1850 Colony Dr APT 3D, Myrtle Beach, SC 29575

# Deal Memo: 1850 Colony Dr APT 3D, Myrtle Beach, SC 29575 --- ## Executive Summary **Verdict: Negotiate — Confidence: Medium.** The headline returns on this Surfside Beach condo are exceptional on paper, but the projected $25,786 annual gross revenue sits at the 68th percentile of comparable listings, which requires above-average execution in a market with 41% median occupancy and extreme seasonality. The single most decisive factor is **whether the operator can consistently outperform the market median revenue of $20,008 by 29%** — achievable but far from guaranteed, and the deal's attractiveness collapses rapidly below that threshold. ## Financial Snapshot | Metric | Value | Benchmark | Assessment | |--------|-------|-----------|------------| | Cap Rate (STR) | 17.25% | >8% target | 🟢 | | Cash-on-Cash | 27.80% | >10% target | 🟢 | | DSCR | 2.99 | >1.25 target | 🟢 | | Monthly Cash Flow | $1,306 | Positive | 🟢 | | GRM | 5.3 | <100 target | 🟢 | Every metric screens green — unusually so. This warrants **skeptical scrutiny** of the revenue assumptions rather than celebration. The purchase price at $136,400 (53% of area median home value) provides a significant margin of safety on the asset side. ## STR Income Analysis The underwritten $25,786 annual gross implies an effective ADR of ~$171 at 41% occupancy, or a higher-occupancy/lower-rate blend. Comparing against authoritative comps: - **Median comp revenue is $20,008** — this deal underwrites 29% above median. - **Comp 5** ($33,160 revenue, 166 reviews) proves the upside is real, but that operator has years of review momentum and Superhost status. - **Comp 4** ($11,354, 21% occupancy) demonstrates the downside scenario — a Superhost still pulling dismal numbers. - The **realistic revenue band is $19,000–$28,000**, making the projection optimistic-to-realistic rather than conservative. **Seasonality is the dominant concern.** Myrtle Beach STR demand is heavily summer-weighted (June–August). Expect 60–70% of revenue concentrated in Q2/Q3, with winter months at sub-20% occupancy. Platform fees (Airbnb ~15% host+guest combined) reduce the $25,786 gross to approximately $21,900–$22,500 in net platform revenue before operating expenses. The stated $2,709 monthly net revenue ($32,508 annualized) appears to already account for some expense netting, but investors should verify the expense assumptions underlying the gap between $25,786 gross and $32,508 implied net. **Stress test:** At p50 revenue ($20,008), monthly cash flow drops to roughly $825 — still positive but with CoC falling to ~17.5%. At p25 ($14,334), the deal likely breaks even or goes slightly negative. ## BRRRR Assessment **BRRRR is not viable here.** The ARV of $150,000 yields a 75% LTV cash-out refi of ~$112,500, which after paying off the $109,120 loan returns only ~$3,380 — nowhere near recovering the $56,372 total cash invested. The negative equity recaptured (-44.3%) and $81,367 cash trapped in the deal post-refi confirm this is a **buy-and-hold play, not a BRRRR candidate**. The modest ARV premium ($13,600 over purchase) offers no meaningful forced appreciation opportunity. Investors seeking capital recycling should look elsewhere. ## Market Context The $136,400 purchase price at **53% of the $256,500 median home value** signals either a value pocket or a lower-quality asset class (likely older condo complex). The 50.5% vacancy rate is alarming for traditional rentals but expected in a seasonal beach market dominated by STRs. Myrtle Beach/Surfside Beach demand drivers include summer tourism, golf tourism (spring/fall shoulder), and snowbird traffic — providing three distinct demand seasons. With 25 active comparable listings, the competitive set is moderate but manageable. Household income of $68,031 is modest, indicating limited long-term rental upside as a fallback strategy. ## Risk Factors - 🔴 **High: Revenue Concentration & Seasonality** — 60–70% of income generated in 4 months; a single bad summer (hurricane, recession, pandemic) devastates annual returns with no winter cushion. - 🔴 **High: Overperformance Dependency** — Projections require top-quartile execution (p68+); median performance drops CoC to ~17%, and below-median operation erases the thesis. - 🟡 **Medium: STR Regulatory Risk** — Horry County and Myrtle Beach have evolving STR ordinances; condo HOA restrictions could tighten without warning. - 🟡 **Medium: Condo HOA & Special Assessments** — Older coastal condos face rising insurance costs and potential special assessments (roof, elevator, siding) that can erase years of cash flow overnight. - 🟢 **Low: Asset Price Risk** — Purchase well below area median provides downside protection; unlikely to lose significant principal at this basis. ## Recommendation **Negotiate the purchase price to $120,000–$125,000** to create adequate margin for median-revenue performance. At $125,000, even p50 revenue ($20,008) delivers a ~14% CoC — a deal that works without requiring elite operator performance. Conditions to monitor: (1) **only proceed if you can verify the expense load (HOA, insurance, utilities, PM fees) totals under $8,500/year**, as coastal condo carrying costs are rising rapidly; (2) **target Superhost status within 6 months** — comps show Superhosts capturing 30–50% more bookings; (3) **build a $10,000 reserve for special assessments** given the coastal condo profile. This deal is best suited for an **experienced STR operator who already manages Myrtle Beach properties, can cross-promote listings, and can tolerate lumpy seasonal cash flow** — it is not appropriate for a passive or first-time investor.