Hilton Head Island is one of the best-known vacation rental markets in the Southeast. A well-kept villa near the beach can earn more in a summer than the same unit would in a year on a long-term lease. It also asks more of its owner.
The appeal
- Income. Weekly rates in season are high compared with annual rent.
- Upkeep. A property cleaned and checked after every stay stays in good condition.
- Control. You set the calendar and the price, and can keep weeks for yourself.
- Long-term value. Property on a built-out island is scarce, though appreciation is never guaranteed.
Vacation rentals are taxed differently from long-term rentals. Ask your accountant how the rules apply to you.
The demands
Bookings, guests, cleaning and repairs all need handling, and income rises and falls with the season. Most owners who live elsewhere use a local management company and accept the fee as the cost of a hands-off investment.
The rules on the island
- The Town of Hilton Head Island requires a short-term rental permit for each property, renewed annually.
- State and local accommodations taxes apply to every stay.
- Owners’ associations and villa regimes add their own rules. A few do not allow short-term rentals at all.
Read the covenants and confirm the permit status before you make an offer. Charleston and Savannah, by comparison, restrict short-term rentals much more tightly.
How the loan works
- We qualify the property on projected short-term income, not on long-term market rent.
- Income is taken from 12 months of rental history or AirDNA projections, counted at about 70 to 80%.
- Purchases are financed at up to 85% loan-to-value. Villas, non-warrantable condos and condotels are eligible at slightly lower leverage.
- Regime fees, property tax at the 6% assessment ratio, and flood and wind insurance are all part of the payment we test the income against.
Terms are on the DSCR rental loans page. For a free analysis of a specific property, call (954) 598-4564.