Hello I’m Greg Harrelson with 21 Harrelson Group down in Myrtle Beach South Carolina. And I just wanted to send you a quick little video sharing some answers to some of the questions I’ve been getting from the e-mail and even incoming phone calls.
Some recent questions that I’ve been getting about Myrtle Beach real estate in particular, investing in Myrtle Beach “is anyone buying?” The answer to that is yes. Quite a few properties are being sold right now to investors. The other thing is “can you get financing?” The answer to that is yes. There’s financing even on condo tails. And depending on credit assuming somebody’s got good credit then there’s even investor loans out there for with only 25% down on the ocean front. So there’s a lot of things loosening up right now that maybe isn’t being talked about in the media. It seems like the national news always talks about you know they always tell us about the times when no one can buy because the mortgages are not being given out. And yet you don’t see a lot of news of then notifying you that the mortgages have become easier to obtain. So I wanted to share that bit of information with you.
WHO is buying on the Grand Strand?
One of the interesting questions that I had from somebody though is they said, “well okay if people are buying who are those people?” And of course there are thousands of people that have different, every person has their own motivation for making a purchase or an investment property together. But I did think that was a great question and I wanted to address that because I looked into it and I found something’s that were fairly interesting that I wanted to share.
So who is buying? Who is buying real estate in Myrtle Beach South Carolina? Before I tell you who they are I wanted to say I was watching CNBC one day, probably a couple of months ago and I recall the analyst talking about Warren Buffett was buying some particular companies. And what they were talking about is how there are certain bit of analysts that will actually follow Warren Buffets every move and when he purchases something they start to go in and look at it more carefully for consideration of purchasing themselves. Because of his past track record and the results and the returns he’s obtained in the past a lot of people look at him as an authority and when he makes a move they start considering making moves also.
So I just kind of wanted to put that in perspective. Of course this is not about Warren Buffett. And I don’t really know much about his real estate habits but I can tell you who’s buying in Myrtle Beach right now.
Developers. This may come as an interesting fact to you but developers have been purchasing some of the properties that they originally sold to other people. Now there a quite a few developers that no longer even exist maybe they went through bankruptcy or have been foreclosed on. So I’m really not talking about them, I’m talking about some of the very successful developers who created good projects, sold them and still actually have done very well in the down times or the adjusting market. What they’ve done is they had originally sold say a three bedroom condo on the oceanfront they may have originally sold that for $500,000. Okay you saw those purchases back in 2005 and 2006. Well unfortunately the buyer who bought it missed the market and was not able to flip it and then over the years they found themselves in financial strain because the rental income could not support the massive mortgage they had placed on the property. So then the bank foreclosed on that property, relisted the property for say $170,000. Now can you imagine the developer sold it at $500,000 and now it’s back on the market 6 years later for $170,000? Well yes the buyer who bought it for $500,000 it made no sense from a rental standpoint. In other words financially a purchase price of $500,000 could not be supported by the rent. But in some cases the rental income will support a purchase price of $170,000. So because so many developers are also in the rental business they are able to come back and buy the property at today price, put it in a rental property and actually make financial sense.
Now what they’ll do is they’ll break even and make a little bit of money on a monthly basis from the rentals and then they’re waiting 5,6,7,8 years and then the market appreciates, who knows when the market will appreciate, but they’re waiting longer term knowing that they’ll actually make profit on that unit again.
So who is buying? There are situations where developers are buying. I actually know some of the buildings that they are buying in and the price points that they look to purchase. Number two who are buying. Realtors are buying. I am noticing offers on my listings and in the disclosures they are disclosing that they are actually the purchaser or maybe their son is the purchaser. I think that’s a good sign. When you see real estate agents purchasing their own products, real estate, then I think it’s safe to assume that they’re analyzing the market, they’re projecting what they think is going to happen in the future, they’re noticing that there’s quality products on the market for sale and they’re analyzing the cash flow and then they’re making offers and making purchases. I think it’s a great thing. I think when you need to stay away is when real estate agents who a lot of them are investors. They’re kind of called insiders. If the insiders are not buying their own product then you probably shouldn’t be buying their product.
So, who else is buying?
As a matter of fact we could say maybe I got lucky but in 2005 I was not buying real estate. In 2011 and going into 2012, guess who’s buying? I’m buying real estate. So not only are some developers buying properties that they’ve already sold and now buying them back on the foreclosure block because they see opportunity. And not only are realtors in general getting back into the investing game and buying properties. I myself am actually buying. This week I made two offers on two different properties that I wanted to purchase. Now I will say I’m not the most aggressive investor. I’m probably a little bit more conservative when it comes to investing in real estate markets and any other type of investing. I’m very analytical at looking at all the numbers. I look at what the cost of the property is of course, the cost of borrowing money, the cost of ongoing maintenance, the cost of any management fees and I come down and look at it logically and determine whether or not the property that I’m purchasing can actually make some sense and maybe carry itself, give me a little bit of positive cash flow and then give me opportunity for appreciation later on.
So I just wanted to let you know that you get videos from me from time to time and you know it’s easy to for someone for a realtor like me to just send a video and say go out here start buying. I know that would make me a lot of commissions but I think there’s a little bit of validation when as I’m saying now is a good time if I’m also purchasing. I think that validates my comments.
Going one step deeper who is buying? My dad is buying. So not only am I considering properties right now but even my dad is considering property. Now you don’t know my dad but my dad brought me into this real estate business 17 years ago. He retired with about 25 years under his belt and in the local Myrtle Beach economy. He has seen the market go up. He has seen the market go down. He’s seen it go sideways. And at this time he noticed that there are some quality properties that are coming on the market at extremely discounted prices. Giving us an opportunity.
Buy real estate smart or don’t buy at all…
So developers, realtors, myself, my own family. Before I end I think some of you will probably ask well Greg what are you buying. I’ll kind of share a little bit of that with you. But first of all the key is to buy smart. You know don’t just go in and start making offers like people did in 2005, 2006. Where they were just making offers. They didn’t look at the stability of a homeowners association. They didn’t look at what the real rental income was. They didn’t look at the fine print on the management contracts. They didn’t understand really what they were buying. That wasn’t too smart. And when you don’t buy smart you end up getting in trouble. And I think we’ve got plenty of stories that we can observe to see exactly what comes up when you don’t buy smart.
So I’m telling you buy smart. Cash flow for people that are looking for cash flow. Cash flow is in the annual rentals right now. It’s not necessarily in the vacation rentals on the ocean front. You can break even in some cases, slight negatives in other cases. On the ocean front if you can break even and you can find yourself in a good position for future appreciation that might be a good investment for you.
For people that are okay with buying houses and putting long-term tenants in there. I find in myself recently making an offer on a property that’s not $90,000. It’s 1450 sq. ft. 3 bedroom 2 bath. With a two car garage in a neighborhood located near the best school system in Myrtle Beach. I’m actually making an offer for a $90,000. I’m going to put 30% down. I like to put a little bit more down and my payments are only going to be 300- 340 dollars a month. On that particular property. I can rent it immediately for $1000 a month.
So let’s say after everything I have $525 in expenses and I’ve got it rented for $1000. I’ve got a quality home. I bought it at a discount. It’s located in the best school system in Myrtle Beach and I’m making cash flow. So those are just a few ideas. Some of you want a vacation spot and you want to rent it and use it. There’s opportunity up and down the grand strand as long as you look at everything. Research everything. Make sure your realtor is providing good information to you.
So I hope that helps you and at the end of the day and developers aren’t buying, I’m at least looking. If realtors are buying I’m looking. Okay and that’s why you see that I’m buying. If I can ever help you I or my agents will be here to assist you in any way. Once again I’m Greg Harelson with Century 21 the Harrelson Group. And I hope you have great holiday season. Thank you.