2709 S Ocean Blvd. #401, Myrtle Beach, SC 29577

# Deal Memo: 2709 S Ocean Blvd. #401, Myrtle Beach, SC 29577 --- ## Executive Summary **Verdict: Pass** (Confidence: **High**). The projected annual gross revenue of $111,007 is severely disconnected from actual comparable performance — the five closest comps average just $56,675 in TTM revenue with a mean occupancy of only 18.4%. This property's underwriting assumes top-quartile performance in a market where similar listings are dramatically underperforming, creating unacceptable downside risk to cash flow and debt service. --- ## Financial Snapshot | Metric | Value (Projected) | Benchmark | Assessment | |--------|-------------------|-----------|------------| | Cap Rate (STR) | 7.64% | >8% target | 🟡 | | Cash-on-Cash | 6.70% | >10% target | 🔴 | | DSCR | 1.25 | >1.25 target | 🟡 | | Monthly Cash Flow | $962 | Positive | 🟡 | | GRM | 6.8 | <100 target | 🟢 | **Critical caveat:** Every metric above is based on projected revenue of $111,007 — a figure that **none of the five direct comps have achieved**. Stress-tested at the comp average of ~$56,675, this deal goes deeply cash-flow negative with DSCR well below 1.0. --- ## STR Income Analysis The underwriting assumes ~$111K gross revenue, which would place this unit above the **75th percentile** ($131,508) in occupancy terms while charging roughly median ADR. This is aggressive to the point of being unrealistic given the comp evidence: - **Comp average TTM revenue: $56,675** — 49% below projections - **Comp average occupancy: 18.4%** — versus the 45.6% market average and the implied ~49% needed to hit projections - **Comp average ADR: $722** — healthy, but ADR alone cannot compensate for catastrophically low occupancy - **Best-performing comp** (Comp 5) generated $78,028 at 21% occupancy with 14 reviews — still 30% below projections The market ADR of $616 and occupancy of 45.6% produce an *area average* of $103,646 — but this average appears to include diverse property types. The 5BR/4BA oceanfront condo submarket is clearly oversupplied and underperforming. Platform fees (~14-17%) and cleaning/turnover costs on a 5BR unit will further compress net revenue. **Revenue projections are aggressive and not supported by comp data.** --- ## BRRRR Assessment | BRRRR Metric | Value | |---|---| | ARV | $861,925 | | Cash-Out from Refi | $27,450 | | Equity Recaptured | 15.9% | | Cash Remaining in Deal | $144,935 | BRRRR viability is **weak**. Only $27,450 recaptured (15.9%) leaves $144,935 trapped — essentially the full down payment. The ARV of $861,925 is unverified and represents only 15% appreciation over purchase price, which is plausible but offers no margin of safety. A 75% LTV cash-out refi at the stated ARV yields ~$646,444, barely covering the original loan amount plus closing costs. This is not a capital-efficient BRRRR execution — the strategy does not meaningfully recycle capital. --- ## Market Context Myrtle Beach is a well-established leisure destination with strong seasonal demand (May–September), but the STR market shows signs of **significant oversaturation** in the luxury oceanfront condo segment. With 25 active comparable listings and most direct comps achieving sub-25% occupancy, supply is outpacing demand. The absence of median home value, household income, and vacancy data is a diligence gap, but the comp data tells the story: this submarket is crowded with underperforming listings. Myrtle Beach STR regulation remains relatively permissive, which is positive but also fuels supply growth. --- ## Risk Factors - 🔴 **High: Revenue Overstatement** — Projections exceed every direct comp's TTM revenue by 42-184%. The underwriting is not grounded in demonstrated performance. - 🔴 **High: Occupancy Risk** — Direct comps average 18.4% occupancy vs. the ~49% implied by projections. Seasonal concentration means 6+ months of minimal bookings. - 🔴 **High: Debt Service Vulnerability** — DSCR of 1.25 at projected revenue drops to ~0.64 at comp-average revenue, triggering monthly losses of ~$2,900+. - 🟡 **Medium: Market Saturation** — 25 active comps in a narrow submarket with poor average performance signals oversupply. - 🟡 **Medium: Unverified Inputs** — No actual income history, no verified ARV appraisal, no local market fundamentals provided. --- ## Recommendation **Pass.** The gap between projected and demonstrated revenue is the widest I've seen in a deal submission — projections are nearly double the comp average. At realistic revenue of $55,000–$78,000, this property generates **negative monthly cash flow of $1,800–$3,600**, making it a capital-destructive hold. To achieve adequate CoC of 10%+ at comp-realistic revenue, the purchase price would need to be approximately **$425,000–$475,000** — a 37-43% reduction. If the investor is committed to Myrtle Beach, require 12 months of verified owner income statements from an existing STR operator before proceeding with any offer above $500,000. This deal is only suitable for a high-net-worth investor with substantial liquidity reserves willing to subsidize negative cash flow while building reviews — and even then, only at a significantly renegotiated price.