A Cookbook for How to do Vacation Rentals at
your Property on Hilton Head Island

This information is for educational purposes only and should not be construed as financial, business, legal, or investment advice. If you have questions or do not understand something, please seek licensed professional advice! If you have any questions or comments about this document, please Click to Contact Me

So you own a property on Hilton Head Island and you want to do short term vacation rentals to help cover your expenses and mortgage. Below you will find some suggestions of the steps you need to consider. We do not specifically recommend any vendor on this page, please check their references and ask them to give you a rental proforma (estimate) for their services.

The information provided here is specifically for short term, transient, vacation rentals under 60 days. You will not be operating as a "Landlord" which requires leases and operates under the jurisdiction of the SC Landlord Tenant Act. Rentals under 60 days are considered "transient" rentals and you are an "Innkeeper", not a "Landlord". Just like a hotel operator. This information also assume you've already hired a cleaner, have linens and toiletry supplies, dish soap, trash bags, etc.

If you are planning to use a rental property manager, such as Vacasa or Evolve, they will collect the rental money, fees and taxes, hold it in trust, and pay you on a scheduled basis. Most property managers pay the State and Town accommodations taxes for you. Be sure to ask. Contact them and ask what they need you to do in order to place your rental property with their company. It may be completely different than the information provided on this page. For example, you may need to set up a VRBO or AirBnB page for your property with the property manager listed as the contact. Property management companies may pay a small referral fee to realtors that send them new clients. Please mention Cheryl Morgan Hilton Head Island Realty sent you, Thanks!

What kind of business structure are you going to use?

This decision affects both your tax filing and your personal liability. You should talk to your personal attorney and financial planner for legal advice and to explain your options.
  • You need to decide whether you need to set up an LLC or Corporation to operate your business.
  • If you decide not to set up an LLC, you'll be operating as a Sole Proprietor
  • Liability insurance is critical to protect you in case an accident occurs on your rental property. You should consult with your insurance provider to make sure you have adequate coverage.

Once you have decided on your business structure. You will need to set up your business licenses in order to operate legally:

  • Register your business with the State of SC and get your Accommodations Tax ID so you can pay the 7% STATE tax.
  • Obtain a business license from the Town of Hilton Head
  • Register for an accommodations Tax ID from the Town of Hilton Head so you can pay the 3% TOWN tax.
  • Apply for a Short Term Rental Permit from the town of Hilton Head
  • File a Rental property furnishings declaration with Beaufort County for the furniture and furnishings used for your rental property.
  • If you will be accepting rental money directly from guests, you will need to set up a Rental Trust Account with a South Carolina bank.

Register your business with the State

Visit South Carolina Department of Revenue This is the ID you will need to pay your 7% STATE accommodations taxes monthly. They have an easy online payment system. You can pay by e-check or credit card.

Get your Town of Hilton Head business license

Visit hiltonheadislandsc.gov You need the license in order to do business in town limits. You also need it in order to obtain your Short Term Rental Permit that goes on the inside front door of your rental property.

Get your Town of Hilton Head accommodations tax number

Visit HHI Accommodations Tax There is an ID number and pin code you will need to pay your QUARTERLY TOWN accommodations taxes online. There is no explanation of how to get this code on the Town website so just give them a call at the number provided. This local 3% accommodations tax provides 1% towards tourist infrastructure, fire and EMS, etc. The other 2% goes towards beach renourshment every 8-10 years. This is how we keep the beaches so awesome!

Apply for the Town of Hilton Head short term rental permit

Visit HHI STR Permit This is a relatively new permitting system that the town is using to track issues and assist guests when there are problems with a rental property or if your rental property is causing a nuisance (noise, overparking, trash, etc.) There are specific requirements for smoke and carbon monoxide detectors, fire extinguishers, etc.

File your rental furnishings property tax declaration

Visit www.beaufortcountyauditor.com and click on the form for "Return on 6% Assessed Real Property or Rental Residential Property". When you rent a furnished property in Beaufort County you are required to declare the depreciated value of the furniture, appliances, small appliances, artwork, and furnishings, etc. Everything provided for the benefit of the guest is considered business "equipment". At the end of the first year you purchase the item, on December 31, you will declare the value of the item as the original purchase price you paid that year. Each successive year you are allowed to depreciate the value of the item by 10%, every year until you get down to 10% of the original cost (but never less than 10%). If you bought a furnished property, they allow you to estimate the current used replacement cost on each item and start from there in your first rental year. Create a spreadsheet to track each item and its depreciated value each year. You have to be able to provide this information if they request it. Be sure to read all the information they provide on the county website and call them if you have questions or concerns. You MUST provide this form every year by April 30 or the auditor's office will take your tax appraised value for the entire property and estimate your furnishings as 20% or so of the total tax assessment. This can mean the difference between a $100 tax bill and a $1000+ tax bill if you fail to do so! Every year.

Set up a rental trust account

If you are collecting rental payments and deposits in advance, you are required to set up a separate trust account at a South Carolina financial institution that provides trust accounts. Collected money, checks, credit cards, Zelle, Paypal, and other payments must go directly into the trust account so that if anything happens to the property owner (YOU) the money can be returned to the guest and is not part of your estate. The money in the trust account cannot be touched except to transfer to another account upon check-out of the guest or to return a payment to the guest after a cancelation. You will probably want to set up a separate rental business checking account to receive all your rental money at check-out. Use the business account to pay your rental expenses. DO NOT pay bills FROM the trust account. If you are using a rental property manager, or a service like AirBnB and VRBO, you will not hold or receive any rental money until after check-out. You only need the trust account if you accept direct payments.

Advertising

  • AirBnB The 800lb gorilla of rental marketing
  • VRBO The 799lb gorilla that has been marketing rentals for decades
  • Local special interest magazines/publications, Pink Magazine, Time Out, etc.
  • Church, club, HOA bulletins - Let your neighbors know you have a beach rental!
  • local bulletin boards - check your grocery store and break room at the office. If it's free, it can't hurt.
  • Word of Mouth - This is your best source of rentals
  • Referrals - Give your existing guests a discount if they send friends or family to stay with you
You may find you know enough people that you don't need to advertise!

How do you get payments?

  • Zelle - Most US bank accounts offer Zelle payments for free. Login and check your bank's online menu for Zelle information. Zelle acts just like cash, once someone "Zelles" money to an email address, it is just like handing them cash. In most cases it cannot be cancelled or retrieved. Some people may be skittish about sending you money via Zelle.
  • PayPal - You can use http://www.paypal.com to collect credit card payments for your rentals. You pay a small transaction fee for each credit card transaction.
  • Checks - Obviously, the old school paper check by US Mail works too. Recommend to your guests that they write "For Deposit Only" on the back of their check. That way if it gets stolen, they can't deposit it.

Good luck and I hope this information has been useful to you.

Jeff and Cheryl Morgan
Hilton Head Island Realty and Rentals
www.homesonhhi.com

webmaster@hhresort.org
www.gotoHiltonHeadIsland.com