Last January, I was vacationing with my family on Maui and staying in Equity Residences’ Villa in Kapalua. We were ready to buy the Equity Villa Fund’s second Hawaii property on the Big Island.
The Kapalua resort shuttle drops you at the West Maui airport where Mokulele airlines operates Cessnas to Kona. It’s truly one of those small airports where the plane barely comes to a stop as you hop on.
After a beautiful flight along the West Maui Mountains and across the short expanse of ocean separating Maui from the Big Island, I landed at the Kona airport. Our local real estate agent, Cindy Wild from Windermere C and H properties, was there to meet me. This trip would eventually lead to Equity Residences Maui and Big Island properties being featured on HGTV’s Building Hawaii. More on that in my next post.
John and I began scouting the Big Island even before we launched the Equity Villa Fund. We visited Maui and Big Island in November 2011 shortly before we put the Kapalua Villa under contract.
During that first trip, we were captivated by the dramatic views across the Pacific that resulted from the elevation change above Kona. The gated community of Keauhou Estates in particular had some beautiful properties that could make for both great investments and great vacation experiences.
On this particular trip, I was focused on securing a property for the Equity Villa Fund. Immediately upon returning to the mainland, we placed a 3,548 sq ft short sale under contract in Keahou Estates. The property features a private pool and stunning ocean and sunset views.
A short sale is when the proceeds of a sale are less than the amount owed on the property and the lender decides that selling the property and absorbing a moderate loss is preferable to having the borrower default on the loan.
A short sale can take several months and this one took five.
Short sales often have several obstacles to overcome; this particular property had back HOA dues and IRS liens to be negotiated. Most buyers don’t want to touch these types of deals.
We love them.
After the upfront purchase price is agreed upon with the seller, the mortgage holders (sometimes as many as 2 or 3!) will often want to renegotiate. Needless to say, after several months of negotiating, some properties may go into foreclosure after all.
Our experience is that short sale properties are often neglected for months, if not years. This Big Island property had good bones and some nice design features, but was in need of an extensive remodel.
We closed on the property for $749,000 which is $211 per sq ft.
Think about that, EVEN if someone handed us this prime ocean view land for free and then offered to grade it (make it level) for free, we still wouldn’t have been able to build this house for $211 per sq ft!!
Clearly, this was an amazing value for the Equity Villa Fund and proved to be well-below construction cost.
Our final purchase price was also 32% below current market prices and $.35 on the dollar from the market peak. With deals like this, we’re providing significant upside for our Investors.
Beyond that, this is a truly amazing property where our Investors are building amazing memories with their families and friends.
Read Part 2 :: How we decorate and designed our Hawaii properties and Part 3 :: The Big Island Reveal of this series.