Okay, you’ve decided to purchase an ocean front condo in Myrtle Beach. There is a lot to learn! Just because a condo sits direct ocean front, can be rented weekly, and purchased for under $100,000, it doesn’t mean that you are going to see a lofty annual profit. If you are hoping to purchase a condo, use it 2-3 weeks out of the year, and rent weekly to cover your monthly mortgage payment, and other monthly and annual fees, then you’ll find lots of condos that qualify. If, however, you are looking to cash flow by $20-30,000/year, you’ll need to do a little number crunching.
Here’s our guide successfully purchasing a condo for annual profit.
1. Talk to a lender and tell them that you would like to purchase an ocean front condo in Myrtle Beach. Rates and lending guidelines for homes, townhomes, land, condos and ocean front condos vary greatly. Lately, buyers are being required to put 40%+ down to purchase an ocean front condo. Next, ask the lender how much money you will be allowed to borrow. This can also be your price cap when doing your condo search. Get a proof-of-funds or pre-qualification letter up to the amount the lender is willing to let you borrow. If this lender is not willing to work with you, ask why, (perhaps there is an issue with your credit that can be resolved). Then, talk to several other lenders; just because one lender is not willing to work with you, doesn’t mean that others will not work with you, as well.
2. Seek the help of a realtor. Currently on the market, there are lots of great opportunities to purchase bank-owned foreclosures, short-sales, and distressed properties. Realtors have the ability to research these properties for you. Ask the realtor to send you a daily list of new ocean front condo foreclosures. Banks work entirely through realtors to sell their properties, so even if you contact the bank directly regarding a property they have for sale, they are going to direct you to the realtor who has the property listed. Seek the help of a realtor who both lists and sells foreclosures; they have the best knowledge of how the process to purchase a foreclosure works. Short-sales are an entirely different process altogether; short-sales require a lot of patience because the offer/acceptance process can take months. We’ll discuss short-sales in a later blog post. With foreclosures, you'll often receive a counter-offer and/or offer acceptance within 24-48 house and some banks, like Fannie Mae, are even offering special rates with as little as 3% down if you purchase a foreclosed property they own.
3. Now, get ready for the gritty work. From the foreclosure list, select the condos you like…eliminate the ones you don’t like. Ask your realtor to show you the ones you like. Again, eliminate the ones you don't like. Try to be unemotional about the elimination process...you're buying for investment purposes, not personal use.
a. Then, ask your realtor to gather gross annual rental figures for the ones you do like.
Ask for a 2 or 3 year history and then take an average; due to the state of the
economy, rental figures have been down for the past few years.
b. Next ask what the nightly, seasonal rental rates are.
c. Ask what % the rental management company charges and what the fee covers. Ask how the units are rented…are they based on a “grading system” (…grade A,…grade B,..grade C), or are they simply rented on a rotation-basis. If on a grading system, Grade A units are rented first, because they are in better condition and/or have better views.
d. Ask what the Property Owner’s Association fees are and what those fees cover.
e. Ask if the building is currently undergoing an assessment or if there are any proposed assessments. The last thing you want is to close on a condo and then find out that the building is having the roof repaired or windows replaced and there is a $500/month assessment.
4. Next, crunch some numbers and see if any of the units will give you an annual return. There may be 2 or 3 out of the entire list that you preview, but they are out there! One more bit of advice if you are planning to purchase a foreclosure...have that pre-qualification letter or proof of funds letter in your hand and be ready to make a decision quickly. The really, really good deals go fast! In our next blog, we’ll discuss making offers on foreclosure properties.
We’ve provided a lot of information here and there is even more to learn about purchasing ocean front condos in Myrtle Beach. We have the knowledge and experience to help you through the buying process. We list and sell foreclosures, as well as all other types of property. Our goal is to help 100% of our buyers find great properties at a bargain. If your goal is to cash-flow, we can help you do that too! In July alone, we’ve put 9 properties under contract, and are working on several more. Give us a call at 888.360.7263 if you have questions, or would like to speak to us directly.
