Oct. 3, 2018
Oceanfront condos in the Myrtle Beach Area are legendary! They come in all shapes and sizes, from high-rises with full-on resort style waterparks, to low-key, low-rise buildings tucked away on quiet stretches of sand.
Whatever your style, two things are certain:
1. The Myrtle Beach area has what you're looking for and
2. Nothing beats a morning cup of coffee on an oceanfront balcony.
With that being said, the vast amount of options along the Grand Strand can be overwhelming. At BRG, we're lucky to have some of the most knowledgeable Oceanfront Condo Specialists in the Myrtle Beach area. Mark Loomis is one of the best and he's put together some valuable information to help you in your search.
The first thing you'll need to determine is whether this will be your primary residence or your 2nd home or investment property.
If you are in the market for a primary residence, then of course, any building will work but many primary residents want to be in a quieter building rather than in the high traffic tourist area of downtown Myrtle Beach.
If you are in the market for a 2nd home, then, again, every building will work. So you'll need to start to narrow it down by some additional wants such as the number of bedrooms wanted, approximate square footage, and price.
Then, you'll need to determine the type of building that fits your needs. Along the Oceanfront, there are a number of smaller, typically wood-frame buildings built in the late 1970's and early 1980's. Almost all Oceanfront buildings 3 stories or less will NOT have an elevator, so you'll need to determine whether stairs will be an issue for you. Even 1st-floor condos in wood-frame buildings typically have a few stairs leading to 1st floor units. These types of buildings typically only have an outdoor pool and maybe a hot tub. Many will NOT have washer/dryers inside the condo but may have a laundry facility somewhere on premises.
Then, there are mid-rise buildings (4-6 stories) that were built around the same time frames. You'll find a number of these types of buildings in the Surfside / Garden City Areas. These buildings will usually have an elevator and typically only a pool and/or a hot tub.
And last, there are the concrete/steel high-rises (7+ stories). These tend to be the more "resort-style" properties like you find in Myrtle Beacn, North Myrtle Beach, and a few in Surfside / Garden City (like Water's Edge and Royal Garden). These buildings have elevators, many will have on-site check-in desks, and most have multiple water amenities including indoor and outdoor pools, hot tubs, and possibly lazy rivers. These buildings operate more like a "hotel” and are commonly referred to as "condo-tels” (a hybrid word combining "condominium" with "hotel"). The term "condo-tel" comes from Fannie Mae and in short, if the property can be rented daily/weekly (regardless of whether there's an onsite front desk), then it is most likely a "condotel". (Even some non-oceanfront condos can be classified as "condo-tels". If the lender can google the property and see that rental companies and/or individual owners are renting the property daily or weekly via anything like AirBnB, HomeAway, VRBO.com, etc., then they will likely be classified as a "condotel" for lending purposes.)
Finally, we have the high-grossing "rental machines". If you are an Investor looking for the highest ROI (return-on-investment, which equals the net income after all expenses divided by the purchase price), then you will want to look at the concrete/steel high-rise "condo-tel" buildings and almost all of them are in the Myrtle Beach city limits. There are also a few options for these types of condos in North Myrtle Beach, such as Avista, Prince Resort, Beach Cove, and the luxurious North Beach Plantation.
The age of the building is an important factor. Most concrete/steel high-rises were built from 1980-1986. After the changes in tax laws in 1986, developers stopped building new resorts.
"After the lengthy peacetime expansion of the 1980s, inflation began to increase and the Federal Reserve responded by raising interest rates from 1986 to 1989. This weakened but did not stop growth, but some combination of the subsequent 1990 oil price shock, the debt accumulation of the 1980s, and growing consumer pessimism combined with the weakened economy to produce a brief recession.”
The recession referenced was from July 1990-March 1991. So, from 1986-1996, you saw no new Oceanfront resorts built along the Grand Strand other than a few smaller, boutique-style buildings like Emerald Cove and Beach Club I, II, and III. A few existing buildings DID add a tower to their already-existing resorts (Beach Cove added Tower II with 2 and 3 bedroom units in 1996; Beach Colony added the ocean view tower in 1995; Sands Ocean Club added the "Executive Tower" in 1994; Landmark Resort added the south side ocean view tower in 1996).
Then, another wave of Oceanfront high-rises were built with Long Bay Resort opening in June 1997. From 1997 – 2009, we had at least 2 dozen new resorts built and completed. The last new building to open was North Beach Plantation, which opened in January 2009.
Most Myrtle Beach area Oceanfront high-rises were built either in the last 21 years or 32-38 years ago, roughly. The newer resorts tend to have better amenities onsite including lazy rivers. Some feature onsite restaurants, golf stores, sundry stores, tiki bars, etc. Dunes Village even built two indoor water parks that are 15,000 square feet each. As an investor, you will typically want the newest building with the best ROI. These newer buildings are the ones that are currently seeing rental incomes increase more dramatically than older buildings, thus increasing their resale value. The higher the rental income, the higher the resale price. There are other variables that help with price increases, of course, but increasing rental income is one of the strongest drivers of price.
NOTE: Investors should plan on an ROI on an Oceanfront condo in the 5-6% range max. This assumes, however, that the buyer is using the onsite front desk. In this day and age where owners can more easily rent their condos on their own, then the ROI could increase a bit by cutting out the onsite rental management fees to some extent. Not all buyers will want to rent it out on their own, but, for those who can, this is the way to go for the highest ROI. The 2nd highest ROI will be to use the onsite front desk. Most Oceanfront condo buildings will charge somewhere between 35-45% rental management fees. You have to add another 5-8% on top of that to account for miscellaneous charges such as travel agent commissions, annual maintenance agreement, annual business license fee, replacement fee (typically 1% of the monthly gross rental income), repairs, carpet cleanings, etc. But the NET income an owner will receive from on-site management is almost always higher than what they will receive if they use an off-site rental agency. Off-site rental agencies will typically charge around 15-20% but there are usually extra fees such as the cost of cleaning the condo after each renter, etc. When you add up the "extra" fees from these off-site rental agencies, you may end up closer to 30-40% of the gross income.
The added benefits of using onsite: Need more towels, just call downstairs. Get locked out of your room, just go to the front desk. If you use an off-site company, and you need more towels or get locked out of your room at 2 AM, you have to call the rental companies emergency number and wait for someone to come assist you. It can be more of a hassle to your renter when you use off-site rental companies.
NOTE: If you are interested in both a 2nd home AND high rental income, you will need to assess your priorities: How long do you plan to use the condo: 1-2 weeks per year, 4-6 weeks per year, or much more often? In other words, what is MOST important to you...personal usage OR high rental income? If you only plan to use your condo personally for just a few weeks per year, then it sounds like you really want the most rental income possible, correct? If so, then you're probably looking for more of a "rental machine." If rental income is your 2nd priority and perhaps you're just looking for enough to offset the taxes and HOA dues, then you may be happier with a 2nd home style building.
STAY TUNED! Next up on the blog:
FINANCING YOUR OCEANFRONT CONDO PURCHASE