After seven years and three beach houses in Myrtle Beach, I’ve made my share of short-term rental mistakes, and last week I walked through a lot of them. This time I’m sharing the other side: the wins that keep me choosing to own and run these houses. I talk about the family memories we’ve made, why staying in a house set up for us matters so much while we travel full-time, and how these homes support both our guests and the local economy. I also walk through the numbers behind how they build wealth, why depreciation is really a deferral and not a true tax savings, why we moved up to higher-value oceanfront houses, and how we keep our equity working. If you own a short-term rental or are thinking about one, this is an honest look at what makes it worth it.
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Welcome back. I’m Adrienne Green. And here we focus on how real estate entrepreneurs can break free of the grind and create the freedom they wanted at the start. And today I am going to follow up to last week’s episode where I talked about a lot of my short-term rental mistakes that I have made. And so, as promised in that episode, I wanted to come back and share some of the wins from the short-term rentals.
For those who don’t know me, I am a real estate investor who’s done a lot of everything. And on these episodes, I’m specifically talking about my short-term rentals. Currently, I have three short-term rentals in the Myrtle Beach, South Carolina market. One, my first one, is a smaller two-bedroom, two-bath a few blocks from the beach. And then I have two oceanfront, four-bedroom, three-bathroom houses that are right next door to each other. We’re gonna talk about some numbers here.
So let’s dive into some of the wins of having short-term rentals. The first win is that we have made so many amazing family memories at these houses. That is something not to be overlooked, and it’s one of the reasons a lot of people do like investing in short-term rentals. And I know there are short-term rental investors out there who are gonna come at me and say, my goodness, do not consider personal use. And yet, one of the wins that we have had is that we have great vacations at these houses over the years.
Right now we stay at one of the oceanfront, beachfront short-term rentals, and my kids love being able to just go downstairs, go in the pool, go to the beach, ride the scooter around the sidewalks within the little neighborhood there. They have so much fun, and we’ve been able to host family members and have holidays at this house. I remember multiple Thanksgivings, a few Christmases as well, and it’s been really great to have this and have it as a resource that we can use for good family times.
Similarly, a thing that’s been nice about having the short-term rentals, and I really appreciate this because we’ve been full-time travelers for over two and a half years. So I’ve been living in hotels, Airbnbs, other rentals, and there’s some beautiful things about traveling the world, and I love it; we’ve had great experiences. One of the challenges is always being in someone else’s rental, right? And so one of the wins that I love about having these short-term rentals is that we get to go enjoy a house that is set up for our preferences, that is well equipped, right? That has the things that we like. And so we can be there and be comfortable in a way that we couldn’t necessarily if it was just a rental house or an Airbnb that was someone else’s rather than ours.
So some of the things we love and enjoy about going to our own short-term rental as a beach house is that we’ve got bathtubs for the kids. I have some kids who love taking baths, and it’s really nice to have bathtubs. And yes, we could seek out rentals that only have bathtubs, but fun fact, that is not a searchable feature on Airbnb, so it’s kind of a pain to find if something has a bathtub. We also have beach toys on hand, so the kids can come, they can get the sand toys, they can get the beach chairs, they can get the boogie boards; they love boogie boarding. And we’re not having to buy that from scratch every trip. It’s just there for us. I also love that we’ve set up this house to have king-size beds for the adults and bunk beds for the kids, both of which these two groups favor, and a well-equipped kitchen, having a nice kitchen with dishes and cookie sheets and a blender and a toaster that can hold multiple pieces of toast because it’s a big house. All of those things that we’ve put into the kitchen, I enjoy getting to use them instead of being somewhere else that’s maybe a little ill equipped.
Now, moving on from my own enjoyment, one of the other wins is that I’m able to give guests a nice place to vacation. I remember after we moved to Northern Virginia and we were starting to vacation on the East Coast beaches, like Myrtle Beach, we went to the Outer Banks. And that first Outer Banks house, it was oceanfront, like two of our houses, and it was so bad. The stove, one of the things I really remember is that the stove was so tilted that when you went to fry eggs in the morning in a frying pan and you cracked the egg, they all just would run down to the same part of the pan. You could not make fried eggs. You had to make scrambled because the stove was so uneven. And this is an oceanfront prime rental. I also remember how cold it was at night, because we were there in the fall, because it was so poorly insulated and the windows and doors were so old. There were things like that. And so I really appreciate that I’m able to provide people a better experience. If people are going on vacation, then they probably want a house with a stove that’s flat enough to make whatever kind of eggs they want, right? And they probably want a house where they’re not gonna feel cold inside, things like that. So I do appreciate that I am able to give guests a nice place to vacation.
Another win outside of myself is that these houses really support the economy. The money that flows into my world, I will tell you, a lot of it flows back out into the community. The cleaners, the handyman, the linen service, other contractors; there are so many people in Myrtle Beach that are eating well because of this house and the money we’re able to make in it, and then the support that they give to the house as well.
Now, I will also say that these houses do build our own wealth as well. Now, in the last video, I did talk about how there are no costs to having these houses, especially the oceanfront ones, and that is very true. And yet, if you know me, you know my background is in finance. I love looking at the numbers, and these houses do build wealth for me.
Now, one of the great things about owning a house is that there’s multiple ways you build wealth from that investment property. The first is that the guests or tenants are paying down the loan balances. And that is definitely happening on my property. So I’m not putting in money every year, but my mortgage is going down, and we’re paying that off because of the payments that the guests pay, the rents that we get for renting out the house. So over the next 12 months, we’ll have about $32,000 in principal paydown across these three houses. So that’s $32,000 of value I’m adding to my net worth without having to actively work and make it in another source.
Another aspect is, of course, appreciation. I’ve had these houses, one since 2019, one since the end of 2021, and one since fall of 2022. And over that time, they have appreciated approximately $688,000 combined across the three of those. So again, that’s $688,000 of appreciation, or increase to my net worth, by having these houses over the years. So, in addition to any cash flow or tax benefits, those are a couple of ways that the houses are helping me grow my net worth.
And then, of course, there are the tax benefits. Of course, we’re able to write off expenses related to the house, to managing them, to going there and checking on them. And we’re also able to take depreciation on the houses as well. We were able to do cost segregations on the house to accelerate that depreciation. So there were a lot of tax benefits that allowed us to keep more money in our pockets today by owning these houses.
Now, I do want to say this, because this is kind of one of my little chips on my shoulder with real estate investing. People are like, “Depreciation, you pay less in taxes.” It is not forever, okay? And that’s not said enough. Depreciation is really an interest-free loan on that money. So let’s say that I had $100,000 in depreciation that offset $100,000 in income, and let’s say I’m in the 25% tax bracket, so that saved me $25,000 in taxes. At the end of when I have this house, when I sell it, unless I 1031 it, I’m going to have to do depreciation recapture, and I’m going to pay that $25,000 I owed in taxes then. And so you’re not really saving the $25,000. You are still going to owe it eventually. What you are really getting is the fact that you can invest that $25,000 over the years until you sell that house, and you’re able to keep the returns that you get on that $25,000. I really feel like, especially people who are trying to sell you something, like sell you on buying a short-term rental, they overstate the impact of things like cost segregations and accelerated depreciation. It can be super fabulous, but you’re not saving that tax money itself; you’re just deferring it. And I feel like that’s not highlighted enough. Even so, it is a benefit. So we do get tax benefits and savings from this house.
Now, one of the other things that’s specific to two of the houses in my portfolio, that’s a big win and something that I did strategically, and I will say I evolved into this as an investor. So if you are a new investor, this is probably not gonna be your step one. That’s okay. All right. But with two of the houses, we have higher-value houses. So we’ve bought them in just over the million-dollar range. And the thing that I like about that is that, you know, the more expensive your house, often the more rent you’re going to get. And that’s the case with these short-term rentals, right? Obviously, my gross income is a lot higher on the more expensive oceanfront houses than on my smaller, less expensive house that’s not oceanfront.
The thing is, having a plumber replace a toilet costs the same at the cheap house as it does at the expensive house. But if I’m getting a thousand dollars a night from a guest instead of two hundred dollars in the high season, then that gives me a lot more money to pay for that toilet, to pay for the sliders, to pay for all of these things. Now, oceanfront specifically does have extra wear and tear and extra costs, and yet my point here is that a lot of times in the real estate investing space, we think about these little inexpensive houses. That’s what’s really promoted. “I got a house for $40,000,” et cetera, et cetera. And that can be a viable strategy, especially as you get started. And yet, if you’re keeping something as a rental, whether it’s long-term or short-term, if you have things that are getting you more rent, right? Whether it’s monthly rent, whether it’s short-term rental rent, when you’re grossing more per house, again, that toilet is going to cost the same. That sliding glass door is gonna cost the same. That roof, it might cost more if it’s a little bigger, but relatively, typically, you’re getting more economies of scale with a more expensive house that’s getting you more in rent. So that’s something that we evolved up to. We started with lower-value things and then moved into these higher-value ones.
And the other piece of that, besides just the money, is the guests. So if I’m gonna have to deal with a guest who’s peppering me with questions, and they’re paying $100 a night or they’re paying $300 a night, which one am I getting a better return on my time for answering those questions? Right? And that’s just kind of where I want you to think: if you’ve got houses that can gross you more, that’s going to probably also net you more because of these economies of scale.
The last win I want to share with you is that we are able to leverage these houses to keep our money working and boost our returns. So when you have an investment property, what a lot of investors do over time (so if this is new to you, pay attention, it’s very common) is you’re either gonna do cash-out refinances or a HELOC, a home equity line of credit. Because as you own this house over time, it appreciates and your mortgage is paid down, so you’ve got more equity in the house from these two things combined. And so you’ve got all this value in the house, and it’s just sitting there unless you do a cash-out refinance or a HELOC, which allows you to tap into that money.
Now, cash-out refinances are less common right now because a lot of people have mortgages at, let’s say, three to four percent, and they don’t want to do a cash-out refinance because that eliminates your original mortgage, and they’re gonna now be at, let’s say, seven, seven and a half percent on the new one, right? They don’t want to get rid of their low interest rate. There’s also the opportunity now (they are tough to find) but there are credit unions and banks who will give you HELOCs on your investment properties. Are the terms gonna be as great as they are on a primary? No. But still, even if you’re paying, let’s say, nine or 10% on the equity that you’re getting out of this house, if you can go invest that and make more than nine or ten percent, you’re keeping that difference, and that’s how you can make more money.
So that’s one of the other things we’re able to do with these houses. One of them we had on seller financing; we had to do a cash-out refi. One of the other ones we’re able to get a HELOC on, and we’re able to take that extra equity out and go have that equity earn money for us. So right now, that rental is going up in value, its mortgage is getting paid down, we’re making money from the rents, and we’re able to take the value, the equity in that, and go invest that in our private money lending and earn more money on that. So that’s another way that these properties really do help us make money and grow our wealth.
All right, so that was a lot of wins and an explanation of how these short-term rentals are a net positive for us, even if in the last video I did highlight a lot of issues and a lot of lessons learned. And that’s really real estate, guys, right? If you’re in real estate looking for a get-rich-quick scheme, or you think that you’re going to get outsized returns for no effort or no cash investment, that’s because social media has sold you a lie and acted like you can get something for nothing. And that’s not the way the world works.
So yes, real estate investing is very advantageous. Yes, it is more leveraged. Yes, it can be more lucrative than other businesses, and yet there is no such thing as a truly free lunch. So with short-term rentals, there is time spent there. There is the fact that, like I said in my last video, we go there and I have to work, right? I have to work for part of those times, depending on how often we go, how much work it needs, things like that. And yet it is very advantageous for us, both financially and as a family.
I would love to hear from you if you have a short-term rental. What are some of the wins that you’ve had with that short-term rental? Why do you keep making the choice to have it and to run it? Please post it in the comments below, and join me again next week for another episode.