What to expect if trying to purchase a vacation rental condominium in St Thomas, Virgin Islands

The local Virgin Islands Real Estate market for Vacation Rental / Investment condominiums continues to struggle with very low supply and heavy demand.  Rarely does a day go by without receiving an inquiry for one of the “high demand” locations on island.  Let me try to help you understand what is going on.

Some of the more popular condo complexes include Sapphire Beach Resort, Sapphire Bay West, and Point Pleasant.  These locations offer excellent vacation rental income potential with “minimal” investment.  But because these are typically easy to rent (with options on management of units), they provide excellent income.  Hence the high demand, along with sellers unwilling to unload their investments.  These particular locations are also classified as “condo-tels”- making a purchase slightly more difficult.  Why?  Because financing in these spots is limited and you cannot get typical conventional financing.  For this reason, a majority of sellerss only wish to consider cash offers, and there are usually ample buyers willing to pay cash for these properties.  So those needing financing will struggle to be able to purchase in these locations until the market changes.

The two banks willing to lend at these locations are Merchants Commercial Bank and First Bank.  MCB is extremely efficient and professional in my experience- they do a great job.  But their financing offer includes a five year balloon payment and a higher interest rate than typical thirty year rates you read about online.  It may also require a higher down payment- this can fluctuate depending upon the buyer but you should expect to pay 25% and it could be 30%.  First Bank, and I am sorry to say this, rarely seems to come thru with a successful loan.  I have waited four months for loan approvals of a buyer only to be refused after all that time.  Since this has been going on for years, educated sellers may not consider an offer planning to utilize FB for a loan.  My hope is FB improves their business in the coming years, because we could use another local bank providing loans.  The opinion above is solely my own, but it is something I hear from many others over the years too.

Now, there are other locations where you can purchase and still get a more typical loan.  My favorite lender has always been First Liberty, and have closed dozens if not hundreds of deals thru them over the years.  They can do loans at some other desirable locations like Cowpet Bay and Mahogany Run.  In these cases, a typical 30 year loan with a reasonable interest rate can be expected.  But note: CASH IS KING and a seller will always prefer a cash offer if all other terms are the same.

So what can you expect knowing these things?  You are in a much better position as a buyer if you are paying cash.  It removes the financing contingency and can lead to a faster closing timeline.  It avoids the worry of a property not appraising for the sales price.  Besides how you plan to pay for the property, you should also plan to move very quickly if a new listing comes up.  There will surely be multiple buyers interested in the same condo, so you must act quickly.  And you should expect multiple offers.  The days of buying something “on the cheap” are no longer here.

Plan to keep up with the market.  Speak with an agent in our firm to get on a mailing list if one of these condos does pop up for sale.  And be ready to act quickly.