Every listing on Folly Beach that mentions rental income comes with an unspoken assumption: buy the house, keep the income stream. The photos show a bright coastal cottage two blocks from Center Street with a booking calendar full of summer weekends, and the number attached to that calendar becomes part of the offer price in everyone's head.
That assumption is wrong, and it costs buyers real money when they find out at the wrong moment.
On Folly Beach, a short-term rental license belongs to the person who holds it and the structure it was issued for. It does not belong to the house in any way a new deed can pick up. When a property sells, the license stays behind with the seller and simply expires. The buyer starts from zero, whether or not the home has rented successfully for a decade.
The License Lives With the Owner, Not the House
The city's own short-term rental rules make this plain: no rental license is transferable, and all new owners must apply for a new one. That single line reshapes how a rental property on Folly Beach should be priced, marketed, and evaluated, because the thing generating the income is not conveyed at closing.
There are three license types, and which one a buyer can even apply for depends on how they plan to use the house. A Long Term Rental license covers stays of 30 days or more and carries no restrictions. An Owner Occupied Short Term license lets someone who lives in the home as their primary residence rent it out for up to 72 nights a year. An Investor Short Term license covers full-time nightly rentals on a non-owner-occupied property, and this is the category that matters most for anyone buying with rental income in mind, because it is the one subject to the citywide cap.
New ISTR licenses are effectively closed to new buyers right now. Only owners who already hold a valid prior-year license can renew it. New ones go to heirs of the owner of record as of February 7, 2023, or to owners with a documented medical hardship. Everyone else who wants to operate a full-time investor rental has to join a waitlist, and that waitlist has not moved.
Before writing an offer on any Folly Beach property marketed with rental income, a buyer should confirm:
- Whether the seller's license is an ISTR, OSTR, or LTR, since only one of those has any chance of relevance to the buyer's own plans
- Whether the seller has owned the property since before February 7, 2023, which matters only for heirs, not for buyers
- Whether the property has been rented at least 28 nights in the current license year, the minimum required to keep a license in good standing
- Whether the buyer intends to live in the home, which opens the door to a 72-night owner-occupied license outside the investor cap
- Current position on the investor waitlist, if any, and how long it has been open
None of this shows up in a standard listing sheet. It has to be asked for directly, and it changes what a rental projection is actually worth.
How the Waitlist Got This Long
Folly Beach voters capped investor short-term rental licenses at 800 in a referendum that passed in February 2023. At the time, the island had roughly 1,125 rental properties, close to 43 percent of its total housing stock. The cap did not phase in gradually. It was already exceeded the moment it took effect, which meant existing operators could keep their licenses but the door closed immediately behind them.
The city opened a waitlist in phases, with Phase 1 licenses awarded in order of when the property was acquired and Phase 2 awarded in order of application, starting October 1, 2024. As of the start of this year, about 200 entries remained on that list, and none have come off since it opened. New licenses only become available when an existing one lapses or is forfeited, and that has not been happening at any meaningful pace.
For a buyer, this means the waitlist is not a formality to check off during due diligence. It is closer to a queue with no visible movement, and anyone underwriting a purchase around future rental income needs to plan for the possibility that the license never arrives, not just that it arrives later than hoped.
The 90 Days That Confuse Everyone
There is one bridge that softens the transition, and it gets misread constantly. Under the South Carolina Vacation Rental Act, a new owner can request a temporary license that honors bookings the previous owner already had on the calendar before closing. To get it, the buyer has to submit the closing statement or signed contract, the seller's list of confirmed rentals, the rental management agreement, and proof those bookings were made before the sale closed.
That temporary license runs for 90 days. It exists to protect guests who already booked a stay, not to give a new owner a running start on building a rental business. Once those 90 days end, the new owner is exactly where every other buyer without a license stands: on the waitlist, with no guaranteed timeline for a permanent one.
Buyers sometimes hear "temporary license available after closing" and assume it functions like a grace period toward a permanent one. It does not. It is a guest-protection mechanism, and it runs out.
What This Means If You're Selling
For a seller with an active ISTR license, the honest version of the pitch is that the buyer is purchasing a well-maintained coastal property with a documented rental history, not a licensed business. That distinction should shape the marketing, not just the fine print. Income history and occupancy records are still valuable, because they help a buyer decide whether a future license, if and when one becomes available, would be worth waiting for. But nothing about the sale transfers the ability to operate that rental the day after closing.
Sellers who lean too hard on "turnkey investment" language risk a disclosure problem down the line, and buyers who are shown a rental pro forma without a clear explanation of the license situation are the ones most likely to feel misled after closing. The stronger, more accurate story is one built around the house itself: its location, its condition, its history as a functioning rental under a specific owner, and a clear-eyed conversation about what a new owner would need to do to operate it the same way.
One More Line Item Worth Knowing
Flood insurance is not optional on a barrier island, and Folly Beach's standing in FEMA's Community Rating System is one of the few pieces of good financial news buyers get here. The city earned a Class 4 rating in 2018, and that rating still discounts every NFIP flood policy on the island by 30 percent. It is a real, ongoing number on a closing statement, not a marketing detail, and it is worth confirming with a flood insurance agent as part of any offer on a Folly Beach property, alongside the license questions above.
The Rules Might Change Before You Close
Folly Beach City Council is in the middle of reviewing the entire rental cap this year. Council members held a workshop on July 21, 2026, to scope out a request for proposals for an outside firm to study how the cap has performed, and Mayor Chris Bizzell has said the goal is an objective look at its effects on housing, tourism, and the local economy before any changes are made. City Administrator Aaron Pope has said the city wants any amendments finalized well ahead of the 2027 business license renewal period.
Nothing is decided yet. Options on the table reportedly range from adjusting the number of available licenses to exempting commercial districts to leaving the cap as is. What matters for anyone transacting in 2026 is that the rules a buyer researches today could shift before their closing date, let alone before they reach the top of a waitlist. A pending sale on Folly Beach right now is a pending sale under regulations that are actively being reconsidered.
That is the real thesis here. The price on a Folly Beach rental listing reflects a house. It does not reflect a guaranteed right to operate that house as a nightly rental, and right now it does not even reflect a stable set of rules for trying to earn one. Anyone buying or selling a rental property on the island this year needs that distinction spelled out before they sign, not after.
A Few Questions We Hear Often
If the seller has an active rental license, can I keep renting the house the same way once I own it? Only for 90 days, and only for the specific bookings that were already on the calendar before closing. After that, you need your own license, and investor licenses are not currently available to new applicants outside the waitlist.
Does the cap apply if I plan to live in the house and rent it occasionally? An owner-occupied license lets you rent up to 72 nights a year if the home is your primary residence, and this license type is not part of the same investor cap or waitlist.
If the city changes the cap this year, does that help buyers already on the waitlist? It could, but nothing is confirmed. The review is still in the study phase, with a consultant selection expected this fall and any council decision likely in fall or winter, well before the 2027 license year begins.
If you are weighing a rental purchase or thinking through how to price and market an active Folly Beach rental, this is exactly the kind of detail that belongs in the conversation before you write or accept an offer, not after. Reach out to The Calore + Lacke Team and we will walk through the license status, waitlist position, and flood insurance picture on any property you're considering, so the number on the offer reflects what you're actually buying.
