Kaneohe, Hawaii Rental Property

[Justin Howe]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $876,000
Cash invested: $220,000

This is a buy and hold property. This was a total gut. House had great bones but every room needed to be updated. This project took 3 years to complete and I did it while I lived at the residence.

What made you interested in investing in this type of deal?

Very interesting question. I initially looked into the rental market but was turned away because I am a pet owner. (Two Airedale terriers) So kinda out of necessary and the fact I didn't want to live on a military base drove me to purchase my own home.

How did you find this deal and how did you negotiate it?

I found this deal on Zillow. This was a property they had been on the market for almost a full year! The owner had moved off island and the realtors were exhausted. The initial asking price was 955k but after conducting my analysis and the amount of work it would take to update I offered 870k which I thought was a fair deal. They didn't take the offer and countered at 925k. I walked away from the deal and two weeks later they came back with a counter of 876k and we closed the deal.

How did you finance this deal?

I used my VA loan. The VA backed 721k (0 down). The 876 selling price was over the VA amount, so I had to come to closing with 25% down on the difference which was 155k. Fortunately, I had the cash but that impacted the time to repair.

How did you add value to the deal?

I completely rehabbed the house. Every bathroom has been updated, the kitchen, took all carpet out of the house and replaced with Natural Stone Travertine, replaced all wood on both decks, a lot of work (sweat equity) when into this home. I replace all the windows, added solar PVC, and huge landscaping project

What was the outcome?

Beautiful product. I currently earn 4500 per month in rent. After the mortgage, taxes, and HOA are paid I clear 300.00 per month.

Lessons learned? Challenges?

Using my VA loan. The interest rate on my VA is 2.75 percent. After completing all my updates and attempting to refinance to a conventional loan I was unable to make the transfer because rates were 3.85 percent and I would lose money in the rental market. I had to change my model to purchase future properties and figure out of way to get my VA loan back.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes Cathy Bridges. She was awesome to work with very professional and giving of her time.