January 2017

Know Your Local Real Estate Market: Is NOW the Time to Buy?

Author: Realtor, Kevin Quat

Oftentimes, you will hear from a real estate sales agent that now is the time to buy. He or she will tout low interest rates and large inventory of available properties as reasons. While I do not debate this principle, I think it’s relevant to drill down and understand why. Now may be the time to buy, but it also depends on the buyer’s goals.

I have been working in real estate on Hilton Head Island and in Bluffton since 2006. I have tracked sales very closely during the downturn. I have also tracked rental rates and have seen a tremendous uptick in asking prices. We don’t know how high rent may go, but what is certain is that Hilton Head Island and Bluffton are both growing. The demand for the lifestyle on the island, coupled with a township that is encouraging economic growth both on the island and in Bluffton, speaks to a continuing need for housing. All things considered, I see a unique and potentially lucrative play for both investor buyers and first time homebuyers who have been renting.

Let’s speak in specifics so you understand what is happening in the market. Take a two-bedroom villa in the community of Summer House Hilton Head Island. Condos there have been selling in the mid $150,000s and rent quickly between $1,400 and $1,550 monthly. Using rough numbers (and please note I am not a lender and one should be consulted for pricing quotes), if you purchase at $150,000, place 20 percent down and obtain a mortgage around 4 percent, your payment is roughly $575. This includes principle and interest. Of that $575, over $170 goes towards paying down the principle amount monthly, and this figure grows during the life of the loan. Now, factor in monthly association dues of $350 and taxes of $120 monthly, insurance of $40 monthly (regime covers exterior), and the total monthly cost (before repairs) is under $1100.

It is important to verify this math and pay attention to it. This means an investor will generate a positive return on cash if he or she can place a renter in the home. It also means a primary occupant (a first-time homebuyer or anyone planning on living in the home) will save thousands of dollars per year, while building equity versus continuing to rent. A similar model works for three-bedroom-plus homes under $225,000.

While I’m happy to provide analysis on rental rates versus home purchases for all clients, be sure to have a plan and a goal. Buying and investing does not have to be a scary experience. With the right Realtor and team in place, you will make an educated decision, which ultimately may lead to improved cash flow and wealth.

I have tracked rental rates for 10 years and have seen tremendous growth in this market. During this time, prices have fallen and are now coming back. The combination of where rents are and where purchase prices are relative to financing does tell me that the time is now. 

Kevin Quat is the owner of Coastal Empire Realty. He is the current president of the Beaufort County Apartment Association. He also employs a team of property managers and manages over 500 units in the Hilton Head Island and Bluffton markets. For more information, you can reach Quat at kevin@coastalempirerealty.com or by calling (843) 290-6463.

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