beach and Grand Strand real estate investment opportunity. We have a lot of clients who’ve come to us looking to buy investment properties in the Myrtle Beach area – specifically short-term vacation rentals. Many of them don’t understand the vacation rental industry in the Myrtle Beach area. Oceanfront and Oceanview condos and homes are a market unto themselves.
Short term rentals – vacation rentals – are different than longer term investment properties. Whether an investor is interested in a long term student rental investment or an short term vacation rental depends on their expectations and financial abilities as an investor. We spend a lot of time with new clients exploring short- and long-term goals as well as their ability to secure an investment real estate mortgage loan. Borrowing guidelines are quite a bit different than traditional owner-occupied property.
The majority of the investment real estate market along the Grand Strand is driven by the turnover of condominium units along the oceanfront. From Garden City to Little River, the area’s skyline is dominated by hundreds of high-rise towers, mid-rise buildings, and wood frame low-rise buildings. Together, these buildings total tens of thousands of rental units. These individual condos represent the majority of investment real estate Grand Strand.
Understand What You’re Buying
Most investors buying an oceanfront or ocean-view condo considers it a second home. As such, it is subject to unique tax considerations. We are real estate experts, not tax experts. There are some tax advantages to owning investment real estate but we always recommend our clients consult their accountant before buying rental property. It’s important to fully understand what they’re getting into. The units can be a really good investment vehicle as well as a personal vacation home for their owner. But all oceanfront condominiums are not created equal.
Condominium-Hotel vs. Residential Building
What exactly is a condominium? A condominium is an individually owned housing unit with common ownership of the structure that contains the unit, and common ownership of its associated amenities–pools, tennis courts, fitness rooms, etc. A Homeowners Association, made up of individual owners and an elected board of directors, runs the business of this common ownership, and sets its fee. The monthly or quarterly fee covers certain expenses – maintenance, lawn care, insurance, etc. On oceanfront investment units, this fee can range from less than $200 to $1000 or more per month, with varying degrees of inclusion. For example, sometimes insurance and unit-level electricity are included, sometimes not. An oceanfront or ocean-view condo building usually carries one of two possible designations–a condo-hotel, or a residential “true” condo.
A condo-hotel is just what it says it is. To the guest, it acts like a national chain hotel or motel. The units are often identically furnished, rent for the same amounts as others in the building, but are owned individually. To meet the condo-hotel designation, the building must have a 24-hour check-in desk that can make and execute nightly rentals, have maid service, and hotel-like amenities. These buildings often provide the highest yield in rental income. Depending on weather and additional variables. A three-bedroom, three-bathroom oceanfront condo in Myrtle Beach can generate up to $40,000 per year in gross rental income. We always encourage clients to ask for three or four years’ rental history to get an average.
We explain that one bad season can slash these gross rental numbers, and regardless, an owner only receives a percentage of the gross rentals. Depending on the type of rental agreement that the client agrees to, the owner’s “net rental” or take home money, can vary from 80-percent to 50-percent or even less of the gross rental income. Frequently, though, the net rental income may still cover the Association Fees and additional ownership expenses, making these condos particularly attractive to investors.
Residential Condo Building
An oceanfront residential condominium building may also offer short-term, but usually not nightly rentals, and, despite the name, is usually home to only a few full-time residents. The primary difference is the lack of rental desk. Check-ins for guests of these units are usually handled off-premises at the offices of the condo rental agent. Some out-of-town owners do their own marketing, handle their own rentals, and will mail keys and rental agreements to renters. Most of the rentals are handled by the outside agency that specializes in this type of property management. These companies act as vacation rental experts, do extensive marketing, and offer their own rental desk offering daytime check-in, after hours check in, and room cleaning services.
These buildings remains somewhat less-crowded, though with units fully occupied, is still busy in the prime seasons -Memorial Day through Labor Day.
Does the Designation Matter?
In short, financing can be much more difficult (but not impossible) in a condo-hotel. Since 2008, lenders are more skeptical of this type of condo. They represented a huge portion of the foreclosure market when the market crashed. Today, most condo-hotel buyers are cash buyers.
Like their hotel-oriented cousins, residential oceanfront and ocean-view condo buildings can also generate strong gross rentals and are much easier to finance.
Every buyer and every building has its own unique criteria when it comes to financing. A mortgage broker can be particularly useful here in that shopping banks is part of their service and expertise. Here at The Trembley Group Real Estate, we have a good grasp of the condominium finance network and guides their clients to the most experienced and professional condominium lenders. We want our clients to paint the ideal picture of what they want. After they give their essentials, we find them what they want and send them to the mortgage professional who can close the deal.
Generally speaking, investment properties require good to excellent credit, a minimum of 25-percent down, strong liquidity, and a strong employment history. There are exceptions and some flexibility to these guidelines. Lower down payments are available for certain strong buyers in some buildings and there is more flexibility for investors with particularly strong credit and liquidity. It is easier to buy in some buildings than others. Any Real Estate Professional at The Trembley Group is able answer basic questions and show sales activity in any given building, which may influence likely financing options.
No investment is without risk. Those who bought at the top of the market in 2005-2007 will be happy to tell you their horror stories. But today’s investors with cash for a down payment are snapping up some great deals on the beach.
The Trembley Group Real Estate Professionals think the Myrtle Beach market will continue to grow. Of course, everyone knows the economy is cyclical and when it cycles, all real estate markets cycle as well. Nevertheless, all indication are the Myrtle Beach will be strong for years to come.
For investors interested in any property type, Myrtle Beach offers real estate at affordable prices. The area is one of the fastest growing and most popular, moderately priced areas in the United States.
All Signs are Positive
For those thinking of relocating to the Myrtle Beach area, we recommend studying the different areas of the Grand Strand. Remember the term ‘Myrtle Beach’ is used to describe the entire real estate market.
Newcomers to Myrtle Beach will learn about other areas like North Myrtle Beach, Surfside Beach, Garden City, Murrells Inlet, Conway and Pawley’s Island.
The Myrtle Beach area has a lot of options. Each of these towns have their own school system, offer different price ranges and have different amenities like beach, sports complexes and restaurants.
So, the first step a prospective investor needs to take is to learn the market and a Trembley Group Real Estate Professional is the best place to start.
At The Trembley Group, we pride ourselves on being the experts at more than just selling real estate. We are local residents, some of us have been here for a lifetime. The rest of us will be here until the end of time. We love living, working, and playing in the diverse backyard of Coastal Carolina, and look forward to helping you live and love your dreams soon too. Please reach out to us by phone or email for personalized service and one-on-one advice.