Which rental option is best for your property?

Special to the Packet and the GazetteOctober 6, 2013 

Chances are, those of us who own real estate in the Lowcountry made the investment because of an affinity for the area and because of the confidence we had in the area's future of property values.

However, every investment involves risk. In many cases timing is the most critical factor for a successful and profitable deal. If you are looking at a second home or investment property purchase, the timing might be right to take advantage of the Lowcountry's current market conditions.

If you are considering purchasing a rental property, you have two options: renting it short-term as a vacation rental or long-term with a residential tenant. There are advantages and benefits to both.

Long-term rental works well for the owner that does not wish to use the property regularly. The benefits of a fixed, regular rent check are very appealing and your property might not receive as much wear and tear as it would as a short-term rental. According to Keith Miller of Miller Long Term Rentals on Hilton Head Island, occupancy rates are very high for long-term rentals based on the lack of rental inventory.

If you desire more flexibility in the use of your property, condider the short-term vacation rental option.

The Hilton Head Island/Bluffton Chamber of Commerce reports our area hosts more than 2.4 million visitors annually and more than 40 percent of those guests stay in home and villa short-term rental properties.

Renting your property short-term has the potential upside of higher annual revenue but short-term rental revenue can be more volatile.

Property rental managers can make ownership easy and take the hassle and wasted time and energy out of managing a property yourself.

Your rental manager should take care of the property like it was their own. Your manager should inspect the unit regularly if it's vacant and be able to suggest improvements and upgrades in a regular assessment to maximize rental revenues.

The biggest financial reward for rental-property owners is potentially asset appreciation. For prospective rental-property buyers, real estate transactions have been steadily increasing but median pricing has remained relatively flat. Couple the current pricing with low interest rates and an incredible amount of renovation momentum in the area and you have a high probability to earn equity on your property in a relatively short period of time.

The income generated from rental activity will help offset taxes, insurance and maintenance expenses but rarely covers all costs of the property. Be sure to work with a Realtor that specializes in rental properties and consult your lawyer and tax accountant to understand tax benefits of owning rental property and how to best structure the property's ownership.

Robert Stenhammer has been a resort executive for more than 15 years and is the president of Hilton Head Accommodations. Contact him at rstenhammer@hiltonheadusa.com or 843-247-2404.

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