All Forum Posts by: Catherine A.

Aloha Barry,

I'm from Hawaii and invest in rental properties, but not in Hawaii. I've run numbers in multiple locations, on a few islands and I've found that the ROI on SFH and even duplex investments is depressingly low. Rents are high but so is the cost of buying. Best bet is to look for multi family dwellings that need a little work and run rehab, down payment, and rental estimate numbers accordingly. If you're looking at condos, check out monthly maintenance fees and research what major capital expenditures the condo is planning. Look in established, more desirable neighborhoods, as many new residents have a propensity to move or leave the islands, sometimes without notice. You can find these places by talking to a local rental property manager.

Also, you're right about vacation rentals. Many people use them to subsidize their vacation homes, and not necessarily to bring in cash every month. Vacation property managers charge 35% of rents on up and you have to have one locally if you don't live on island. Since you live in Kona, you can always rent and manage it yourself, but that's a whole 'nother line of work.

Good luck to you.

Hi Sean,

Have you thought about doing a refi on your SFR and using the equity for down payment on the duplexes? That way you don't have to sell the SFR.

Generally it takes longer to sell multi-families...smaller group of potential buyers. But it depends on the property, market, etc. If you could do some value added changes to the duplexes to bump your cash flow, that can pay off when you go to sell.

Hope this helps. Good luck to you!

Catherine

Hello Karthik,

We self manage and use a PM on our rental properties and would recommend using a PM out of state.

That said, if you self manage my suggestions are to check credit history, check past landlord references (call until you talk to someone or ask for other references) and keep your rent at slightly less then market. That gives the perception of value, increases your tenant applicant pool, and helps keep vacancy rates low. The more effort you spend selecting the right tenant, the better off you'll be in the long run.

If you do hire a PM, vet and interview your PM in person. Vet several PMs and pick the best one for you. Require periodic walk throughs with a short report or some other method of verification. You can always switch to self management...or switch back if things don't work.

I hope this is helpful. Best of luck to you.

Catherine

Hello Richard,

If you still have a job and want to retire, you could refi that house that you just paid off and buy more income producing property. Interest rates are still low so it's a good time to be using leverage and putting the equity you have in that property to work for you. If you don't want to invest in your market, look elsewhere where ROI is better and spend some time vetting an experienced property manager.

Good luck and congrats on paying off your house. :)

Catherine

Hello Joe,

If someone is going to be living at your property, you want her/him on the lease. If he's not on the lease and he's living there and she leaves for some reason, you could have some trouble on your hands.

Ultimately you have to decide whether you want this person as your tenant and let your existing tenant know what her options are. Let her decide what she wants to do. If she wants to live with him, she'll find another place with him and you could let her out of the new lease she just signed....or go month to month until she's due.

Sounds like a tough one. I hope this helps. Good luck.

Hi Gen,

I've only used property management companies that charge percentages of rent and itemize all work done on the house. Invoices are provided.

If you're only having issues with this one house, you could find another PM that works on commission and is more transparent with their expenses. Maybe you could have the new PM manage this particular house and see if anything changes in terms of cost on your end.

Another thing you could do is pay for the invoice this one time and see what the breakdown actually was. If you're not satisfied, then look for another PM. If you're ok with it, well, you're only out $65 and you've re-gained confidence in your current PM.

Hope this helps. Good luck to you!

Catherine

Just had another thought...if they are paying on the 15th, then the first month that you agree to let them do this (start a new lease), they will owe you half a month of rent (1st - `15th) plus the month of rent that is due (15th - 15th)..unless you already collected the half month rent from them when they initially moved in.

Hope I'm making sense. It is Friday. :) Good luck.

C

Hi James,

We generally prorate and collect on the 1st. It's just less hassle administratively.

As far as the date, depending on your situation, if it's not costing you anything (time or money) then change the date to the 15th. I would most definitely have him/her sign a new contract with an adjusted due date.

If it IS costing you something, tell him you can adjust the date but that the rent will also be adjusted to whatever that cost to you is plus the agreed upon rent. That way they have the option to have the date they want, and you will get compensated appropriately.

If you haven't already, have a convo with the realtor and make sure you are on the same page for future tenants.

Hope this helps you and good luck!

Catherine

Hello Ray,

You have so many options. That's great!

The  'Google' says that the average price of a house in your area is 275k. So you will need roughly 55k for a down...maybe less. (I'm assuming this average is for a 3bd /2ba and I prefer the 2b/1b for rentals myself...less people, less wear and tear, larger number of possible renters.)

If you have that much equity in your home and it's a bit too big, you could sell it and buy two smaller properties...or perhaps a duplex (2bd/1ba) and live in one and rent out the second unit. The market's pretty good in most of the country right now so depending on what you paid for it and when, it could be profitable to sell.

You could also refi and get the equity out of your current home and buy another two properties but...if you keep your house and rent it out, sounds like you're going to have negative cash flow. Interest rates are still relatively low so it's a good time to take advantage of that and look for an investment that will bring you positive cash flow.

This probably goes without saying...I would not take all the savings you have and invest. It's always good to have some liquidity.

Hope this helps and good luck to you!

Catherine

Hi Mike,

SFH and I use an experienced vacation rental property manager. When you say buy with cash, I assume you mean a standard cash down with financing. Generally it's been break even. Cash flow is challenging but of course that's going to depend a lot on what you paid for it, what rents you can get, how much you block it out for personal use, etc. Depending on the market, a short term/vacation PM for a furnished property will run 25% - 40%. (ouch). I find it best to think of this as a different kind of 'investment'...one where you are investing in your own quality of life and happiness.

Cheers back at ya' and best of luck,

Catherine