Should I Invest in Charleston Real Estate in 2020?

 

With every new year, and in this case a new decade, property buyers wonder where they should invest in real estate. If you’re interested in the South Carolina real estate market in 2020, then consider investing in Charleston real estate.

Why exactly should you invest in Charleston real estate? Keep reading to find out!

Related: 10 Best Places to in Real Estate in 2020

Charleston Real Estate Market: Mashvisor’s Data

The best way to analyze the Charleston housing market, or any housing market for that matter, is through property investment data. Where can you obtain such real estate data? Right here, with Mashvisor! Mashvisor’s investment property calculator can analyze any rental market and property anywhere in the US housing market. Take a look at Mashvisor’s data for the Charleston real estate market 2020:

Pricing

• Median Property Price: $649,593
• Price per Square Foot: $310
• Price-to-Rent Ratio: 30

Traditional Investing

• Rental Income: $1,804
• Cap Rate / Cash on Cash Return: 1.6%

Airbnb Investing

• Rental Income: $4,784
• Cap Rate / Cash on Cash Return: 7.9%
• Occupancy Rate: 65%

To learn more about how Mashvisor’s investment calculator will help you find the best rental property in the Charleston real estate market, click here!

You might have noticed that we included Airbnb data above. So before we get into why Charleston is a great place for investing, we need to answer one important question: Is Airbnb legal in Charleston?

Is Airbnb Legal in Charleston?

• The 2018 Ordinance

In July 2018, the City of Charleston passed an ordinance that implemented Airbnb regulations. While all Airbnb hosts should abide by their area’s laws, Airbnb Charleston investors should take this advice to heart. The reason is that Charleston is the only city in the nation that criminally prosecutes illegal short-term rentals. Reports say that the Charleston Code Enforcement Team has been tracking down illegal Airbnb Charleston rentals through online resources as a means to enforce Charleston Airbnb laws. Each conviction carries a hefty $1,087 fine.

• Definition and Operating Requirements

As per the ordinance, short-term rentals are rented for under 29 consecutive days. Non-owner occupied rentals are not permitted, however. Only primary residences, in which the owner is present for at least 183 days per year, are allowed. Hosts can only use one unit for Airbnb purposes, with a maximum occupancy of 4 adults at a time.

Due to these operating requirements, we recommend that investors use house hacking if they wish to invest in Airbnb Charleston real estate. If you aren’t familiar with house hacking, it is essentially buying a multifamily investment property and residing in one of the units. With house hacking, Charleston investors can fulfill the legal Airbnb requirements for investing, benefit from its high rental income, and have a primary residence.

• Permits and Registration

There are multiple permits and registration requirements for an Airbnb investment property in Charleston. These include:

• An STR permit, which depends on the property’s location in Charleston
• A $200 zoning and application review fee
• A business license with a $64 base fee
• A fire inspection and plan review. This includes a $40 base inspection fee, a $32.21 plan review fee, and an additional $32.61 per number of floors in the unit being inspected.

• Taxes

Charleston Airbnb laws require hosts to pay three taxes, which you can learn more about on Airbnb’s Help Page.

• South Carolina State Sales and Use Tax – 5%
• South Carolina State Accommodations Tax – 2%
• Local Charleston Taxes – 7%

Related: 13 US Cities With the Least Airbnb Legal Issues

Why You Should Invest in the Charleston Real Estate Market in 2020

So, why should you invest in Charleston real estate? There are five reasons and real estate trends that you should look into. These include Charleston’s profitability for both rental strategies, high appreciation rate, growing economy, Airbnb success as a tourist destination, and property demand.

• Charleston Investment Properties Are Profitable

The goal of all investment properties is to generate rental income and a good return on investment. As seen from Mashvisor’s data, the average Charleston investment property excels in these regards. Also, Charleston’s profitability is well-above the state average. Charleston’s traditional rental income and ROI are $1,804 and 1.6%, respectively. South Carolina’s, on the other hand, are $1,359 and $1.5%. Charleston’s Airbnb rental income and ROI averages are $4,784 and 7.9%. These figures are much more than SC’s averages of $2,530 and 3.9%.

• Local Properties Will Continue to Appreciate

Charleston houses for sale are not only profitable, but they also continue to appreciate in value. According to NeighborhoodScout, properties in the Charleston real estate market appreciated by 43.43% in the last 10 years. This places Charleston in the top 20% for national real estate appreciation. For 2020, Zillow predicts that the average Charleston real estate investment will appreciate by 2.2%.

• The Strong Economy Boosts the Rental Market

Charleston’s positive economic indicators strengthen its traditional real estate investing market. For starters, Charleston has an unemployment rate of 2.8%, which is much less than the US average of 3.9%. Its job market growth for the next ten years (35.9%) is also greater than the US average (33.5%). Household income in Charleston has grown steadily year by year, with its most recent growth at 6.53%. Overall, Charleston is ranked as the 16^th best economy in the US. Its various industries (such as cargo porting and the automotive industry) and growth are prime reasons for its economic success. There’s no doubt that the traditional Charleston real estate market will benefit from this success in 2020 as the growing economy continues to attract renters.

• The Airbnb Charleston Market Is Popular and Profitable

Airbnb is another top-tier rental strategy for Charleston real estate. Known as “America’s Most Friendly City” and the “World’s Best City” by Travel + Leisure, Charleston is one of the nation’s best tourist destinations. In 2018, 306,000 Airbnb guests visited the area for its rich history, esteemed restaurants, and beautiful architecture. Charleston Airbnb hosts definitely benefited from the area’s tourism success, as they earned $55.5 million in 2018. Even with the new Charleston Airbnb laws, it is expected that Airbnb hosts will continue to reap profit from the Charleston real estate market.

• There Is High Demand Which Points to a Healthy Real Estate Market (But It’s Still a Buyer’s Market!)

Finally, investors in Charleston real estate will find themselves in a healthy market with growing demand in 2020. According to the PwC’s Emerging Trends in Real Estate report, Charleston is 19^th in the nation for overall real estate prospects. This includes being 21^st in homebuilding prospects and having strong investor demand and development and redevelopment opportunities. The report notes that a buy and hold strategy, particularly with multifamily homes, will be in high demand in 2020. Investors will also be pleased to know that on the buyer’s market/seller’s market spectrum, Charleston is considered a buyer’s market, according to Zillow.

Related: Will the 2020 US Housing Market Be a Seller’s or a Buyer’s Market?

All in all, the Charleston real estate market is estimated to be profitable in 2020. To get access to our real estate investment tools, sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.