All Forum Posts by: Doug Nordman

Welcome, @Chris Dudine, and did you know that Brandon Turner is in Kihei?  

He's probably working on the next BP Maui meetup.

Phil, I suspect that the most successful local real estate investors who are investing here (and with less leverage) are doing live-in flips or house-hacking with roommates/friends.

The rest of the island's most successful local real estate investors are loading up on financing risk or investing on the Mainland.

We've had our pandemic-driven surge in Oahu real estate values, which might linger on for another year.  But Koa Ridge seems to be filling the homes as fast as they build them, Ho'opili is moving a lot of dirt around to build more new neighborhoods, and there's a lot of interest in building new commercially-managed high-rise properties within a half-mile of the light rail line.  

Among my military readers, "anything up to a quad" can be a code phrase for "buying with a VA loan." While that's certainly possible to do here, sellers hate dealing with buyers whose loan is subject to the much stricter appraisal criteria for safety & habitability. It's not a bad loan by itself but this is currently very much a seller's market. If you're trying to win a bidding war here then you'd want cash or another type of loan.

@Kyle, David Pere (FromMilitaryToMillionaire) left active duty a few months ago and has recently bought a hotel (in addition to his other investment rental properties).  He can help you with the process and the details in your paperwork.  

Elin, my spouse and I are military retirees who've lived on Oahu for over 32 years. We've landlorded a 4BR/2BA SFH in Waipio Gentry for 24 of the last 27 years, and our current tenants are military.

First, I’d check the market rent for your neighborhood.  Unless it’s gone up over 10% (over $330/month!) I’d offer your tenants another year at the current $3375/month.  At the end of that second year they’ll probably want to go month-to-month while they negotiate their next set of orders with their service and figure out when they’re moving.

Even if the market rents have gone up $330/month in your neighborhood, raising the rent on your tenants now could cost you a month’s vacancy if they decide to move.  (Military families know how to move, and they have friends with pickup trucks.)  Considering how easy they’ve been to have in your property, you could offer the second year as a one-year lease at the current price and tell them that you’ll have to consider raising the rent at the end of the second year.  

You’d want to continue your regular checks of the property during their second year, and if they continue to be great tenants then I’d talk with them about their third year.  During that third year they could either sign another years’ lease (in case they think they’re extending their tour or leaving active duty) or you could talk about raising the rent by $100/month.  When they get your offer near the end of the second year, they’ll probably share their plans with you.

We had military tenants who unexpectedly decided to retire during their second year.  We signed a third year’s lease at the same rent.  We raised the rent 5% during the fourth year (for a year’s lease) and again during the sixth year (for another year’s lease).  They finally moved back to the Mainland after eight years.  They were one of our best tenants ever.

I don't have a bank recommendation, Elin, but you could contact mortgage broker Joe Schmitz at C2 Hawaii.  He'd know who wants to lend to investors.
Joe at c2hawaii

                  -- Doug

I hear you on the emotions of the buy vs rent decision. Let me know if you want more help crunching numbers-- we have a number of military investors on the islands who network and help for free.

You also want to make sure you're not asking a barber if you need a haircut-- hopefully your realtor is experienced at working with real estate investors instead of homeowners. You'll get the $3400 BAH whether you spend it on housing or not, so a sure way to put it to work is to go cheap on rent (or house hack) and invest the rest in your asset allocation (equity index funds or REI) where it makes sense. You don't have to dump your BAH into real estate in the same ZIP code as your duty station.

I’m a solar nerd, and we’ve had a grid-tied system since 2005. It paid us back by 2011 and we’ve had free power since then. It’s worth buying (solar water heating as well as photovoltaic) when your electric bill becomes $26/month instead of $250/month. However Hawaii’s photovoltaic incentives are not coming back. Those subsidies did their job and the systems are cheap enough for the markets to compete on their own merits.

Jeffrey, that old trope of "buy a home at every duty station" might have been cool in the 1980s, but now the Web lets everyone invest where it makes financial sense.  If you're going to become a long-distance landlord after the military transfers you out of Hawaii, maybe it makes more sense to learn how to do it while you're living in Hawaii and investing in someplace like Oklahoma or Michigan.

The military homeowners in Hawaii are making their money by househacking with roommates (like Scott Trench's "Set For Life") or by doing live-in flips... and the more rewarding live-in flips are practically gut-rebuild.  If you're planning to buy a multi-family while you're here during the tail end of a pandemic, well, you'll get real familiar with the landlord-tenant code.

Just because the DoD hands out more BAH here than almost anywhere else is no reason to leverage a VA loan on short-term speculation. The reward is not worth the uncompensated risk.

Dewayne, it doesn't matter what I believe in, but my family has owned a B+ single-family home in Waipio Gentry for over 30 years.  During those three decades it's appreciated at the rate of inflation.  In terms of the 1% thumbrule, we've finally managed to boost net cash flow to 0.4%. 

Several thousand new homes are coming to Oahu in the next few years in Ho'opili, Koa Ridge, and the light rail corridor.  "Gamble" is the right word.  Why not invest anywhere else in the U.S. where the numbers work for both cash flow and appreciation?

@Jordan Selvey, you know that BiggerPockets podcast host Brandon Turner is in Kihei and BP founder Joshua Dorkin might still be on Maui?

You could reach out to them and ask about an outdoor coffee or beach meetup.

Aloha Marc, and I'm sorry you had to leave the islands in the first place!  

Thanks for listening to the podcast-- I'm good friends with Mindy, Scott, & Brandon, and I really enjoy the process of recording the Q&A. Carol and her family are taking five weeks of leave to spend most of November & December over here with us. I'm not sure whether they're more motivated by North Shore surf or by free grandparent babysitting.

It might be worth your time to visit the base legal service office to have them either consult with their counterparts on Oahu, or to help you write a lawyer letter.  Their letter would be considered education on the applicable requirements of the Hawaii landlord-tenant code (and on the many ways to pursue legal remedies) instead of threatening a court appearance.

Thanks, Andrew, I know there'd been a moratorium of sheriffs serving evictions (and the courts were too backed up to hear them) but I don't know if that's restarted.  I'm familiar with the judge calling both sides into chambers for scolding them into mediation before wasting more of the city/county court resources.  Good mediators still charge less than the rest of the process, and they're worth it for the communication assistance.