InvestmentBuilding 8 Houses in Downtown Charleston SC: Elliotborough & East Side

Fall of 2016 was a busy one here at Luxury Simplified.  In the late summer, BNC Bank gave the go-ahead to fund our next wave of construction in downtown Charleston – 3 homes in Elliotborough and 5 East Side homes on Hampstead Square. Five of these projects are slated for construction on empty land, two will be renovations of 19th Century homes and one being infill behind an existing house. Here is how it went …

There is a temptation in life to rely on your own resources. Which preserves your funds, BUT the “opportunity cost ” is lost rent, delayed build schedules, and the inability to take on additional projects until those in-hand are completed. So, having planned the funding, completed the specs and set the time line, five builds went to Lumos (our partner in this development) and two to Luxury Simplified Construction. This helped us get through the projects more quickly, allowing us to concentrate on other growth opportunities.  In investing, there is no profit in winning a race to the feast if you starve to death finding the next one.  

Elliottborough

Todd Street.  A small, ruined 19th century home right next to the Crosstown.  What was left of the burned out Piazza fell into the street in early 2016 prompting a letter from the Livability Court to clean it up. Three massive hack berries growing under the failed foundations up against the Crosstown, and a leaning chimney completed the picture – a bargain at $45,000 four years ago (try that these days!).  As luck would have it, the area between President St and Todd St bounded by Line St. and Septima Clark Pkwy. is Zoned Limited Business and is in the “Accommodation Overlay. ”  Bingo! –  we got ourselves a LEGAL (note that word, more later) VRBO vacation rental.  But there are issues, as it is almost a complete rebuild, needs lifting off the ground and new footings, chimney needs to go as it’s leaning badly (it’s already below the roofline so that’s ok), and a need to be philanthropic and improve the landscaping and sound barriers on an unloved Todd St.  

Line and Ashe St.  This was an odd one – bought at $260,000 in 2015 as a renovation (though less of a mess than the house on Todd St). The grounds were sufficiently large enough to fit in a new-build 600 sq. ft. dependency. The consideration with dilapidated buildings, or those with a previously bad renovation, is that they are both the same, i.e. not up to standard and you will be faced with removing anything and everything sub standard.  Footings were in reasonable order so we concentrated on the building and the roof.  One chimney could be saved, the other was already missing. With its huge piazza, new paint and a galvalume roof it will be one of the prettiest homes in the area. The main house will be rented as three bedrooms, a big house and useful piazza.  We also built a downtown dependency adjacent to this on the remaining plot of the large yard creating an additional 600 sq ft single bedroom, high efficiency Eco Home (see our blog on this experimental build out).

East Side

Back in 2015 a partner and I bought three co-joined lots on the south side of Hampstead Park.  One of these was some 200 ft long and 30 ft wide providing the opportunity for a multiple house build within the “50% lot occupation limit. ”  The remaining two were suitable for single homes.  This took a lot of planning, consulting the East Side Neighborhood and the City, as there were many code and design restrictions we had to be cognizant of.  We also created a great looking bookend to Hampstead Park (one of the lesser known parks in the city).

The final result is a 4+1 rental home development including landscaping and two grand oak trees on the same plot. The investment strategy here is a play to build and hold as income generating property.  The front home is 4-bed, the next a 3BD/2BA duplex and finally a 3-bed single home to the rear.  One additional home is being built next to these at 5 Hampstead Court.  All have inverted floor plans with bedrooms downstairs and living space upstairs to take advantage of the views and summer breezes, while 4 of the 5 have roof decks.  We went for a slightly more contemporary design feel, but keeping the historic markings of timber construction, fenestration, height and mass.   We were also allowed to use artisan hardy board on the external fascia, it looks just like wood but saves so much on maintenance.

Financials

The total cost of building on the Charleston peninsula for this project is a shade under $2M for the 8 properties in total. Add acquisition costs to this and we are at about $2.5M with the final Loan-to-Value (LTV) being about 65% (on Bank appraisal) so reasonably conservative. BNC Bank on Meeting St have been a great partner to work with, and our primary builder was Lumos Construction.  Our own team completed 118 Line St. (already rented) and are completing the final build on 5 Hampstead Court.  

Note: As investors, we’re always looking for new opportunities to challenge ourselves and our Construction team. Building eight new homes in downtown Charleston over the span of five months was a daunting project, but with careful planning, efficient management of resources and a well coordinated team, profitability waits on the other side. Our long term rental potential is good with tenants already in place on Hampstead, and our Todd Street short-term investment property is ready to rent through our Luxury Simplified Retreats team.