All Forum Posts by: Elijah F.

This is a great thread! I lived in Hawaii about 25 years ago & lived both in Hawaii Kai & near Diamond Head (Pualei Circle), and I am, as well, considering some leasehold properties, however I must say that I am going in with "both eyes wide open". I have seen some pretty good prices, but I assume that either the remaining lease term is short, or perhaps there is significant deferred maintenance which may require a special assessment in the future.

One building which is in a good location (Waikiki), reasonable prices & has a lot of listings is 1860 Ala Moana Blvd (Wailana Condos Waikiki). Given there a so many listings, I am suspicious / skeptical. HOAs are relatively high. Below is one unit in the building, but there are many others.

1860 Ala Moana Blvd, Waikiki(#1105)
https://www.zillow.com/homedet...

Anyone have any local insight into this building, or, similar situations?

Mahalo!

Looks like the monthly maintenance fee for that unit is $1,169 and monthly lease rent is $925. So monthly, you would pay $2,094 for this unit before any other expenses. Also, you can't (or it is REALLY difficult to) finance this unit.

1 Vote

Originally posted by @Gayle Bennett:

@Elijah F. I was the winning bidder and I should close next week! I bid $67000 and was the only bidder, but did not reach the reserve. They came back with a counter offer of $83860 which I accepted (last week the counter was $92k). There is a $5500 REO closing credit which brought the price down to $78360. The appraised value on the property is $189,000 and the current listing suggestion on realtor is $228,000 so I don't think I can go wrong on this one :) I'll let you know next week after I get inside if I am right.

Thanks, Gayle. Please let me know how it goes. I lost my auction and was the owner bidder. Gonna keep looking.

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Originally posted by @Stacey Agustin:

Hey Marlo,

Did you end up finding a hard money lender in Hawaii? I'm currently searching for one now and would love to hear who you ended up going with!

Stacey, if you wanna check out Keco capital, they are hosting their weekly Coffee Talk at 10AM HST today. Let me know and i can send you the link.

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Hey Gayle. I donʻt have insight to offer as I am also trying to bid on Hubzu. Were you able to get the property? If so, what was the price? Thanks

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Doesnʻt look like you will get a screaming good deal on this. This is the information that HUD gives: If you have inherited property secured by a HECM, you have certain options regarding disposition of the property and the outstanding HECM loan. The borrower's estate or heirs may satisfy the lesser of the outstanding HECM loan balance or 95-percent of the current appraised value of the property.

https://www.hud.gov/sites/dfil...

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Originally posted by @Brian Geiger:

@Elijah F.

Dave Ramsey was one of many investors who was negatively effected by the Tax Reform Act of 1986. To give you an idea of how it change the Real Estate industry, the law contributed to the elimination of the capital gains tax differentials, the increase in the period for writing off taxes for depreciable real estate, and the limitation of the deductions of passive investment losses. These changes have reduced the market value of real estate significantly which caused Dave to owe more than what his properties are worth. To add to that, Dave's local bank, where he took out the loans for his properties, either went bankrupt or was bought out by another bank. The other bank called all his loans due. Due to all of this, Dave had no other choice but to file bankruptcy.

Dave Ramsey offers really good advice on how to be debt free. I used his approach in my personal life and it helped a ton. However when applying this to Real Estate investing for me this did not help as much. I found that it takes way too long to build wealth by saving for the down payment not to mention the full Purchase Price. I rather raise the capital from private partners and pay them a nice return on their capital. In addition I can get higher returns when my properties are leveraged up with a mortgage on good terms and I have investors in my deals.

As I mentioned in my previous post, Dave Ramsey audience are people who made very bad mistakes with money. For investors, I believe Robert Kiyosaki is the better guru because he actually explains how debt can make you rich. And unless you planning to save money for every investment or you are Bill Gates (if you planning to pay cash on all investments), you are going to need some type of debt for your investments at some point. To me Robert Kiyosaki relates more to RE Investors while Dave Ramsey relates more to people who are not financially literate.

DISCLAIMER: It is important to NOT over leveraged on your investments. Debt is like a loaded gun. It can protect you from tax liabilities but used the wrong way like over leveraging, it can kill you. Hint: Dave Ramsey in the 1980s is an example of this but I will admit that it wasn't entirely his fault.

Dave may have become a victim of circumstance, but it was a circumstance he put himself into. He was highly over-leveraged and hoped the laws/market wouldn't change while he was taking on too much risk. In turn, he now preaches that people should buy, with cash, real estate. It's that message I have an issue with because real estate (most of the time) requires leverage (i.e. debt) in order to grow successfully. Dave became rich by pandering his financial system (not a dig on his hustle), not via real estate. I do agree, however, in his teaching of reducing debt using the snowballing method. It is counter intuitive and more costly a method, however, given the psychology of financial/debt stress, many people (some I personally know) have had success using this strategy.

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Originally posted by @Marcus Johnson:

@Kristian Conway

Not that I’m fully on board with Dave Ramsey’s plan on cash buying investment properties, but I doubt many of you on this forum can pay for a brand new $40 million facility in cash like Dave Ramsey has.. He must be doing something right.

Yes, what he is doing right is selling books and seminars on his financial strategies and debt reduction. His over leverage in real estate bankrupted him, so he switched strategies and became a financial salesman. He did not get rich via real estate so his opinion on real estate investing is of no value. One takeaway from him could be to not over leverage oneself in real estate investing by using highly risky investment tools like he did, e.g. 90-day mortgages, and not expect to pay the piper when the sh!t hits the fan.

2 Votes

Originally posted by @Anthony Gayden:

Originally posted by @Kai Sato-Franks:

@Brian Geiger I don’t disagree with Ramsey on buying in cash but it just seems unrealistic for a lot of people (like me). I agree with Robert as well! It makes sense if the numbers are right but the idea of relying on tenets paying my mortgage until they don’t and a pandemic happens worries me but I guess that’s the risk you take!

I really do like Dave Ramsey and I used his baby steps to get out of debt, build an emergency fund, and learn the basics of budgeting. Keeping that in mind, I do not follow his advice on real estate investing. I believe his advice on real estate investing is absolutely terrible.

1. Save $1000

2. Pay off all of your debts smallest to largest using the debt snowball

3. Save 3-6 months of emergency reserves

4. Invest 15% in retirement accounts

5. Save for your kid's college

6. Pay off your house

NOW, you can begin to invest in real estate.

The previous steps may take you 5-10 years to accomplish. Only after you have done them can you begin to invest in real estate according to Dave Ramsey. All real estate you buy must be in all cash. So if you are buying a $200,000 single family rental, you must save $200,000 up to pay for it. Even aggressively saving $50,000 per year, expect to wait four additional years to make your first purchase.

So it could take you 10-15 years to buy your first rental property with Dave Ramsey's plan. As most investors know, you will be giving up appreciation, debt pay down, and tax benefits by paying all cash. You will also likely receive a much lower return on investment. The higher cash flow you receive will not make up for the other factors.

Leverage is a powerful tool in real estate investing. It has literally made me hundreds of thousands of dollars. Fear of debt will slow your progress and growth as well.

I agree. I have listened to some of Dave Ramsey and it seems like his aversion to having a mortgage and real estate investing is because he once had a lot (or all) of his investment mortgages called at once causing him to go bankrupt. Mind you, these were 90-day loans that the bank could call upon when it felt the need to. He was HIGHLY over-leveraged and using a product that doesn't even exist today. So his view, IMHO, on real estate investing is warped and too risk adverse.

2 Votes

Danielle Dorien you can shoot yourself in the foot and lose a lot of money by purchasing a leasehold property without understanding the many nuances of ownership.

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All Forum Posts by: Elijah F.

Elijah F. has started 1 posts and replied 84 times.

Post: Advice for time share seller

Post: Thoughts on leasehold units?

Post: Hubzu - How much to bid?

Post: Hard Money Lenders for Oahu

Post: Hubzu - How much to bid?

Post: Revers Mortgage - how to buy?

Post: Dave Ramsey recommends buying everything with cash!

Post: Dave Ramsey recommends buying everything with cash!

Post: Dave Ramsey recommends buying everything with cash!

Post: Is fee simple vs lease hold profitable?