In my 29 years of selling real estate on Hilton Head Island I have often had people call up and say something like “I got my tax bill and I need to sell my property – it is more than it has been in the past” or “I just got my insurance adjustment – they raised my rates and I need to sell my property”.

I often ask – why would you do that?

In response, they would say that costs are going up and it is costing too much to own the property.

Over the years I have often said that the bundle of costs affect the overall value of property.  If the items in the bundle of costs goes up, if it is a rental property that means they are getting less money out of it, their return on investment is not as good and therefore they would sell the property.

The major items usually in the bundle of costs are taxes, insurance, homeowners association fees, if it is a villa there will be regime fees and utilities.

One of the villa complexes recently raised their regime fee to $800/month because they had a project they were working on.  Because of the high cost of the regime, we could not sell villas in this complex because people would always complain about that high fee.  It had a very detrimental effect on the value of the properties and since very few were selling the value was going down because of simple supply and demand. 

Most people in homeowners associations have no understanding of how this affects the real world.  Several of the plantations on Hilton Head Island have recently added a transfer fee.  This is a major component in the “bundle of costs” and it has a detrimental effect on property values in these areas. 

It amazes me that many of these retired executives forget everything they have ever learned in the real world and do not understand that the bundle of costs affects values.

When we are showing people resort property on Hilton Head Island they usually want to know what it is going to cost to own, if I rent it what will be my income or net loss would be.  If the net loss is small they say they can handle that and they would love to have a place at the beach.  If the net loss is large they will wait until some of the bundle of costs comes down.