Investment Info:
Condo buy & hold investment.
Purchase price: $213,500
Cash invested: $20,716
Short term rental on Table Rock Lake near Branson, MO. Working with our Rockstar agent, Bill Beck, we identified an excellent lakeside investment property near Silver Dollar City and other key Branson attractions that should (eventually) generate a 50% COC return (we have a lot of learning to do - so I'm not banking on that high of a return in the first few years).
What made you interested in investing in this type of deal?
I've been interested in purchasing an investment property for several years, and honestly, pitching a STR unit on or near a lake was a much easier sell to my wife than a traditional rental. We took a family trip to Table Rock Lake in late June, and she agreed to let me start looking when we got back. After about 3 weeks of researching STR strategies, a few lake markets in MO and AR, and taking a hard look at our current finances, I contacted a few agents in the area to get started.
How did you find this deal and how did you negotiate it?
We found the deal through our agent, Bill Beck, who we connected with through Bigger Pockets. There wasn't much negotiating the deal when we found it. The condo was listed lower than others in the same complex of similar quality and much lower than units that had been fully renovated. We offered asking price + a seller credit for our closing costs and won out over a cash buyer who wasn't willing to come up to the seller's asking price (luck - we got lucky).
How did you finance this deal?
Local bank portfolio loan, 10% down, fixed interest rate for 30 years. We couldn't do a traditional second/vacation home loan on the unit because the condo is non-warrantable. Most condos that are zoned for STRs in the Branson market are primarily owned by investors or are condotels, so they aren't warrantable and therefore aren't eligible for conventional loans.
How did you add value to the deal?
The primary value add for us was offering what the seller was asking. Based on past deals, Bill knew it was priced below what it would appraise for. We just didn't know how much lower until the appraisal came back - $25,000 lower! At closing, our $20k investment bought us an additional $22.5k in equity and property that should generate a 50% or higher COC return. In addition, minimal cosmetic upgrades, painting, new décor and new flooring will add more value relative to its cost.
What was the outcome?
Closed on the property 40 days after going under contract (were able to move the closing date up by 5 days).
Lessons learned? Challenges?
Listen to your agent! I had gotten a prequal from a bank prior to contacting an agent. Our agent recommended going with a local bank since they understood the non-warrantable condo issue, but I was stubborn and wanted to go with our original bank. They switched our loan to a hybrid commercial loan and said it would work for non-warrantable condos - IT DIDN'T. They backed out less than 30 days before closing leaving us scrambling to find a new loan. I'll never make that mistake again.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Bill Beck is an absolute Rockstar. If you are looking in the Branson market, give him a call (417) 973-1987
