This blog series will focus on our personal journey purchasing four properties on Maui.
After the trip to Maui in 2011 that culminated in the purchase of our first property, we came home to upstate NY and returned to the routine that we had followed prior to our trip. The only difference was, we had Maui on our minds all of the time. Within a few months, we determined to plan another trip to Maui for the early summer of 2012. We were hoping to once again find a property that we would be able to purchase.
Tip: Be Diligent with Your Search
During the winter of 2011-2012, we looked online at every property that we thought we might qualify for. We were determined to follow the same concept that resulted in the success of our first purchase:
- The property would be newer
- The property would need to be rentable
- Rental income from the property would need to provide positive cash flow
We were extremely excited to find nearly the exact same type of property at Ho’onanea at Lahaina. We found a 2 bed, 2 bath condominium with a 1-car garage, brand new, and we were purchasing directly from the developer once again. The price was $342,000. After discussion with our Maui lender, we determined that we could come in with a slightly smaller down payment, and still provide positive cash flow, as well as provide a buffer to handle potential market/economy fluctuations. The only issue was determining the source of the down payment.
We were both a bit skeptical of the stock market at this time, so we made the decision to withdraw the down payment from our retirement account. Our accountant warned us of the tax and penalty that we would incur, withdrawing from this account prior to reaching 59-1/2 years old. We gave this considerable thought, and determined to proceed with the plan. We considered the penalty of 10% as the “cost of admission”. We withdrew enough to pay the tax and penalty, and leave $110,000 for the down payment.
We contacted our Realtor, and wrote an offer from New York. Since this was a transaction with the builder, we had 30 days from contract signing to determine if this was a property for us. We arrived on Maui in early June, 2012 and we were able to see the property in time to determine we wanted to continue with the purchase. The condo was in the final stages of construction.
We closed on the property in about 3-4 weeks. The resulting numbers are as follows:
- Purchase Price: $342,000
- Approximate Total Monthly Expense: $1,688.00
- Approximate Monthly Rental Income: $2,500.00
- Approximate Positive Cash Flow: $812.00
Be sure to read my blog “Purchasing Rental Property on Maui – Part 3” to see how we structured our third purchase on Maui!
For more information regarding real estate on Maui, contact:
Rick Wyffels, Realtor-Broker