Sold short term rental condo in Tucson

[Tom Albares]

Investment Info:

Condo buy & hold investment in Tucson.

Purchase price: $245,000
Cash invested: $55,000
Sale price: $375,000

1077 sq ft two bed, two bath condo used as a short term rental. Located in a condo complex in north Tucson that includes two heated pools, hot tubs, a tennis court, and hiking trail.

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

We already had a short term rental condo in this area of Tucson. We though we would scale up by purchasing a second.

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

We found the deal on the MLS and negotiated using our buyers agent. This was during the buying frenzy in 2021, so people made escalating offers, were in bidders wars, waived appraisals and inspections. We made an escalating offer, the eventual high offer. We had the property inspected. Cancelled offer after inspection - too many repairs needed for that price. Property sat, we made a lower offer that was eventually accepted.

How did you finance this deal?

Conventional financing with 25% down. Used a local broker and got a rate of 4.875%.

How did you add value to the deal?

Changed all flooring to LVP. Remodeled both baths with new fixtures, new vanities, new tile, and expanded shower. Replaced HVAC. Remodeled kitchen, painted cabinets, new granite countertops, new stainless steel appliances. Repainted entire unit.

What was the outcome?

Successfully rented it as a short term rental from 9/2021 - 7/2024. Grossed around $60k in yearly rentals, netted around $21k. Decided to shift to long term rentals in 2024 and sold the condo for $375,000. Took the proceeds and put them into a 1031 exchange to be used on purchasing a long term rental.

Lessons learned? Challenges?

Short term rentals are not real estate, they are the hospitality business. If you want to be successful at short term rentals, learn guest relations or hire a property manager. We self managed the entire time, even remotely, because we found the cost of property management to be too high and it cut into small profits. Use good automation - a PMS, and a good pricing software. And build a good local team that you can depend on.

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

We bought and sold with Mike Morgan or Omni Homes International. We found financing with Mitchell Jones at Nova Home Loans in Tucson.