The vacation rental industry is only rising in popularity, both for investors and travelers. People who are traveling to new and exciting areas are increasingly looking for the comfort and luxury of a full rental home, and for investors, vacation rentals can turn a serious profit.
But turning your Hilton Head home into a vacation rental can be a complex decision. Short-term rentals often come with more regulations and restrictions on many parts of the island. Running a vacation rental can be costly and time-consuming as well.
Wondering whether you should convert your Hilton Head home into a vacation rental property? Here’s how to decide.
Your Goals as an Investor: What Do You Hope to Gain?
The first step is to determine what you hope to gain from turning your Hilton Head home into an investment property. What goal can this help you reach? Will the upkeep and overhead costs be worth it for you over time?
If you’re just looking for a small amount of extra income, short-term renting might not be for you. These properties generally require a lot of investment before potentially turning a profit.
However, long-term investment gains are very possible if you maintain consistent booking numbers. You want booking revenue to exceed your mortgage and any upkeep costs by enough money to turn a significant profit.
Personal Use Considerations
Some owners want to rent out their Hilton Head home for part of the year and keep it for personal use at other times. Keep in mind, though, that the months you wish to vacation are likely the same as peak booking times. If you want to use your property personally during the spring and summer months, you could miss out on peak rental pricing.
As a Hilton Head homeowner, you may also want to avoid crowds. If so, then renting your home during peak season could work for you, as you could then vacation when the island is less busy.
Overhead Costs: Labor, Property Maintenance, and Taxes/Fees
You likely already know that you pay for more than just your mortgage when you own a home. However, running a vacation rental comes with its own overhead costs. Keep these added expenses in mind before making your decision:
Cleaners
You’ll need to have the rental professionally cleaned in between each booking. Some cleaning companies offer discounts for bulk services like this, but the cost still adds up.
Property Managers
Most vacation rental owners use property management companies to handle matters related to maintaining and managing the rental. Property managers charge ongoing fees, and sometimes, there are extra charges for on-call services.
Landscaping and Maintenance Crew
Having a well-maintained vacation rental is paramount to getting repeat bookings. If your property management company doesn’t handle lawn care, landscaping, and maintenance matters, you’ll have to hire for each of these services independently.
Local Taxes and Fees for Short-Term Rentals
On Hilton Head Island, there are certain taxes and fees for vacation rental properties.
As the owner, you could be subject to all of the following costs:
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Annual permit
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Business license
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Room fees, which are currently $150 per bedroom
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Property taxes
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HOA fees
Some of these fees don’t apply to residential properties. It’s a good idea to compare what you owe as a rental owner versus as a regular resident.
Rules and Regulations for Vacation Rentals in Hilton Head
If you want to transform your Hilton Head home into a short-term rental property, you’ll need to follow specific regulations and guidelines. There are certain requirements for vacation rentals in particular, which are classified differently from rental homes.
24/7 Availability
Hilton Head Island has a 24/7 availability policy that applies to short-term rental owners, including their agents and property managers. Someone must always be available to respond to concerns and complaints on-site within 60 minutes of the request.
Safety Features
All short-term rentals on the island must have the basic safety features:
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Easily accessible fire extinguisher
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Working smoke detector
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Working carbon monoxide detector
These features may seem obvious, but they’re often forgotten during regular property maintenance checks. Make sure you have the smoke and carbon monoxide detectors tested frequently to ensure they’re in good condition.
Approved Parking Spaces
Parking for rentals on Hilton Head Island is restricted to “improved surfaces.” This means renters cannot park on the grass or the street in front of, next to, or behind the property.
Neighborhood Restrictions
Some neighborhoods in Hilton Head have tight restrictions on short-term rentals. In certain communities, vacation rentals are banned outright. You must consider your location before making any investments or decisions.
The following neighborhoods are not appropriate for short-term rentals:
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Hilton Head Plantation
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Port Royal Plantation
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Indigo Run
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Palmetto Hall
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Windmill Harbour
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Leamington, located in Palmetto Dunes
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Wexford and Long Cove Club
Keep in mind that vacation rentals are permitted in Palmetto Dunes, but not inside Leamington, which is a gated community.
Is Joining the Vacation Rental Market Right for You?
Not sure whether turning your property into a vacation rental is right for your property and goals? Getting the right guidance from a local expert is essential. John Campbell is an experienced realtor from Hilton Head who can help you weigh your options with a straightforward, no-pressure approach.
FAQs
What Is the Average Price of a House in Hilton Head, SC?
On Hilton Head Island in South Carolina, the average home valuation is currently around $787,000. Hilton Head home values have gone up about 3% in the last year.
What Is the 2% Rule for Investment Properties?
The 2% rule is a general guideline for investors. It states that your monthly rental revenue should be around 2% of the property’s total purchase price. This means your booking revenue each month should total 2% of what you paid for the property.
What Is the 75-55 Rule for Rental Properties?
The 75-55 rule states you should maintain 75% occupancy in your vacation rental throughout the year, and 55% of your revenue from bookings should be profit. This means total expenses and operating costs should only amount to 45% of what you earn from bookings.
Is It Worth Turning a House Into a Short-Term Rental?
It may be worth turning your Hilton Head home into a vacation rental if you live in an area that allows for short-term rentals. If you want to increase your income and are prepared for the overhead costs and time investment, vacation renting can be a good option.
