Greg Gaudet owns and manages 17 rental units on the island of Maui, HI, through Maui Home Buyers. In this episode, he discusses how he overcame addiction and homelessness to achieve financial independence, how he ended up getting started in real estate after moving to Maui, and the kinds of deals he’s currently targeting.
Greg Gaudet | Real Estate Background
- Real estate investor at Maui Home Buyers.
- Portfolio:
- 20 units, 17 fully owned
- Based in: Maui, HI
- Say hi to him at:
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and I'm here with Greg Gaudet. Greg is joining us from Maui, Hawaii. He owns Maui Homebuyers, which currently has 20 single family homes in Maui, Hawaii, all rentals, 17 of which Greg owns without partners. Greg, can you give us a little bit more about your background and what you're currently focused on?
Greg Gaudet: Yeah. Hey, thanks for having me on the show. So a quick little overview of my background. I had a great childhood, but went through some things, lost my dad when I was a teenager and got sucked into addiction, and that led me to some real lows, and I ended up being homeless and having nothing, basically. Fast-forward, I turned my life around; it was very long process, but the point of all that is that coming out of that, and having that background and those barriers to building a life, real estate was the thing that allowed me to achieve financial independence. So like you said, I've been actively investing... I have worked in real estate most of my life, but I've been actively investing for about five or six years now, and full-time in real estate for the last few years.
Slocomb Reed: Nice. That's awesome. So did you grow up in Maui? Is that where you got started in real estate?
Greg Gaudet: No, I grew up in Miami, and I did a little bit of real estate there. I was an appraiser in Miami before the recession... But I moved out to Maui in 2011-2012, and that was kind of around the time I was getting my life together, and recovering, and been here ever since.
Slocomb Reed: Gotcha. It's a pretty interesting market for someone to start real estate investing, and especially you didn't move there for real estate, it sounds like, did you?
Greg Gaudet: I didn't, no. In fact, at that time, I was honestly kind of pretty fresh into the recovery process, so I had no idea what I was going to be doing, and I wasn't even thinking about real estate. But coincidentally, I ended up -- the first job I got was working at a brokerage here. So it was sort of a chance thing that I landed at a brokerage... I just love real estate, so it was a perfect fit, and then I ended up moving to another brokerage after that... And it kind of resparked my love for real estate. But no, I did not move here intending to invest at all. And it's certainly -- yeah, it's a very challenging market, due to our median home price of 1.25 million or so... Hard to start out here.
Slocomb Reed: Yeah, let's talk about that. Let me ask first, how is it that you got started in buying rental property in a place where the median home price is one and a quarter million?
Greg Gaudet: Well, I started by -- I'm very conservative, first off, I'll just say that. So obviously, I'm different than the majority of the Best Ever guests in that I'm residential only. I'm not in the commercial space at all. I'm not a 1,000-unit kind of guy. I'm very small, but I'm purposely, kind of strategically, I like to stay -- I don't want to say small, but I'm very particular about the types of properties that I'll buy. And the way that I got started, to answer your question, was like I said, I was working a W-2, and it was saving, really. I saved a lot. I never wanted to take on investors' money, especially starting off. Now obviously, today I have, but I'm still very selective and very minimal in the investment I take on.
So yeah, it was saving really, really aggressively, bringing peanut butter jelly sandwiches to work every day for lunch, and saving every dollar I could. I saved around $35,000 for my first downpayment, and I started off buying low-end condo units that were Section-8 rentals. I wasn't too sure about it, and it ended up working out really well.
Slocomb Reed: When did you start buying those condos?
Greg Gaudet: I started in 2016 to 2017, kind of in that time. I think I closed my first one in 2017, and then shortly after that, it was just every couple of months I bought another one, and did that for a year or two... Then I started doing flips, and that gave me the capital to buy more rentals, and then start buying actual houses, and two to four-unit homes in Maui, that cash-flow, because I buy them below market value... And yeah, that's what allowed me to leave my job and go full-time.
Slocomb Reed: Nice. So the first few units you were buying with $35,000 down - those are not one and a quarter million dollar condos, it sounds like. Let me ask - as a frame of reference, I'm an apartment owner-operator in Cincinnati, Ohio... What is Section-8 paying for those condos?
Greg Gaudet: Those are currently about $1,800 a month for a two-bedroom?
Slocomb Reed: What's the value, or what did you buy them for?
Greg Gaudet: Those I bought for between $30,000 to $70,000. I'd say the average I paid was about 50k. Today, they're selling for about 250k... Between 200k to 300k average price. About 230k I'd say right now.
Slocomb Reed: Gotcha. Okay. So I've got a Cincinnati, Ohio mindset when it comes to real estate... So I think it's helpful to have those numbers to understand how you can get started, quote unquote, from nothing, in real estate investing in Maui. Condos that can be bought at the time under $100,000, that are now worth two to three that much - that makes a lot more sense as a place to start...
Greg Gaudet: Well, I've gotta say, I was buying them at those prices, but if you were going and picking them off the MLS at that time, you were paying 120k or so. Around 100k, 120k. I think I did pretty good and got lucky, and my timing was great, and I've worked really hard at finding good deals... And like I said, I'm just so conservative that I had plenty of options to buy other units, I just wouldn't buy it if it didn't meet my very strict criteria of a maximum of 80% purchase price and rehab, 80% of ARV. And I stuck to that. I felt like that's one of the challenges in a higher-priced market, or especially in a very desirable market like Maui, where you've got buyers from everywhere trying to put capital in here... So it can make buying those discounted properties a little harder... But just like any market, it's got its challenges. That's just one we deal with here.
Slocomb Reed: The challenges you're facing in the Maui market... I do want to talk about that. You said you got on with a brokerage in Maui. Were you a residential sales agent?
Greg Gaudet: No, my title was escrow manager, but that was kind of before the TC days. But now my job was a transaction coordinator, basically.
Slocomb Reed: Yeah, that makes sense. Transaction coordinators are a lot more frequent; or it's at least a lot more frequently used title in residential real estate sales. That makes sense. Well, let me ask - it sounds like you weren't working directly with people who were looking to invest in Maui, representing them as an agent... Your 20 rental units in Maui - are they all long-term rentals? Have you gotten into the short-term rental game at all there?
Greg Gaudet: They are all long-term. I personally don't own any short-term. I have flipped a few short-term rentals, actually with Brandon Turner, that you're friends with too...
Slocomb Reed: We were talking about that before we started the interview. We have a mutual real estate celebrity friend.
Greg Gaudet: There you go, yeah. So we did a couple of -- actually, I think most of our flips were all kind of vacation rental properties... But I've kind of stuck to the long-term rentals.
Slocomb Reed: Gotcha. So I do remember Brandon talking about when he was flipping houses in Maui, and how he had a partner who was handling a lot of the day-to-day of that. That was you?
Greg Gaudet: Yeah, that was me.
Slocomb Reed: Gotcha. My Brandon Turner story, which is Best Ever podcast-appropriate - and I say that because it's an apartment investing story... I represented him in the purchase of a 24-unit here in Cincinnati, that I later bought from him when he had had some struggles with finding good property management... He had those struggles - this is what Greg and I were chatting about, because he partnered up with Greg on those Maui flips after selling this property to me... He had those struggles because the 24-unit was in a sub market of Cincinnati with not a lot of inventory, and there weren't any high-caliber third party managers who were willing to go that far away from the rest of their portfolio to manage 24 one-bedroom doors in a workforce housing neighborhood. Why that made sense for me as a local investor is because with very little apartment inventory in the area, that gave me a lot more control with my property, the property's reputation, the tenant base, that I could garner the rents that I could get, being able to push the market a little bit, get the building turned around... You can't see any other apartment buildings from that one, which gave me a lot more control when it came to repositioning that property. Bringing this back to a conversation about Maui, and I've been wanting to ask, what are the difficulties beyond just property value to investing in Maui, and what investing strategies does that naturally lead investors to?
Greg Gaudet: Now, my investing career has always been in Maui, so I don't have a lot of real-world experience to compare this based off... But just from all my networking and everything I've learned in my time here, I believe that one of our biggest challenges is the appeal of Maui, that brings investors from all over the mainland, all over the country, and they're all trying to buy property in Maui. So I think that's one of the things that makes it really competitive and hard to -- now, of course, pretty much any market, even probably the least desirable markets over the last couple of years have been extremely competitive... But first, I believe that it's just a little more competitive here in Maui, just because, again, you have buyers just from everywhere, and not just the mainland; from other countries, from Asia, from all over, competing for these properties.
So my way of adapting and working around that challenge is making sure that we're talking to the seller before they're going on the market, and that's really reaching that seller before they have 20 other offers coming in... And actually, one other challenge that we have - and I don't have any hard facts on this, but again, it's something just from my experience, that it seems that our properties are much more financeable, meaning that -- since we talked about Brandon, when Brandon first moved here, he and I went to see a house that was listed on the MLS together... And as we're walking through, Brandon's realtor told us, "Oh, they have another offer from a first-time homebuyer. She's offering full list price." And Brandon made a comment about "Oh, she'll never get that mortgage." And we're looking at him wondering, saying, "What do you mean? Why won't she get a mortgage?" And Brandon was saying, "Well, look at this place; you can't get a mortgage on this place. It's a dump." And we're all like, "What do you mean, what's wrong with it?" He's like, "Well, look at the windows; it's got the old louver windows, the old linoleum floors, it's got rips in it, and all this" and we're like, "That's every house. What do you mean?" Because I think because it's such a high-priced, expensive market, and everything shipped in, materials are more expensive, everything's more expensive, you tend to see less modern, renovated homes. It's just very common for homes to be original, dated, kind of falling apart... So the reason that becomes a challenge is because that seller, of that home, that's on the mainland, that home, maybe that seller's only option would be to call a cash buyer, whereas on Maui, they throw it on the MLS and they've got 20 competing offers with financing, and it's just another sale; no big deal. And again, the solution is just reaching that seller before they're on the market.
Slocomb Reed: And I can absolutely see where Brandon decided in that moment that he wanted to flip houses in Maui, because -- this isn't the way I want to put it, but he found a market inefficiency. He found a high barrier to entry in rehab costs and material costs, and he figured that he could tackle it.
Greg Gaudet: Yeah, exactly.
Slocomb Reed: [laughs] That's not exactly what it was... And of course, it makes a lot of sense that you're going to find less renovated, older-finished type stuff on an island that's hours of flight and days of boat away from everything.
Break: [00:13:21.11] to [00:14:26.15]
Slocomb Reed: Greg, you said earlier that all 20 of your units are long-term rentals. You haven't gotten into any of the short-term rental stuff. In a market like Maui, being in Ohio, and I'm just making the assumption, having some short-term rental experience here in Cincinnati, that it would be highly lucrative to do that where you are - why haven't you decided to dive into short-term rentals?
Greg Gaudet: That's a great question. Even more reason [unintelligible 00:14:52.29] was that one of my last brokerages I worked with I was a vacation rental manager. I manage 132 short-term rental condo units on the beach in Kihei... So it is certainly interesting and appealing to me. The reason I haven't dove into it is, number one, the vacation rentals on Maui are priced in the increased revenue they produce. First off, you can't just short-term rent. Maui has very strict rules. So you can't buy a residential condo and put it on Airbnb; they'll shut you down very quickly, and they have pretty aggressive fines, too. So you have to be in a complex, or a property that is already zoned or permitted for short-term rental use. You can apply for a permit, but you have to own the property for five years first, and you're not going to get it even after five years.
So you have to buy a property that's already a short-term rental, and those properties, the profit they produce is priced in... So unless you're putting a big chunk down in cash, or adding value in different ways - which you still can; again, some of the properties we bought, some of the vacation rentals I flipped, we could have kept as rentals. But my other reason for not doing short-term rentals is I do feel like it's a very crowded space right now, especially... And I personally, just with a little bit of my background, having been homeless, and not knowing how I was going to eat to get through the days, and coming from a pretty low bottom, I like to use my business and my fortune today to kind of give back and help others... So that's why I have a lot of -- well, six out of our rentals are low-end Section-8 condos, and they're people that most landlords don't want to be dealing with or renting to... And that's kind of one of my ways to give back and help the community and provide the right balance for the short-term market, especially because Maui has a real shortage of residential homes.
Slocomb Reed: That makes a lot of sense. Last question before we head into the final segment of this episode... Greg, we're recording in late September 2022; strong employment numbers economically, but very high inflation, high interest rates... And there's a general sentiment that sellers of residential real estate are lagging behind the times in their price expectations. What are you buying right now, if anything, and why is it that you're targeting the things that you're targeting in this moment that we're experiencing now?
Greg Gaudet: I completely agree. We're seeing the same thing in Maui, where sellers are looking at comps from six months ago, and they kind of want to keep that trend going... Whereas buyers are looking at the interest rate their mortgage lender's given them and saying "We can't do that price. It's got to be $100,000 less." But what we're buying right now -- first off, we are not scrambling and hustling to buy as much as we can right now. We're in a position where it's okay if we don't do a deal for a year, two, three, or five years probably... So I'm not really desperate for deals; we did just happen to get something under contract last week that I'm buying as a flip... So that's a single family home that we're buying for 625k. I think it's a strong contender, because it's about the cheapest single family home [unintelligible 00:18:25.18] entry level. We're going to put about $100,000 into it, and we should be able to sell it for around 900k to 950k. So that's about kind of the lowest end you can buy a single family home in Maui.
So I think there's a lot of demand for that... And then I also think that we have enough of a discount already buffered priced into it that even if the market corrects significantly, we should not lose money, at least; that's always kind of been my mindset. And that's why after this many years of being in the business I still own only 20 units, because I would much rather not do a deal than do a bad deal. So I follow the three cardinal rules. Number one, don't lose money. Rule number two, don't lose money. Rule number three, see rules number one and two.
So yeah, we're just kind of taking it easy, and seeing where the market's going, and if a deal comes up that we feel 100% like, "Okay, we're gonna win no matter what happens with the market", then we'll do it, like this one.
Slocomb Reed: Yeah, I'm personally trying to only buy no-brainers right now as well, which is why in 2022 I've only bought four units; one four-family. That's not the direction my portfolio was supposed to be headed in, but it's the only no-brainer that I've seen in 2022 so far. And I'll tell you, I get where you're coming from with your expectations for your flip. I'm rounding out a flip right now that I let sit on the back-burner for far too long, and I'm kicking myself for not getting it sold back when the skies were bright and sunny for getting top dollar. Greg, are you ready for the Best Ever lightning round?
Greg Gaudet: Let's do it.
Slocomb Reed: Awesome. What is the best ever book you've recently read?
Greg Gaudet: E-Myth.
Slocomb Reed: Michael Gerber?
Greg Gaudet: Yeah.
Slocomb Reed: What is your best ever way to get back?
Greg Gaudet: I kind of touched on that a little bit... I really like to provide value to especially some of our tenants that don't have it as good as we do... So just as an example, I've got a tenant that I have, that has terminal brain cancer. I knew that when I chose her; nobody else wanted to take her, because they kind of know the liability... So I'm willing to take that on. And yeah, it might cost me a little money in the long run, but she's actually one of the best tenants I've ever had.
So things like that... I've got a tenant that all his family came from China, all his family has died, and they've been living in one of these condos we own for 20 years now... And they're paying about half of the market rent, but he can't afford any more. He worked for basically minimum wage, taking care of his sick mom for 10 years... And she recently passed. So we've had his rents down for about three or four years now, and we just keep them at that 50% of market rent. I got a screaming deal on that unit, so I've got the margin to do that. That's one of the condos I bought for $30,000, so... It's renting for $1,200 a month. I'm still cash-flowing.
Slocomb Reed: Of course.
Greg Gaudet: But it's also giving back to him. We actually had him over for Thanksgiving... Again, he doesn't have any family. So those are some of the ways I like to get back. I also like to volunteer at the homeless shelter sometimes; I haven't been recently, but I really like to go down there, and bring dinner, and serve dinner to the residents there. And also just helping tenants -- another way we help tenants there are by not charging application fees to everybody. We choose a tenant that seems best, and then we charge that person [unintelligible 00:21:50.16] so we encourage tenants to have dogs, because especially -- I'm not sure about other markets, but Maui, it's impossible to find a rental for the dogs, so...
Slocomb Reed: Yeah, it sounds like there's a lot that you guys are doing for your tenants. Greg, thus far in your real estate investing career what's the biggest mistake that you've made, and the best ever lesson that resulted from it?
Greg Gaudet: Oh, okay. Well, I was going to say in terms of deals where I lost money... Now, the market's been booming the whole time I've been active. I'm fully aware of that. So I've been lucky; again, I've been conservative, I haven't bought a deal unless I knew I was gonna make money. Because the market's been so hot, I usually made twice what I thought I was gonna make. I think the biggest mistakes I've made were being, I would say, overly conservative. There's a lot of deals that I passed on because it was just a little bit over my criteria. There was a triplex that I wholesaled to Brandon, because the purchase and rehab were going to be 81.5% of the ARV. And at that time, I'm just like, "It's a yes or no. And if it's over 80, it's a no." So I wholesaled it to Brandon, I think I made 25k or something, the assignment fee... For $580,000 he bought it, and now that thing's probably worth 1.2. And that was just three or four years ago, too. So I was just so conservative that I think that's a good strategy, and it's how I sleep at night having low owned values and lots of equity and all this cushion and everything... But I think there's a balance, too. There's a happy medium.
Slocomb Reed: Sure. Greg, what's your best ever advice?
Greg Gaudet: My best ever advice is that you go with what's right for you. I think in today's world, there's so much competition, with social media and everything, we see all these things everybody else is achieving... And for myself especially, I see other investors that started at the same time as me that have hundreds of doors, and who are doing all these things... And it is very tempting for me to want to compete with them, or feel bad about my progress, but I couldn't be happier with the progress and where we are. I've grown our business at the rate that I wanted to grow it at, and I don't need to buy more deals just to keep up with other investors. I do what I'm comfortable with... And I have to remind myself this regularly, too. I don't want to have 50 employees; or not right now, at least. Maybe down the road things will change, but for right now, I really enjoy our business the way it is. We do between average three flips, maybe two to three wholesales, and buy two to three, four rentals a year... And it's the perfect blend. It's just me, my partner, and I love it. And I sleep well at night. I know I don't have much to worry about.
So yeah, again, I remind myself that all the time, and I like to share that with other investors too, because it's easy to get caught up in the hustle and competing.
Slocomb Reed: For sure. Greg, where can people get in touch with you?
Greg Gaudet: They can follow us on Instagram at Maui Homebuyers, or my personal Instagram is @Investor.Greg, where they can check out our website, and see a little bit about... I like to post obviously -- our website's geared towards sellers, but I like to share a little bit about properties, and I'll write some blogs on there about different things that happened in the Maui market, and the unique factors we deal with here... And the website is MauiHomebuyers.com.
Slocomb Reed: Awesome. Those links are in the show notes as well. Greg, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show, leave us a five-star review, and share this episode with a friend who you think may be interested in the real estate investing scene in Maui, Hawaii. Thank you, and have a best ever day.
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