Another Maui STR closed!

[Mike Neubauer]

Investment Info:

Condo buy & hold investment.

Purchase price: $450,000
Cash invested: $40,000

Welcome to the longest escrow in history. This off market deal brought to us by an out of state investor consisted of a total of 3 people dying (literally) in sequential order and having to get title transferred that many times in order to finally close on this thing. It's a small ocean front studio condo that we will rehab and rent nightly. At the end of the day it should bring in around $6-$7k conservatively per month (gross). Not a home run, but a solid base hit.

What made you interested in investing in this type of deal?

We are always looking for good deals on STR condos in south Maui. This one was brought to us off market and while it is not normally a location we would go after, the timing was right and we were looking to take something down. This property was available at the right price to make it worth the investment.

How did you find this deal and how did you negotiate it?

Brought to us off market from an out of state investor that we actually met here on Bigger Pockets.

How did you finance this deal?

Conventional financing. For STRs on Maui there are only a handful of lenders that will fund on these things. Most lenders steer clear because they are considered "Condotels." It's difficult for banks to sell these loans, apparently so they are very hesitant to lend on them. They typically require at least 30% down, as this one did.

How did you add value to the deal?

The tenant who was living in here had been in the unit for 30 years. Nothing had been updated at all. Day 1 we came in and pulled out everything to get the unit down to the studs. It will be built back up to have a modern and open feel.

What was the outcome?

This will be added to our portfolio as a nightly rental. We will collect data on it for at least a year and then make a decision whether to hold or 1031 out of it.

Lessons learned? Challenges?

Challenges here are that we had this moving closing date. Because of that we lost a lot of our labor that we had in place. Because sellers kept dying off (!!!), the closing date kept moving. So upon close it was a real struggle to find laborers, contractors and handymen to get the project pulled off in the timeline we have allotted for it.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Because this was off market we worked directly through a probate attorney on this. I was so grateful to have my wife Caroline lend her expertise as a realtor in making sure all of our bases were covered.