As the process began we never had the intention of buying a beach house for rental income, but after our purchase in 2013, the pieces came together.
Our townhouse purchase gave us a wonderful summer. We spent many hours laying on the beach and surfing, but we also worked hard furnishing it, and getting things fixed up. It was mostly vacant for the winter off-season and we visited during Christmas, spring break, and a few other times. The idea of an empty townhouse sitting there empty is just a waste, and I wanted to transition to a profitable beach house, that was rarely empty.
My imagination also ran all kinds of bad scenarios through my head. The threat of getting robbed was real, but there wasn’t that much to steal. Kids breaking in, vandalizing, or partying could be disastrous, but there are empty mansions, with views of the water, blocks away. I felt the most realistic bad scenario was a bunch of bums camped out living there, for months, without me having a clue. My kids were always eager to run inside after the long car ride to Myrtle, but I always go in first. We’ve been lucky so far.
We had made some effort and done some work during the off season. I tried to rent it for long weekends, and I hoped there would be golfers and families that might like the place in fall or spring. In the summer I envisioned families booking full weeks. I made a calendar, put prices on it, and displayed it on a free google site. I got it rented a few times, but did not really have much luck. With expenses at about 750$ a month, I had the money. We were there a lot for the summer, but it just felt like a wasted opportunity and I wanted a profitable beach house.
That summer, I had the idea of renting it to a coastal Carolina student for the school year. I thought about piling all my stuff and furniture into one room, installing a deadbolt, and listing it as a 2 bedroom apartment. In the end, I listed it furnished, with 3 bedrooms, and advertised it was available for a 9 or 10 month lease.
It took about 6 hours after hitting enter before things went live in computer land. We also put up a few neighborhood signs. I am not somebody who is tied to my phone. I don’t like to talk on it much, and I answer texts (eventually). It was kind of horrific for me, because my phone has never been so busy. Many of the callers did not read the ad. They wanted it unfurnished, or they wanted a lease longer than 10 months. I would say 9 out of 10 were not interested after hearing the details, but tons of people were calling. There were people that were trying to give money excuses already without even seeing the apartment. I decided to condense all the work into one day, and show the townhouse on Saturday morning. 4 appointments were set up in half hour increments.
Then on Friday, I got a call, and the guy said that he was leaving town that afternoon and wanted to view it today, instead of Saturday. I agreed, and he said he’d be there in 15 minutes. The mad cleaning dash began, and luckily my sister in law’s family was in town. The guy showed up with his wife, and she had a one year gig as a bio professor at CCU. They wanted a furnished apartment and they said that they did not have a lot of stuff. He added that they were short, and we could leave our stuff high up in the cabinets and closets. They were perfect!!!
They left and drove out of town, and we completed the details of the lease by mail. We got 875$ a month for 9 months. I kept paying the internet bill, and they took over water and electric. Money was transferred into my account 2 days before the first of each month like clockwork. We had dream tenants and a profitable beach house.
The next year, the phone rang like crazy, we interviewed 3 people, and chose to sign a lease with a waitress. 875$ for 10 months. Same conditions, but she was a little less of a dream client. She never switched the water and electric over to her name. I agreed to send her the amounts and she reimbursed me. She made a few late payments, but in the end, she paid everything she owed and took care of the townhouse. I returned her deposit in full, and for a little while, I had hope she was going to sign another lease for the following year.
We are currently in the third school year and bumped up the price. We signed a 925$ lease for 10 months with a young couple who are expecting a baby any day.
This process has been educational. I learned a lot about people’s advice. I already knew that people love to give their opinions/advice. Below is a list of some of the opinion/advice I have received. I think these people are trying to be helpful, but for the most part, people were just clueless or negative. If I am honest some of these, might have been the quiet negative voice in my own head.
Advice I received in quotes, followed by my experience.
“If you rent your townhouse, you can only stay in it 2 weeks per year.”
I am not a lawyer, accountant, or real estate expert, but according to lots of stuff on the internet, I found otherwise. The allowance is 2 weeks or 10% of the rented days. If you rent 300 days, you get to stay 30 leisure days. There is also a sketchy term “maintenance days” that property owners use. Maintenance days are where you are in the house not for leisure, but to paint, make repairs, and clean. Who knows what really goes on? When I get dirty from cleaning on a maintenance day, I go swimming in the ocean. When I get thirsty from repairing, I take my break in the courtyard with a beer diet coke.
“You are asking too much. You’ll never find someone who can afford that.”
Proven wrong. We increased the rent this year, and had a lot of interest.
“There is no way you can do it yourself. You need a realty company to rent it for you.”
Proven wrong. Rental companies are expensive, and there are tax advantages to renting it yourself.
“Renters will trash your townhouse.”
Proven wrong. It was actually reassuring to have someone there. When the flooding happened, or later when Hurricane Mathew came through, I could ask the tenants about the condition immediately.
“Renters will bug you all the time with stupid things like wanting light bulbs replaced.”
Proven wrong. The only thing I have had to handle is a broken water heater.
“The taxes will make it not worth renting.”
Proven wrong. My tax refund went up after I began renting. Apparently there is this voodoo rich man tax thing where on your taxes, the property depreciates, and you get deductions for that loss in value. My working man logic, says that my property did not depreciate. It went up in value.
“The potential tenants from online ads are much better than those from neighborhood signs.”
Great advice. This one was spot on. I stopped putting physical signs out after the first year. Thanks Dan.
Anyway, an extra 8 or 9k$ per year offsets all of the expense of owning the beach townhouse. I am hoping for some appreciation, and believe real estate prices can only go up. There is only so much land near the ocean. I also always have the option of renting year round to bring in another 2K$ per year, if needed. Although I would rather have June 1st to Aug 1 each summer to enjoy the beach.