Owners seldom report net rent because it can vary depending on the rental situation and wheteher the owner takes depreciation each year. One owner could net 40% another owner in the same building with the same unit may only make 10%.

In the resort condo rental market you have some big expenses as wells as other incidentals.

1. HOA Fees
2. Management Fees
3. Property Taxes.
4. Incidentals include maintenance, replacements, advertising,  business licenses, and possibly other expenses like electricity and insurance.
5. Depreciation (IRS)

We’ll use Sandcastle South as an example

Purchase price = $59,000
Gross rent = $16,000
Onsite management = $6,400 (40%)
HOA Fee = $5688 ($474/mo)
Property Taxes = $1015
Fixture & Equipment Tax = $50
Myrtle Beach Business License = $230
Utilities = $0 (included in HOA)
Hazard, Fire Flood Insurance = $0 (included in HOA)
HO6 homeowners contents Insurance = $400
Repairs and replacements = $800 (estimated 5% of gross)
Depreciation: $2124 (Approximately 3.5% of the adjusted cost basis each year, consult a CPA)

              $16,000 Gross rent
 Minus  $14583 Expenses
   $1417 Net rent (8.8%)

Minus $2124 Depreciation
   -$707 reported income/loss

Most resort rentals do not generate significant Net Income. They generally pay for themselves and allow owners a paid for vacation opportunity for family and friends.

Consult a tax advisor regarding depreciation. Some owners take it, some don’t. It can reduce the amount of federal and state taxes you pay each year. Keep in mind that accumulated depreciation has to be taken from the original cost basis when you sell and often results in a higher capital gains tax.

If you purchased the condo for $59,000 and took  $10,000 in depreciation over 5 years your cost basis is reduced to $49,000. If you sold the unit for $70,000 your gain subject to tax would be $21,000. If you did not take depreciation, your cost basis is $59,000 and the gain subject to tax would be $11,000.

Most of the expenses of owning a resort condo are expenses that you cannot control and are likely to increase over time. You have some options when it come to management fees.

Onsite management usually charges 40 to 50% of gross rents.

Off-site management companies typically charge 15% to 25% of gross rents.

Both onsite and off site companies manage bookings, promote and advertise tour condo, provide maintenance, laundry,  and house keeping services and take care of remitting sales and hospitality taxes.

Many owners choose to manage their own properties. They use online reservation companies like VRBO.com HomeAway.com and others to promote, advertise, and manage their bookings. Self management expenses will run 5% to 10% of gross rents.

If you self manage you will have to get a retail sales license ($50/yr) and remit sales and hospitality taxes to the state and local revenue departments. You will also have to contract with independent housekeeping, laundry, concierge, and maintenance services. Some resorts offer these services for self managed owners for a fee. 

Another issue with self managed properties is that there are a few resorts that do not allow guests of self-managed units access to the amenities. This is not common but you need to be aware before you purchase.