Cottages at Kilmarlic: Millionaire status not required to invest

By on April 9, 2018

Kitchen, dining area and living area beyond. Spiral staircase leads to a loft that can be converted into a sleeping area.

Typically, when one contemplates purchasing a vacation rental home on the Outer Banks, visions of purchase prices from $600,000 to $2 million dance in our heads.

But a new community located inside the Kilmarlic subdivision in Powells Point, four miles from the Wright Memorial Bridge, offers down-to-earth sales prices and a longer rental season due to its unique target audience — golfers looking to play a several different courses over a two- or three-day period.

And with purchase prices of $310,000 to $350,000, fully furnished, these are investment properties that don’t require a seven-figure income and six-figure down payments in order to take ownership.

And while no vacation rental property can ever guarantee that elusive positive cash flow owners crave, The Cottages at Kilmarlic present one of the best chances in a long time for buyers to make an investment decision.

Kilmarlic may not be familiar to many potential investors who reside outside the region.

The entrance is located on the west side of U.S. 158, one-mile north of H2OBX Waterpark and across from Powells Point Baptist Church.

The subdivision covers over 600 acres, nestled in a maritime forest, and boasts the 18-hole Kilmarlic Club course.

The club also offers an outdoor swimming pool, a pro shop, fitness center, tennis courts and a dining room with a full bar for members, owners and guests renting at Kilmarlic.

The ‘Cottages’ are being developed by Bryan Sullivan, who is also the Director of Golf at Kilmarlic, and Mike Kirk, owner of OBX Cottages, a construction company that will be building the 18 units that comprise Phase 1 of the new community.

Sales and marketing are being handled by Eillu with veteran Outer Banks real estate developer Raju Uppalapti at the helm as CEO.

The project is its own community within the larger Kilmarlic community and while renters and owners will enjoy all the amenities of Kilmarlic, the ‘Cottages’ offer some exclusive amenities available only to owners, guests and renters, in the ‘Cottages’ community.

Built in the style of a cottage court, the home sites surround a 5,000 square foot lighted putting green as well as a small quartet of par 3 holes ranging in length from 27-45 yards, complete with undulating greens and pot bunkers.

The mini-course is affectionately called “The Killie”.

L to R: Raju Uppalapati, Bryan Sullivan, Mike Kirk

Sullivan and Kirk came up with the idea from their five-year experience in operating OBX Golf Travel, which books off-season golf packages for groups ranging from foursomes to as many as 24 golfers during the spring and fall shoulder seasons.

They have built the business up over the course of the last half-decade by visiting golf shows in the northeastern U.S., a major feeder area for Outer Banks visitors.

OBX Golf Travel can book players into almost every Outer Banks golf course including the Nags Head Links, The Currituck Club, The Pointe, the Carolina Club, and of course, Kilmarlic.

One property they book golfers into is a house near the first hole and the Kilmarlic clubhouse.

“We noticed it was rented a lot by golfers coming down on short trips and they were telling us we need more houses to rent,” Sullivan said.

Both men heard similar requests on their road trips to the golf shows and they hit upon small, cottage style homes that would be elegant and simple at the same time – as well as affordable – the kind of rental that would be perfect for a group of four to six players interested more in golfing than expensive digs with elevated daily rates.

The homes Kirk is building are 1,125 square feet and feature one master bedroom, a second bedroom, two full baths, a full kitchen, dining area and living room.

An upstairs loft accessed by a spiral staircase can serve as a second living area or a third sleeping area, making each house able to sleep six if so desired.

Daily rates are $210-$225 per night in the off-season, and $400 a night during the summer tourist season, making each house far less expensive than a hotel on the beach while being far roomier and providing renters a ‘resort experience’ given all the amenities of Kilmarlic and the ‘Cottages’.

During the off-season, two-night minimum stays are required and for the summer, three nights is the minimum booking, which provides another advantage for visitors who do not want to rent a home for an entire week, as is required for the beach rentals in Dare County.

And renters can expect complimentary shuttles, Monday through Friday, to the beach and H2OBX during the summer, discounted tickets to the water park, as well as being able to book tee times at any of the courses OBX Golf Travel works with.

Kirk said another advantage for renters, and owners, is Kilmarlic is close enough that golfers coming from Washington, D.C., Richmond, Hampton Roads and other Virginia localities can get in a round of golf on the day they arrive, giving them more bang for their golf excursion buck.

Sullivan also mentioned that beach rental homes have shorter rental seasons as their visitors are here primarily during the summer, while golfers will travel to play from early spring to late fall.

Uppalapati also emphasized that owners are automatic members of the Kilmarlic Golf Club and they and their personal guests have full privileges whenever they are staying in their homes.

Putting green behind the cottages.

With the target rental market established, we asked about the market for buyers.

Obviously, price points in the low to mid $300,000 range, including furnishings, expand the potential buyer universe for an OBX rental property considerably.

The three men all agreed that those seeking rental income were the likely primary buyers of these houses, but Uppalapati identified two other groups that should be looking at these homes.

One group would be true second-home owners who would never rent the home to others. The price points and amenities make this an affordable option for those in that market niche.

A second niche would be owners who would rent the property occasionally as a means to offset purchase and finance costs, but would not be looking at rents to ‘pay for the house.’

But for those who would be looking at the properties as a pure rental play, Uppalapti reveals a scenario where rental income can cover all operating costs and debt service (excluding closing costs) assuming 20% down payments, 4.5% financing, and rentals of $34,000 per year, which is in line with the usual expectation of rents covering 10-12% of the market value of an investment property.

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“The concept has a lot of appeal for both renters and owners and there’s nothing else like it on the Outer Banks,” Uppalapati observed.

Sullivan also brought the conversation back to the cottage-court concept and the appeal of a close-knit golf-centric community.

He can envision renters meeting other renters on The Killie after a day of hardcore golfing, or at the putting green, or foursomes keeping the day’s competition going (as well as the side bets and bragging rights) in a more casual atmosphere as the sun sets over the sound to the west.

With community grills, a drink in hand, and perhaps a fine cigar, there’s a chance renters will flock to these accommodations, especially when they and their non-golfing family members can enjoy all the various amenities at a price that allows an ordinary, average guy or gal a chance to live the golf resort life.

It’s been two decades since the rental math even came close to making sense for Outer Banks real estate investors. And even longer since rental or second homes were in reach of middle-class investors.

Perhaps The Cottages at Kilmarlic will be the sweet spot to bring those days back to the region and show us 15-room homes aren’t the only option to invest in our community.

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  • chaser

    That price point is expensive for what you get.

    Monday, Apr 9 @ 12:42 pm
  • GolfGuy

    At $290 per square foot, although furnished, I wonder about appeal to 2nd home owners. Kilmarlic is a fine golf course, but the others are meh. And distance to beach could make it last choice for families with golfers and beachgoers, especially at $400 per night in summer. Still, its relatively short distance from mid-Atlantic states could help sell units…with proper marketing.

    Tuesday, Apr 10 @ 8:35 am
  • Bud

    I built on Hatteras for $80 per square foot, unfurnished. $290 far exceeds what is reasonable.

    Thursday, Apr 12 @ 6:56 am
  • ObxChic

    These look awesome! Such a great idea!

    Thursday, Apr 12 @ 3:29 pm
  • Tim

    Too funny! Amazing how no one understand the basic economics that drive this market. Terrible advice to any investor is buying over there

    Friday, Apr 20 @ 9:05 pm