All Forum Posts by: Greg Gaudet

Wow this is a busy thread.. just getting to respond to this and it's 8 pages later lol 

The condos I buy are around 100-200k. I own 6 in one complex, and the average sales price there is about 140-150k (dated units selling for 120ish and nice ones up to 180ish). I bought mine for 70, 75, 95, 97, 30 and 50 (more detailed numbers on each unit and pics on my BP profile). 

For HUD you just post that you'll accept HUD in your ads. Then fill out a packet for them to review. Then they approve the rent amount, then send an inspector to make sure all appliances, outlets, doors, etc. all work. Basically anything that is health and safety - they don't care about permitting or legality from my experience. Then once approved the tenant moves in and HUD will pay a portion of their rent each month by direct deposit.

I collect $4,006 from HUD each month, and a little under $1,000 directly from the tenants (obviously not counting the tenants that don't have HUD assistance). I like this because I can cash flow even if all my tenants stopped paying their rent. And I can evict them, even if the total rent is 1400 for one unit, HUD paid 1300, and the tenant didn't pay their $100 portion. So if a tenant stops paying I can evict them, but cash flow during the eviction. But the reality is that tenants know they lose their HUD if they get evicted, so they generally don't let that happen. Like anyone else, you have to screen HUD tenants, probably more than others.

To answer your question; "is it worth it"; it's the same answer as every other question in REI - like should I buy in my own market or long distance, should I buy SFH or MF, etc. The answer is: it depends on what your goals are. HUD works great for me. But I know others that have hated it.

@Kyle Martinez

Again, this is extremely rare. Mold strands like stachybotrys (which is what people are thinking of when they say “black mold”) require a very specific environment to grow and take at least 10 days to grow, whereas more common strands begin to grow in 3 days.

Mold is everywhere, chances are I have mold growing in my primary residence Even though we built it in 2018. It’s all about the strand of the mold, the quantities, and the persons sensitivity to molds. Similar to peanut butter; I can eat a jar of peanut butter (which can contain arsenic and other toxic contents), whereas as other people can die just from a small taste. Sam with mold, except there are hundreds of thousands of strands. Some more lethal than others.

Bottom line, when you have amounts like these pics, the risks are astronomically higher of permanent brain and or respiratory damage being done from breathing this stagnant air for as little as just a few minutes, and the risks increase the longer you are exposed. A property like this is not worth the chance. Spend a few hundred or thousand dollars extra to have a mold removal specialist check it out for you and buy you and your team the appropriate PPEs and equipment. Email me with any questions or for help (email is on my profile)

@Derek Okahashi

Dude seriously do NOT go into that property without a full face fit tested respirator. As an IICRC Certified MRS (Mold Removal Specialist), I can tell you quantities of mold like that can cause permanent damage to your body. Stachybotrys is much less common than people seem to think, but I would be beyond shocked if there were not astronomical amounts of it in that unit.

Just as an example, a friend of mine was the resident manager at Kihei Alii Kai in 2015 when a first floor unit had a supply line leak resulting in similar conditions. He went into the unit and turned off the supply line that caused the leak, said he spent less than 5 minutes inside, and 5 years later he is still disabled, unable to work and barely able to put a sentence together. In the months after, he had been hospitalized and paralyzed in the left half of his body for months.

This kind of stuff is super rare, but when you have this extreme of a mold problem the chances are astronomically higher if you don’t have the proper PPEs and training on how to handle the contaminated materials.

Not sure which island you’re on, but I’m glad to call a friend to stop by and check it out for you and give you some pointers on how to take care of this while minimizing risk of damaging your body, and risk of cross contaminating and ending up with a chronic mold issue even after full rehab. I know guys on all islands that do mold restoration full time, and can most likely have someone give you some help free of charge.

@Ryan Hazelwood

Great thread!

I’m 36 and own 7 rentals (although I am a 50% partner in one of them; the other 6 I own personally). They’re all lower end condos, but the lowest end condos on Maui still aren’t exactly war zone. I rent most of them through section 8, and look for people in the shelter that need a chance, but pass the application with flying colors.

Closed on my first rental less than 3 years ago. Never would’ve imagined that I’d scale this fast (not to mention, have the opportunity to partner with Brandon Turner!!! Still can’t believe that one!) Now have about 17 deals done between flips, wholesales and rentals. The. Has flow on my 7 rentals is probably enough to pay the bills (40-50kish), but major surprises, vacancies, rents dropping, and other issues could put me in a very bad position so I continue my full time job, probably until we have six figures of cash flow. The really fun news is that this year I made more flipping in the first 3 months than I make in a full years income!!

Get started!! If I can do it anyone can!

Whoops. I should've read Colby's comment before posting! 

Colby wouldn't you think that these seller's listing agents would have explained this to them before they went on MLS? This stuff has gotten out of control... I wonder if all this hysteria will shift due to what's happening in the world/economy.

I think the listing agents do explain it, but the sellers just insist that their property is special, and they're just willing to keep collecting cash flow and wait it out until some dumb money cash buyer shows up and overpays.. 

To piggy back on Christian's comment I would recommend getting in with the neighbors. IDK about Oahu, but I know that on Maui the county doesn't really seem to be out looking for these SFH-MFs; but if someone calls it in they are required to come out and you must return it to conforming. So make sure your neighbors will call you to give you a chance to fix anything that bugs them first.

Regarding the loan; if it's permitted as a SFH with an ADU, but has 5 separate rentals, you will need to present it to the appraiser as permitted. Which means that all units must be accessible without going outside, meaning there must be doors to access the other units without having to go outside (except for the permitted ADU). It also means that you can only have 2 stoves - one for the main house and one for the ADU. If you have 5 stoves, you'd have to hide 3 of them for the appraisal. It's not uncommon on Maui for buyers to be opening doors that were blocked off and moving stoves outside and covering them with tarps during appraisals. Some appraisers are stricter than others, and there may be other issues I haven't encountered.

Also note that any unpermitted additions will generally not be counted as value. Meaning that if the SFH was permitted as 1,000 sq ft, but 500 additional sq ft have been added on unpermitted, your appraised value will be based on the 1,000 sq ft and the extra 500 will be considered storage area and not living area. This tends to be an obstacle for sellers on Maui that have added 5 rentals to their 1,000 sq ft house. They want to sell it for 850k because comps with 1,500 sq ft sell for that; but no one wants to pay that bc the comps with 1,000 sq ft might only be selling for 650k.

I've noticed sellers here seem to be trying to blur the line between residential and commercial. I say that because they also often argue that their property is worth more because of the revenue it generates. But as a licensed appraiser myself, I find that to be the most ridiculous argument ever... Bc SFHs are valued based on comps, not based on NOI.. Sure, STRs tend to be more a hybrid, but if it's a permitted STR or condotel, it's a lot easier to argue that it's a business and while it's still valued based on the comps, buyers tend to be willing to pay top dollar due to the revenue they produce (or should I say "used to produce before the pandemic"? lol). I just dealt with a seller that wanted 1.8m for his SFH even though the highest comp was 850k! His argument was that he has made private entrances for 12 bedrooms, with two shared kitchens/living rooms, so it produces 120k/year... just seems like such a joke to me.. Seriously.. where do you find someone dumb enough to fall for that? Ok sorry for going off on a rant. This has been driving me bonkers!

Disclosure: I know nothing about the Oahu market; all of my experience is based solely on the Maui market. Some things may be different there. 

I got the 61k HL deal because the seller called me directly to buy it. That's something that has taken years of marketing and networking, plus just being very involved at HL, including serving on the board of directors. But again, you can't compare the 61k to the market value of HL condos selling for 150k - this unit is an NJF and title is not insurable. This seller actually listed on MLS for 120k and no one would buy it because retail buyers don't understand NJFs.

I have a few guys I use including Travis, who commented above, but I'm always looking for more guys and would love to see some examples of your previous work. I have a business partner that I flip houses with and he and I will be looking for a GC to bring into our partnership to project manage and handle rehabs in the next year or so hopefully, assuming we find the right fit.

(BTW Travis you should be getting a call from Kerri O'Connor, she's the lady that sold us the house we're flipping in Wailea now; she asked for contractors to help w rehab on the house they 1031'd into, it's a $2m oceanfront house at Waiehu - should be a good job) 

Regarding Mahealani; again the main obstacle there is that it's an NJF, so you can not use any kind of financing to buy it. You literally need 600k in cash. And anyone I know that has that kind of cash has much better opportunities to invest it in. Hope this isn't discouraging; I think that house could work, you'd just have to be very creative and have a lot of resources. But again, I'd never recommend an NJF for someone's first deal.

Actually just got one under contract for 61k! Just got the completed contract an hour ago! Needs a complete rehab, and doesn't qualify for title insurance, but at 61k for 1700/mo in rent I'll take it! 

BTW great point about the rents.. 2500/mo on a 600k purchase would barely be enough to cover just the P&I, so definitely a big loss after all other expenses.. But if this is that Mahealani house that thing can probably do closer to 7-8k/mo between the 3-4 units. 

Actually I just remembered.. the reason that Mahealani house seller (Mark I think?) needs to unload is because that house was an NJF... which is exactly why I can't insure that harbor lights condo for 61k.. it went through NJF like 10 years ago and no title company will touch NJFs with all the controversy around them today. 

Andrew I'd suggest doing a ton of homework.. spend every min of free time listening to podcasts/books/webinars/etc., analyze 1,309,038 deals and learn learn learn and save save save.. prepare yourself for when the real opportunity presents itself. I feel confident in saying that these two are not the ones.. But keep doing what you're doing and they will come, just be ready so you recognize them and don't hesitate.

The second one for 599k sounds like 869 mahealani st. What Mark is looking for on that one is a little more complicated, and if that is the house you're looking at it's very far from great condition.. it could be rented as is. But really it needs a complete rehab. Do you have the 500k liquid cash to close on this? That's the big roadblock.. it's not financeable.. maybe not even by HML.

I'm not sure what you're strategy is; buy and hold? Or flip? I would not suggest either of those deals to a first time investor. They both sound way too complicated. If the experienced full time investors on Maui are not buying them, that usually means there's something wrong. I suggest starting with buying a condo at harbor lights for cash flow, like many of the Maui investors did (myself included). I wholesale some of them from time to time, but they don't come up often. 

I'm sure many others said this too; but I collected all rents on my 6 properties. Only two of them pay cash, and they're both essential workers. All the rest are HUD section 8. One of them lost his job, so I told him to call Hud and they adjusted his rent so he pays $0 now instead of $300, and they're paying the full $1,708.
I was always a little nervous  about Hud, but this is a great time to have them. There are downsides though; like during the government shutdown we got within weeks of potentially not getting paid - according to the manager of the Maui office. 
Hope everyone is holding up alright. Brandon and I just bought a $1m house to flip.. hopefully we get lucky on that one too!