Investing On Isle Of Palms: Rental Math Explained

Is a beach home on Isle of Palms really a smart investment, or just a sunny daydream? If you are eyeing a second home with rental potential, the numbers matter as much as the view. In this guide, you will learn a simple, month‑by‑month way to underwrite a short‑term rental on Isle of Palms, with clear assumptions, formulas, and local checks that protect your bottom line. Let’s dive in.

Why Isle of Palms draws steady demand

Isle of Palms sits just northeast of downtown Charleston, about a 35 to 40 minute drive depending on traffic. That proximity expands demand beyond beachgoers to visitors who want beach access with easy city dining, arts, and events.

Seasonality shapes your rental math. On Isle of Palms, the typical pattern is:

• Peak: mid‑May through August with the highest ADR and occupancy.
• Shoulder: April to May and September to October with solid ADR and variable occupancy.
• Off‑peak: November through March with lower ADR and softer weekday demand, but some holiday and weekend spikes.

Because rates and occupancy swing month to month, plan your underwriting by month rather than a single annual average. It is more work, but it is more accurate.

Build your monthly revenue model

Use this sequence to turn comps and costs into a clear cash flow picture.

1. Estimate revenue by month

• For each month, apply: ADR_month × Days_in_month × Occupancy_rate_month = Monthly gross rental revenue.
• Sum all twelve months to get annual gross revenue.
• Tailor ADR by property type, bedroom count, view, amenities, and pet policy. Family‑sized homes and strong amenity sets usually achieve higher ADR and longer stays.

2. Subtract guest‑facing and platform fees

• Platforms charge host fees that often land around 3 to 5 percent. Confirm the current structure for each platform you plan to use.
• Decide whether cleaning and similar turnover fees are passed through to guests. Most hosts do pass them through, but some managers net them differently in owner statements.

3. Subtract variable, occupancy‑tied costs

• Cleaning per stay, laundry, consumables, and higher summer utilities scale with bookings.
• Cleaning fees for beach properties vary widely with size and laundry needs. You will see common ranges from roughly 100 to 400 dollars or more.

4. Subtract management fees

• Full‑service management on Isle of Palms typically runs 20 to 35 percent of rental revenue. Limited service or owner‑managed models may be lower, but expect to take on more work and vendor coordination.

5. Subtract fixed operating costs

• Property taxes, insurance, HOA dues, pest control, landscaping, recurring utilities you cover, and routine maintenance.

6. Fund capital reserves

• Beach homes face extra wear from salt air and humidity. A simple rule is to set aside 5 to 10 percent of gross revenue, or a fixed annual amount based on age and systems, for big‑ticket items like roof, HVAC, and periodic refreshes.

7. Account for debt service

• If you are financing, compare net operating income to your monthly mortgage to evaluate cash‑on‑cash yield and coverage.

Example assumption ranges to sanity‑check your model

These are broad guidelines to test your thinking. Always verify with local comps and recent data for your property type.

• Annual occupancy: often 45 to 75 percent for beach STRs depending on size, location, and marketing.
• Management fee: 20 to 35 percent for full‑service management.
• Platform host fees: roughly 3 to 5 percent.
• Cleaning per stay: commonly 100 to 400 dollars or more, depending on size and laundry volume.

Count every cost on a beach rental

Variable costs tied to bookings

• Cleaning and laundry per stay.
• Consumables, supplies, and guest toiletries.
• Utilities that spike with occupancy. A summer month often brings higher power and water usage.
• Extra wear and tear. Budget a small per‑stay amount for repairs and replacements.

Fixed operating costs you should expect

• Property taxes and recurring utilities you pay year‑round.
• HOA dues if applicable. These can be significant and may include exterior insurance, amenity upkeep, trash, and reserves.
• Pest control, landscaping, and pool service if you have a pool.
• Routine maintenance plus a capital reserve for larger items as noted earlier.

Coastal insurance and flood checks

• Coastal homes often require homeowners coverage plus wind and hail endorsements. Many properties also sit in FEMA flood zones, which may require flood insurance if you have a loan or per HOA rules.
• Compare National Flood Insurance Program options with private flood insurers, and review the property’s elevation certificate and any past claims.
• Ask about hurricane and windstorm deductibles. Insurance premiums can materially change cash flow, so get quotes early.

Management, turnover, and pricing strategy

• A full‑service manager at 20 to 35 percent typically handles marketing, guest communication, check‑in, maintenance coordination, and remittances.
• Turnover frequency drives cleaning spend. Your minimum‑night rules can help control turnovers in peak season and limit wear.

Calculate ROI and break‑even

Here are the core formulas you will use.

• Gross rental revenue = sum over months (ADR_month × days_in_month × occupancy_rate_month).
• Net operating income (NOI) ≈ Gross revenue − platform fees − management − operating expenses.
• Cash flow before tax = NOI − debt service − capital reserve funding.

A quick way to understand risk is to compute break‑even occupancy for a target ADR.

• Break‑even idea: ADR × days_in_month × occupancy_rate × (1 − platform_fee%) − variable_costs − fixed_costs_per_month = 0.
• Practical shortcut: Add up your monthly fixed obligations, including insurance, taxes, HOA, and mortgage. Subtract an average management and platform take. Then divide by your target ADR to see how many booked nights you need in a typical month. Run the same test with ADR reduced by 10 to 20 percent for a stress check.

Stress‑test your numbers

Beach markets reward conservative underwriting. Run three scenarios and compare.

• Optimistic: Peak‑season ADR and occupancy with favorable weather and strong event demand.
• Base: Realistic ADR and occupancy from verified comps over the last 12 to 36 months.
• Pessimistic: Lower ADR and lower occupancy with 2 to 8 weeks of downtime for a storm repair or an unusually soft shoulder season.

Also test an abrupt rules change, such as a new HOA minimum stay or a cap on permits. See how quickly your cash flow recovers.

Local rules and taxes to verify

Before you close, confirm local requirements so your plan is compliant and bankable.

• City of Isle of Palms: Business license, STR registration, occupancy and nuisance rules, and any safety compliance standards.
• Charleston County and City tax compliance: Transient lodging and accommodations tax registration and remittance schedule.
• State of South Carolina: Sales and accommodations tax obligations, current rates, and who collects on each platform.
• HOA or condo association: Minimum rental periods, owner‑occupancy rules, parking and amenity access, insurance requirements, signage, and any local agent rules.
• Safety and building code: Smoke and CO detectors, egress, fire extinguishers, occupancy limits, and any inspection requirements for rentals.
• Environmental and coastal factors: Beach renourishment projects, dune management, and any critical area restrictions that affect exterior work.

Where to find reliable comps and data

Build your assumptions using recent and relevant sources.

• Professional STR data providers for ADR, occupancy, RevPAR, and seasonal curves.
• Airbnb and Vrbo listings to pull comparable calendars and guest‑facing fees. Filter by bedroom count, distance to beach, view, and amenities.
• Local property management firms and broker market reports for on‑the‑ground ADR, cleaning pricing, and booking patterns.
• Local tourism and municipal resources for events that drive shoulder and off‑peak demand.
• FEMA flood maps and elevation certificates for flood risk and lender requirements.
• County assessor and treasurer for tax records, and insurance brokers who specialize in coastal coverage.

Use at least 12 to 36 months of data to smooth one‑off spikes, and lean on multi‑year averages where possible.

Practical checklist before you write an offer

• Pull monthly ADR and occupancy curves for true comps: same bedroom count, similar distance to the beach, condo versus single‑family, and comparable amenity sets.
• Review minimum‑night rules and guest fees on those comps. Note how hosts adjust stays and pricing by season.
• Get the HOA’s CCRs, meeting minutes, budget, and reserve study. Confirm rental policy and any planned special assessments.
• Request insurance quotes for homeowners, wind, and flood using the property address and elevation certificate.
• Check FEMA flood zone and lender flood requirements.
• Confirm STR registration steps and accommodations tax rules with the city and county. Ask about any pending changes.
• Compare three property management contracts, including services, fee structure, and how they account for cleaning and supplies.
• Ask the seller for rental history and platform statements, and compare them with market data.
• Run optimistic, base, and pessimistic scenarios month by month. Calculate annual gross revenue, NOI, cash flow before tax, cash‑on‑cash return, and debt coverage ratio.
• Calculate break‑even occupancy at your target ADR and again with ADR 10 to 20 percent lower.
• Confirm what conveys with the sale, including furnishings and rental‑ready items.

Simple monthly underwriting template

Use the structure below to build your month‑by‑month model. Duplicate it for optimistic, base, and pessimistic scenarios.

Tip: Fill ADR and occupancy with seasonally realistic numbers from comps. Apply your platform and management percentages. Enter variable and fixed costs based on quotes and contracts. The sum of monthly NOI gives you annual NOI. Compare that to your annual debt service and reserves to understand cash flow before tax.

Partner with a local, hospitality‑first guide

Underwriting an Isle of Palms rental is part math and part local know‑how. If you want help pulling accurate comps, pressure‑testing insurance and HOA costs, and connecting with trusted managers, I am here to guide you. Let’s build a clear model so you can buy with confidence and enjoy the beach when you want.

Reach out to schedule a consult with Brittany Shropshier. Let’s connect.

FAQs

What is a realistic annual occupancy on Isle of Palms?

• Many beach STRs model annual occupancy in the 45 to 75 percent range, depending on property type, location, and marketing. Verify with comparable listings and recent data.

How do seasons affect ADR and occupancy in this market?

• Peak runs from mid‑May through August with the highest ADR and occupancy. April to May and September to October are shoulder months, and November to March is typically off‑peak with lower ADR.

What management fee should I expect for a full‑service STR?

• Full‑service management commonly ranges from 20 to 35 percent of rental revenue. Compare services, reporting, and how each manager handles cleaning and supplies.

What insurance should I plan for on a coastal rental?

• Expect homeowners coverage plus wind and hail endorsements, and flood insurance if in a mapped flood zone or required by your lender or HOA. Get quotes early and review deductibles.

How do I calculate break‑even nights for a given month?

• Add your fixed monthly costs plus an allowance for management and platform fees, then divide by your target ADR after accounting for variable costs per stay. Repeat with ADR 10 to 20 percent lower as a stress test.

Do I need permits or licenses to operate an STR on Isle of Palms?

• Plan for a business license and STR registration with local rules on safety, occupancy, and nuisance standards. You will also need to set up state and local accommodations tax compliance and verify HOA restrictions.