Just closed on my best deal yet!

7 Replies

Investment Info:

Single-family residence buy & hold investment in Kahului.

Purchase price: $30,000

Contributors:
@Ryan Murdock

Purchase Price: $30,000. Rehab estimate: $15-20k. ARV: $140,000. As is value: $100,000.

Purchased direct from an off market seller who hated being a landlord. Unit is rented by the same tenants for 20 years paying $1,250/month so I won't be doing the rehab until they are ready to move out. But it cash flows $600/month and my bank will let me take out $76,000 as is, so it's a homerun BRRRR.

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

I own 5 condos in this building. It's the only property on Maui that I could afford to buy when I started investing, and it produces solid cash flow and 25% cash on cash returns for a very minimal investment. Now that I have 5 units there I will be looking to other properties to diversify.

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

This was an off market seller that called me and said she inherited the unit 10 years ago and it's nothing but headaches for her. On our first call I asked what she would like to get for the property and she said around 30-50k so I knew she was exactly the seller I've been looking for. So I scheduled a meeting with her, made an offer for 30k cash with no contingencies and 10 day closing.

How did you finance this deal?

All cash.
The day after closing, without doing anything to the unit, my Bank offered to give me a home equity loan/or line of credit at a fixed rate for 25 years and give me $76,000 (more than double my cash invested). So I'll be taking that to get my cash back to buy my next one, leaving the tenants in place and cash flowing. It's making $600/month now, and will make $200/month after taking the loan - but once I increase the rents it will go back to $600/month cash flow after paying the loan.

How did you add value to the deal?

I bought it at the right price. I increased my next worth by about 70k overnight just by closing on the unit for such a discounted price. But whenever the tenant moves out I will do a full rehab and increase the value even more.

What was the outcome?

Currently letting the existing tenants stay in place (the mom is sick so we don't want to cause any stress for them) and making about $600/month cash flow. I will probably increase the rents slightly, maybe $100, but not up to market rents because the unit is in bad condition, and mostly because I want the tenant to be able to take care of his sick mom and not stress about affording their rent during this time.

Lessons learned? Challenges?

While this deal is a screaming hot home run deal, it also feels really good to be able to help the tenant (knowing that many other buyers would either kick them out or jack the rents up to market), and help the seller. Everyone in this deal is happy as can be with the outcome.

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

No. I found this deal through my own efforts and there were no Realtors or lenders involved. But Ryan Murdock came with me to the meeting with the seller just for fun, but he ended up playing a huge role in breaking down the seller's guard and helping me negotiate the price and lock up the contract. Thanks Ryan!!! Also used Twyla Kukahiko from Title Guaranty, highly recommend! I use her for all of my escrows and she rocks.

Looks like your doing great with this one! I'd leave those renters there for as long as you can handle them. Can't believe they've been there 20 years....renting! I'm sure you'll have a big rehab after they leave, but you'll have plenty of cash for that.

Originally posted by @Matt Ward :

@Greg Gaudet nice! What area/building are buying $30k properties on Maui!?? Perhaps it’s better keep a secret LOL.

Mahalo Matt. It's Harbor Lights in Kahului. You can't really buy em for 30k though.. Everything on MLS is listed for 140k-190k. I just scored with this one :) I've paid 70-95k for the other 4 I have at Harbor Lights, and they even work for a BRRR at 95k with an 80% mortgage. Still produce $500/month in cash flow. I love that building, just have to screen your tenants really thoroughly because there's a lot of section 8 tenants there since it's the cheapest place on Maui.

Originally posted by @Clint G. :

Looks like your doing great with this one! I'd leave those renters there for as long as you can handle them. Can't believe they've been there 20 years....renting! I'm sure you'll have a big rehab after they leave, but you'll have plenty of cash for that.

Thanks Clint! Yeah I'm super stoked about this one.. I had just bid 100k for an empty one that also needed rehab at the sheriffs auction a couple weeks ago and was so frustrated that I didn't win it. But thank god I didn't! Or I wouldn't have had the funds to buy this one (without hard money, at least). 

Yeah I'm going to keep the tenants. He's 38 and his mom has cancer and he just works and takes care of her. Really good guy, and has no family here. So I'm going to do everything I can to help them, while also making an incredible investment and return! 

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