All Forum Posts by: Kahanu Noa

@Shaun Weekes how did it turn out in the end? 

Thanks for the input!

@Eva Salas decided against closing the HELOC and trying to subordinate 2nd. Did what you both recommended.

@Lynn McGeein 

 Will update on situation and closing.  Very helpful, Thanks!

Hi BP,

I am currently going through a mortgage refinance with a national bank on an owner occupied property which has a HELOC in the 2nd lien position with an expected closing date of Feb 25. At the time of application, I specified the intent to subordinate the lien under the new mortgage and also checked with my local bank to make sure that it wouldn't be an issue. For more background info, I sent all required documentation to my loan processor 2 weeks ago and my rate lock of 3.5% will expire mid-March.

I receive a message today ( a day before the expected closing date) that Due to the need for my new bank to subordinate the HELOC under my newly refinanced mortgage that my closing date will be moved to the end of March. If I pay off my existing HELOC, I can expect to close before my rate lock expiration date mid-March.

 This creates a dilemma:

Paying off my HELOC will cause me to pay an early termination fee of ~$1500 with my local bank. I intended to use my HELOC for my next investment property. However, The new refinance at 3.5% will allow my property to positively cash flow around $300 after accounting for cap ex, vacancy, maintenance & management.

Do I pay the fee to close the HELOC, reapply for another HELOC for investment and close before my rate lock expires? OR do I try to subordinate my HELOC under the new loan but run the risk that mortgage rates go up by the end of March effectively decreasing my cash flow amount?

Lastly, I was assured on multiple occasions that as long as get my documents sent in a timely fashion that I will close on time. I have fulfilled my obligations well in advance with the new bank I am refinancing through.  I have suggested that my loan processor send the subordination agreement directly to my local bank but was told that a 3rd party title company needs to request it and therefore the projected time to close is the end of March.   Do I have any rights as a consumer or ,more importantly, what are other options I should be considering?

Thanks!

Aloha @Jeanetta Cueto ,

Great to see someone else from Waianae on BP!  Definitely look at the resources mentioned by Brandon and Mehran.  Best of luck and let us know how we can help.

@Jeremy Baker  , I just pm'd you as well, Thanks for being open to sharing!  Lived in Fort Collins for 4 years prior to moving back home and had a great time!  Miss snowboarding, but being back in the islands...can't beat it unless you strictly look at cost of living.  

@George You having that USD student market is great to have.  Not sure what your investment portfolio looks like but  Have you ever planned to sell as an exit strategy?

I ask because in my case, my sibling plans to live in the house/ condo that will eventually serve as a vacation rental/ vacation home if she needs to move in the next few years.  

Originally posted by @Arlen Chou:

@Kahanu Noa , I have one but I would not say I am experienced in vacation rentals. My property is is in Carmel Ca. I bought it as a personal vacation unit (second home) and it slowly turned into a vacation rental for specific events: golf tournaments at Pebble Beach, Auto Shows and nearby auto racing events. I am not sure if my experience will be directly applicable for you, but I thought I could give you one perspective.

The property that I have is a 3bd/2.5ba three blocks from the ocean, within walking distance to Downtown Carmel and Pebble Beach.  Most of the year I keep it open so I can use it with my family, but on special events weekends I do rent it out for a killing.  It is important that if you are going to use the property for mixed use that you have areas that you can lock up your personal things that you want to keep there. The last thing I wanted to do was have to "move in and out" every time I used my own property.  I segregated the building so that the upstairs area holds of my family belongings.  Therefore I rent the place out as a 2bd/1.5ba.

In my case, I am close to the property so I handle bookings and cleaning myself.  I also have gotten to the point where I don't need to advertise and get bookings based on repeat business or word of mouth. This makes the risk level substantially lower and the potential headaches much more manageable.

The downside of the way I do it is that many months I don't rent it out, which equates to a loss.  However, the upside is that I don't have to worry about people walking around on the hardwood floors with sand on their shoes, because the people want to come back the next year.

Anyway, basically I started out as an owner occupant and I am making the transition to full time vacation rental. It can be done, but your goals and time horizon needs to be realistic to make it happen without major headaches. 

Not sure if I answered your question, but I hope it helped!

Arlen, Carmel is a great place and I had the opportunity to stay in Pebble Beach once.  I understand how you can make a killing when the big venues hit the area.    

Thanks for sharing your very functional tip on segregating the area for mixed use purposes.  I have a relative that lives on an island that is not nearly visited as Oahu or Maui. In her case, rents are less than a mortgage but we need to follow up with vacation rental managers in the area as others have mentioned to get a good idea of the vacational rental market.

As you transition it from a second home to a full time vacation rental, what does that process look like for you?  Do you plan to be hands on or will you find a manager to handle bookings, cleaning, payments, etc.?

Thanks for the post and it definitely helped!

@George You thanks for the tips!  May I ask, What deterred you from investing in Hawaii or is it something you are still considering?

@Elizabeth Colegrove great stuff, thanks!

Hey BP, To those that are seasoned in buying vacation rentals as an investment, could you share your experience? How is deal analysis and financing conducted on vacation rentals? Living in Hawaii, my relative lives on a neighbor island and is currently renting a condo that was recently purchased. Her lease will be up in the next four months. A few days ago, a couple of remodeled condos which are "vacation rentable" came onto the market. The plan is for her to live in it as an owner occupant and then rent it out as a vacation rental. Has anyone done this before? I

@Dawn Anastasi Thanks so much for the updates which helps new investors like myself on things to consider when looking for an investment property.

thanks and keep them coming!