I want to move central, what should I do?

[Gilbert Julian]

Hey guys,
I'm fairly new to real estate. But after listening to BP, I tried the concept of house hacking I was hooked. I literally rent out a portion of my house as a studio and I get almost half of my mortgage paid. Even if my mortgage is 3100 -_- every little bit helps, you guys know the typical mortgage here in hawaii haha. I live in Makakilo, as you know kapolei is booming as the second city, but is far from EVERYTHING. My question is, where do I go from here? I want to move more central and hopefully start a care home business preferably salt lake, manoa, kaimuki area. Should I sell my house and do a 1031 exchange? Or should I try and rent out my both sides of my house, 1300 the studio, and maybe 2500 the other portion and cashflow it about 500-700 dollars, and then save up for 20% downpayment for a second house. What do you guys think, what would be the best way to move central, increase my cashflow, and spend the lease amount of downpayment. Thanks really enjoying the support. 

[Isi Nau]

Hey @Gilbert Julian

Sounds like things are going well so far.  Good job!

$1300 for a studio in Makakilo?!  Impressive.

For your plan, you're looking at two different components; real estate and the care home business.  There is a huge need for care homes in Hawaii, so as long as that part of your plan is done right, then the real estate side should be fine.  I have several friends who are in the care home business (Ewa Beach, Mililani, and Kaneohe).  They've learned some valuable lessons along the way, and are doing really well now.

For a large home in the areas you mentioned, you should be able to find a decent one between $1m - $1.2m.  If you're looking for something larger (like 10 rooms), it'll be closer to $1.5m.

The biggest part of the real estate side of your plan is going to be financing.  How to get $250k+ for the down payment?  And is your income sufficient to qualify for a $1m+ mortgage?

You could do a care home in a more affordable part of the island, but this will have some effect on the residents you'll be able to attract for the care home, which will effect what you can charge and how they are paying (i.e. medicaid, cash, etc.).

The best option would be to keep your home and get the care home.  Then you have two assets appreciating and having the mortgage paid down.  But if qualifying for the care home mortgage will be tough or take too long, then selling your home would be the next best option, to put the funds towards the care home.  If you sold, you wouldn't do a 1031, since it is your primary residence.  You could sell and take the cash tax free (to a certain limit) and use it for the downpayment.