Archive for March, 2009

#42 Hidden Lakes Lane in Bluffton, South Carolina has three-bedrooms, two bathrooms, a two-car garage and a fence back yard; for sale with Go Gated Realty for $174,500.

The Biggest Selection Is In Bluffton, S.C.

Homes that cost less than $200,000 have always been a ‘hot’ market on Hilton Head because many people can afford them.   Prices on lower-priced homes have fallen along with the rest of the real estate market into this affordable price range and with low interest rates, this is the most affordable housing market since affordability has been measured.   Buyers who are looking for these kinds of homes include young families, first-time home buyers, singles, Hilton Head investors and retirees.  

A $200,000 mortgage costs only $1,074 per month, fixed over 30-years with 5% interest.  This is less than the rent for many comparable homes that cost less than $200,000.  

Bluffton, South Carolina is just across the bridge from Hilton Head Island is and it has the greatest selection of homes in the area for less than $200,000.  Today, there are 64 three-bedroom homes with 2-car garages for less than $200,000 for sale from all Hilton Head MLS companies.  These are newer, attractive homes that are located in relatively new communities that are close to schools and that have neighborhood swimming pools, tennis courts and playgrounds.  

“Hilton Head Home” in this article refers to a home in the Hilton Head area.  This includes Bluffton and  areas near and including Hilton Head island.  Homes on Hilton Head Island start at higher prices than those in Bluffton and for example,  there are only 9 homes on Hilton Head island today that are listed for less than $200,000 and none have a garage.  The lowest price for a home with a two-car garage on Hilton Head Island today is $250,000. 

To see the selection of Bluffton homes for less than $200,000 yourself, please visit my web site GoGated.com.  Choose ‘Homes’ and the price range you want and select area 16 for Bluffton, out-of-plantation homes.  Interactive maps on my web site will show you the locations of the communities and the neighborhood finder on my web site will let you make quick community comparisons. 

It costs nothing more to have a good Buyer’s Agent on Hilton Head assist you and represent your interests before, during and after your purchase and understanding which properties are best for you takes time and experience.  I love working with Hilton Head first-time home buyers and retirement buyers who typically want lower-priced homes.  If you would like to receive a list of homes that will meet your needs, and with no obligation, please contact me.

Richard Kadesch, Owner and Broker-in-Charge The Gated Community Specialist ® Go Gated Realty ® Hilton Head Island, South Carolina Rich@gogated.com www.GoGated.com 1-800-333-5025 Read Some of My Clients’ Success Stories

Home Affordability Index Is At An All-Time High

Many voices say that now is the best time ever to buy a home.  This fact is often mentioned regarding the  opportunity for Hilton Head first-time home buyers but it is true for all home buyers as well.  One reason why is the affordability index. 

The affordability index is the amount of your income that it takes to make payments on a conventional home loan for a median priced single family home with 20% down.  According to the National Association of Realtors, this index rose to an all-time high of 158.8 in December, 2008.  This same index bottomed out in July, 2006 at 99 when home prices were much higher than they are today.  As prices came down, affordability went up.

Another index by the National Association of Home Builders and Wells Fargo Bank confirms high affordability today but measures it differently.  It is called the Housing Opportunity Index and it is the percentage of all new and existing homes that were sold during a three-month period that were affordable to a family earning the national median income.  This index measured affordability at 46.6% for the 4th quarter of 2007, 56.1% for the 3rd quarter of 2008 and most recently 62.4% for the 4th quarter of 2008! 

Both indexes tell us that the low price of homes today make them more affordable than ever to more people.  Because prices continue falling, it is reasonable to expect that the next measure of home affordability will be even higher than the last.  The trend toward lower prices continues and as it does, homes are more and more affordable to more and more buyers.   For owners who want a villa as a residence, there is a good selection for less than $100,000 right here on Hilton Head Island!

Hilton Head Affordability Mirrors National Affordability 

These national numbers are consistent with lower home prices that we have on Hilton Head Island today and in Bluffton, South Carolina, the fast-growing town just across the bridge from Hilton Head Island.  While Bluffton does have some very exclusive gated communities, Bluffton is generally more affordable than Hilton Head Island with many homes priced under $250,000 and $200,000.   To see for yourself, search all MLS home listings at GoGated.com.  Set your price range and search area 16 which is Bluffton Off-Planation. 

All Hilton Head Home Buyers Benefit With Lower Prices

Affordability is up and all buyers benefit today by homes for sale at lower prices and greater affordability.  This includes the buyers of luxury homes, first-time home buyers and retirement home buyers.  Let’s face it, everybody loves a bargain and greater affordability are the silver lining for buyers in today’s economic crisis.  

Low Interest Rates Contribute to High Affordability 

Today’s low interest rates mean lower monthly payments.  Conventional 30-year interest rates have been steady around 5% recently and as low as 4.75% yesterday!  Low interest rates combine with low real estate prices for higher affordability.  A quarter per cent difference of interest per $100,000 payment is $16 per month or $32 per month for a $200,000 mortgage.  The affordability of all properties is effected by interest rates and all buyers appreciate lower payments. 

To discuss how much you like bargains, saving money and your love of affordability, please call or email the Hilton Head Gated Communities Specialist today!

Richard Kadesch, Owner and Broker-in-Charge The Gated Community Specialist ® Go Gated Realty ® Hilton Head Island, South Carolina Rich@gogated.com www.GoGated.com 1-800-333-5025 Read Some of My Clients’ Success Stories

New Conventional Mortgage Rate Is Only 4.875%

Hilton Head conforming 30-year fixed rate mortgages are available now @ 4.875% with no points and 4.5%  with one point.   Hilton Head Jumbo fixed rate mortgages are available for 6.375% with no points.  It may be worth saying the obvious, that lower interest rates mean lower payments for you at the same loan amount.  You save a lot of money with lower interest rates.   

Many parts of our economy have a lending crisis but at the same time, Hilton Head banks have plenty of money to lend to qualified buyers at the lowest rates that I have ever seen for conventional mortgages.  Look at these low rates from one Hilton Head bank, quoted today with no points:

• 4.875%     30-year fixed, conforming**
• 4.625%     15-year fixed, conforming**
• 4.75%       5/1 ARM Jumbo** 
• 6.375       30-year fixed jumbo**
• 7.00%       Lot loans to 80% LTV
• 4.875%     FHA** 
• 5%            VA** 
• 5%            RD** 

**Quoted with no points.

Today, qualified buyers have very low interest rates, low prices and a great selection of Hilton Head real estate.  To discuss the best loan for the property you want, please call on the Hilton Head Gated Communities Specialist® to connect you with a good lender today!

Richard Kadesch, Owner and Broker-in-Charge The Gated Community Specialist ® Go Gated Realty ® Hilton Head Island, South Carolina Rich@gogated.com www.GoGated.com 1-800-333-5025 Read Some of My Clients’ Success Stories

Are Hilton Head Island Property Taxes Equitable?

Real estate taxes can be a pretty boring subject but these days it is an emotional one for some people.  I have read letters to the local newspaper from buyers who were surprised after they purchased a property that they would pay higher taxes than they expected.  Other people say that the new 2007 South Carolina Tax Reform Act is bad for real estate sales.  This may or not be true but we should understand what is going on when we purchase real estate on Hilton Head Island so that we eo not get an unwelcome tax surprise.  I have discussed this subject with County tax officials and local attorneys so that I can advise my clients and make sure that they know what to expect beforehand.  A good buyer’s agent should always inform their client of every important issue of home ownership so that there are no unwelcome surprises. 

Hilton Head Island and Bluffton, both in Beaufort County, have always had inequitable property taxes.  Primary residences have always been taxed at a lower rate than Hilton Head second homes, rental and commercial properties but the differences are greater than ever now because under the new act, school operating costs have been removed from primary home taxes but not from second home, rental home or commercial property taxes. 

The formula for the tax on primary residences has always been:  the appraised value x the millage rate x 4%.  The tax on second homes, rental and commercial properties has always been:  the appraised value x millage x 6%.   All taxes included school operating costs and the higher tax paid by non-residents could be summarized as taxation without representation.  

Along comes tax reform and the 2007 South Carolina Real Property Reform Act.  The centerpiece of the Act is lower taxes on primary homes because the millage for school taxes is removed from primary home taxes and schools are now funded by an increase of the State sales tax from 5% to 6%.  Because taxes are lowered for primary homes but not for other properties means that the difference between taxes on primary homes and second home and commercial properties are now greater than ever.  Because schools are funded now by the sales tax and consumption is down, my understanding is that an additional consequence of the Reform Act is that schools are now underfunded, but I do not have specific numbers from the State budget to discuss this fact. 

A second provision of the South Carolina Real Property Reform Act of 2007 is that properties cannot be appraised for tax purposes at more than 15% of their last tax appraised amount. 

A third provision of the Act is that properties sold after 2007 are immediately subject to a reassessment at the full market value at the end of the year in which the property is sold.   For properties sold since 2007, the term “point of sale” taxation is often used however the tax for the purchase year is based on the previous owner’s assessment because the tax notices based on assessments made this year will apply to the following year.  For subsequent years, the buyer will pay taxes based on the purchase price unless the owner appeals the valuation for their subsequent tax payments.

Beaufort County assesses properties for taxes every five years but sometimes assessments are delayed.  This happened for the assessment of 2002 that was not done until 2004 and the assessment of 2007 has been expected to occur in the spring of 2009 but it may be delayed even longer.  This means that a buyer today will be taxed at today’s purchase price in the year following the purchase while owners of homes that have not sold are still being taxed at assessed values based for the end of 2002. 

Let’s review:

1. Buyer’s used to pay the same taxes as sellers until a reassessment was made to everyone at the same time.  Now, Buyers the same tax as the seller for the purchase year only, then based on the purchase price in subsequent years.  
2. Primary home owners pay lower property taxes than ever while second home owners, rental owners and commercial owners still pay more taxes than ever as compared to the lower taxes that primary owners pay.  This is because the school tax has been removed from the primary homeowners tax bill, but not the second home, rental home or commercial property owner’s taxes. 
3. When properties are newly assessed, properties may not be assessed for tax purposes more than 15% of their former tax assessments.  This means that owners of properties that have not sold may pay less taxes than their neighbor who just bought the house next door of equal worth, who must pay taxes at the value of the purchase price. 

Avoid the Property Tax ‘Double Whammy’

The biggest tax shock is possible for a buyer who purchases a property as a second home or rental property that was used by the seller as a primary home.  This will result in the greatest tax increase possible and should not be missed.   The more expensive the property, the bigger the potential tax ’surprise’.   

Any Questions?

This is a complicated subject.  There are special instances and varying interpretations of the new law and it is already being studied for revisions.  I believe that the motive of our State lawmakers was to protect primary homeowners from higher property taxes that would accompany rapidly rising real estate prices that became the great real estate bubble of 2005-2006, a bubble that has now burst.   Now we have lower prices and the reasons for the protections intended by the act no longer are meaningful, in my view.  At the same time, the idea of lower primary home taxes as a trade off for a one percent higher sales tax seems good to me.  State lawmakers may respond once again and this time make the law more equitable.  Until then, buyers need to know about what property taxes they will pay before they buy real estate on Hilton Head Island and in Beaufort County, South Carolina; it is unfortunate that more agents are not prepared to inform their clients on this subject. 

Richard Kadesch, Owner and Broker-in-Charge The Gated Community Specialist ® Go Gated Realty ® Hilton Head Island, South Carolina Rich@gogated.com www.GoGated.com 1-800-333-5025 Read Some of My Clients’ Success Stories

Low Prices and Positive Cash Flows Are Back!

This Tabby Walk two-bedroom villa @ $69,000 has monthly carrying costs of only $619 including the regime fee and 30 fixed rate mortage @ 5% interest.

Hilton Head real estate has always been a popular place for investors to put their money during the 34 years that I have been an Agent on Hilton Head Island and before, I am sure.  The classic story about Hilton Head investment is how ocean front lots once cost only $10,000 that some people considered expensive and risky but are worth millions today.   

Investors Want Cash Flow and Appreciation

I have worked with many investors who buy inexpensive properties not for their personal use, but to rent for carrying costs while the property appreciates at 5-6% per year.  Investors typically buy to hold and not flip, to sell the property down the road for retirement income and possibly hold one for future use as a primary or second home.  In the future, baby boomers in retirement may choose to occupy an inexpensive condominium fixed up nicely rather than take on the cost of a much more expensive home.  My own parents downsized homes twice in their retirement on Hilton Head Island before downsizing again to a condominium and then finally, to continuing care.

The Fitness Center at Woodlake Villas.  The monthly carrying cost of a Woodlake Villa that costs $79,000 today would be only $694 with regime fee and 20 % down and 30-year fixed rate mortgage @ 5% interest.  Rents are $800/mo and up.

Investment Property Prices Have Been Too High

When real estate prices topped out locally in 2005-2006, prices became unsustainable and disconnected from the their rental incomes.  Now, prices have fallen to levels not seen in at least 9 years.  The ’round trip’ brings prices that cash flow once again with 20% down, a tenant who pays a reasonable rent and including the cost of professional rental management.  Two examples of investment properties at Tabby Walk and Woodlake Villas follow later in this article.

What’s an Investment Property?

Real estate investors want:

1. Cash flow
2. Appreciation
3. Tax benefits
4. Use benefits (optional) 

Issues with investment properties are:

• There has not been any appreciation in the last few years and just the opposite, prices have fallen by large numbers.   The market for Hilton Head investment properties has become ‘cold’.
• Typically, the more expensive the property, the greater the negative cash flow.  Often, inexpensive residential  residences have the potential to carry themselves with 20% down, before tax benefits, with a tenant who pays reasonable rent and with the costs professional rental management.   This market has made the ’round trip’ with prices and costs.  The arithmetic is attractive again on some of these inexpensive villas. 
• Vacation rental properties and second homes have negative cash flows unless the buyer pays all or mostly cash.  To offset the negative cash flow, appreciation, tax benefits and use benefits are desired.  Lack of appreciation has made the second home and vacation rental market go ‘cold’ with no thaw in sight soon.
• Investment properties have specific issues about rental income, tax benefits and location that are unique.  Go Gated Realty can help you understand these issues and protect your interests. 

The Example of 706 Tabby Walk, Hilton Head Island

Consider #706 Tabby Walk, a two bedroom, two bath unfurnished Tabby Walk Villa for sale today with Go Gated Realty for $69,000.  Just two years ago, the owner tiled the living room, dining room, kitchen and hallway floors, installed new bedroom carpet, bought some new carpet, painted the interior and made other improvements.  They want to sell now for personal reasons.

With 20% down, a loan with 5% interest over 30 years the monthly carrying cost is only $619:

• Principle and interest of $296.
• Monthly regime fee of $323.

This property cash flows with a monthly rent of only $700 and it rented most recently it for $750.  This villa has 1,030 square feet of living are and it is a first floor flat, with no steps.  Pets are allowed.  Tabby Walk on Hilton Head Island has a community swimming pool.  The next-lowest priced two-bedroom Tabby Walk for sale today is listed @ $94,900. 

This is the kind of  residential investment property that is attractive to many tenants and could be perfectly suitable for an investor to use in the future as a personal primary or second home.  The mid-Island location is a short drive to the beach and near the hospital, library, airport and all mid-Island shops, restaurants, banks and other offices.

The living room with fireplace of a Woodlake flat, an unfurnished long-term rental property with Go Gated Realty.

 Popular Investments: Woodlake Villas on Hilton Head Island

Woodlake is another popular residential community located mid-Island, now with security gates.  Prices start today from about $79,000 and prices then bounce to about $97,000.  With 20% down the monthly carrying cost for the $79,000 listing would be $694:

• $339 Principle and Interest @ 5%, 30 year fixed
• $355 Regime fee

The fair market rent at Woodlake today is $800/mo and up.  Go Gated Realty long-term rental manages about 25 Woodlake Villas today.  Woodlake Villas are both flats and townhouses with about 1,025 square feet and most have fireplaces.  Pets are allowed.  Woodlake has a community swimming pool, tennis courts, a playground and a fitness center.   It is a five minute drive to the beach and near all mid-Island locations that include the hospital, library, airport, shops, banks and offices.

Hilton Head Long-Term Rentals and Go Gated Realty

Go Gated Realty is a sales agency but also a long-term rental agency that knows the Hilton Head Island rental markets and has the knowledge that an investor needs to determine the best investment property for sale today.   There are other invesment properties in addition to the ones discussed in this article.  

Your Buyer’s Agent on Hilton Head Island

Buyers of vacation rental properties, primary homes or second homes are also well served by Go Gated Realty as your Buyer’s Agency on Hilton Head Island, but the issues and needs for buyers of these properties are different than those of ’pure’ investors. 

To discuss your real estate needs, please contact Richard Kadesch, the Gated Communities Specialist today!

Richard Kadesch, Owner and Broker-in-Charge The Gated Community Specialist ® Go Gated Realty ® Hilton Head Island, South Carolina Rich@gogated.com www.GoGated.com 1-800-333-5025 Read Some of My Clients’ Success Stories