Investors

Real estate investments in Hilton Head and the surrounding South Carolina Lowcountry have added wealth to a great many homeowners over the years. Imagine where you would be if you purchased a beach-front home on the Island back in the 70’s, 80’s or 90’s! If history is any indication of future performance, there is real opportunity for those who are looking to enjoy their property for the next several years.

The market here (as well as in the rest of the country) made a huge correction several years ago. The market value is still low comparatively speaking and there is every indication that the values here are on their way up. Look at the investment that is being made on the Island: Over $100 million dollars has been invested in the hotels on the oceanfront in the past year or so. The owner of Sea Pines is investing $60 million dollars in upgrading the Plantation Club, Beach Club, Harbour Town Clubhouse, new tennis center and the pool at Harbour Town with not one cent of the cost being assessed to the property owners. Palmetto Dunes as well as other areas are upgrading their infrastructure and improving their amenities. The development at the Mall at Shelter Cove is also coming into a reality with new businesses (including Whole Foods) opening every day.

None of that would be happening if future success wasn’t on the horizon. Just imagine what will happen to property values once all these new improvements are completed. They aren’t making any more of Hilton Head and in fact, the Town continues to purchase additional land on Hilton Head Island and make it open, non-residential public spaces.

Here are some basic reasons why buying real estate as an investment can benefit you:

• MARKET VALUE:  Many other investments cannot be purchased at less than their current market rate. For example – stocks trade at their current value as defined by the stock market.  In real estate, it’s a different story.   We are dealing with the individual circumstances of individuals (motivation and urgency) in addition to market value. The market value of real estate is what a ready, willing and able buyer is willing to pay, and what a seller will accept. Both buyers and sellers can look at what others have been paying for similar properties to set the asking price, but the sales price is determined by the specific parties involved. There are properties that pop up every now and then that can be purchased below today’s fair market value. To find them, you need to pay attention to the property updates because when a good one pops up, there are many buyers that want it.
• LEVERAGE:  With a mortgage, you can invest only a percentage of the value of a property and still generate a gain based on the full market price. Where else can you put down 20% of the cost of the asset, borrow the balance, and pay back that balance over an extended period of time. You freeze in place the lenders value in the property and as the value of the property goes up, you have the benefit of gaining 100% of the appreciation with only 20% in the investment. In other words, you can use the bank’s money to invest and increase your wealth.
• TAX ADVANTAGE:  With most investments, you pay taxes on any profits when you sell. With real estate, the potential is there for tremendous tax savings the entire time you own and enjoy the property. Not to mention that when structured properly, real estate can be passed onto heirs with little to no tax consequences.
• INTRINSIC VALUE:  When you invest in real estate, you are buying physical land or property. You invest in something tangible. You can look at it, feel it, drive by with your friends, point out the window, and say, “I own that”. So as long as you can afford the property, you will have access to its intrinsic value. As we have seen, values of all assets can go down in hard times but at the end of the day, you don’t watch paper evaporate into thin air – you still have a place that you can enjoy and that is useful for your overall life. (I have never enjoyed sitting on the deck of my stock certificate and watching a beautiful sunrise).
• CONTROL:  When you own real estate, the decisions are yours – you control the asset. You can make updates, upgrades, additions, landscaping, paint, and a whole variety of things to increase the value. There are plenty of things in your control that directly influence the value. With other investments, you have no control other than to sell so you’re at the mercy of the market and the company management as to what the value is.
• INCOME GENERATING:  Some real estate investments are cash generating – think of a condo in Hilton Head near the beach rented weekly or a single family home in Bluffton rented on a long-term basis. You can again use other people’s money (the bank) and have still others (renters) pay a portion or sometimes all of your mortgage!

We have been fortunate enough to have the privilege to help many people with their real estate purchases over the years and to share my insights on the training and education available to us through the CCIM (Certified Commercial Investment Member) Institute. If you are interested in learning more about the numbers and the way cash flows in real estate, we are here to help you get the information you need to make a good decision as well as to help you choose the property that will work best to accomplish your goals and objectives.