All Forum Posts by: Mark Baldwin

@Kellen Canfield  You are correct.  I was a little too generous in my first response about the County of Kauai.  By no means did they roll out the red carpet.  That said, the County makes no development easy.  I was just suggesting that they did get their permits.  If you've followed the Kauai Springs case, that's a case where the County has blatantly withheld permits.  I guess the point I was making was development here is hard.  First politically, which then puts an enormous financial strain on the developer.   Any effort requires deep pockets.  The payout, at the end, can certainly be lucrative.

@Greg Gaudet they definitely weren't there that long. Maybe months? A year at most. They did claim ownership to the land due to ancestral ties. I dont remember enough to know their legal case, but the fact that they stood in front of a judge, rather than being thrown in jail for trespassing, tells you about the climate here.

I can't offer any help on hotel development costs, and probably not much help in general, I can at least warn you (though I'm sure you're aware), of the political hot potato that is Coco Palms.  I'm sure you are aware of the Native Hawaiian Squatters that occupied the property for a long while, and somehow even got their day in court...They may not have won the case, but they successfully drug the nonsense out long enough that the current owners were unable to secure financing.  Now the local Kauai government has a bad taste in its mouth.  They were fairly generous in helping these last guys along, only to have been burnt.  I'm not sure the next buyer is going to have much support politically.  At the very least I think it would be helpful to have a "local" player on your team.  The community seems to be pretty mixed about the Coco Palms redevelopment.  On one hand, it looks like crap and held an important place on the island for many years.  On the other, the East side is already sitting in traffic all the time, and public support for anything that would cause more traffic is tough.  Kauai is a tough place to develop...not for the faint of heart or faint of pocketbook!  Personally, I'd like to just see something happen.  Its been an eyesore for almost 30 years.  Embarrassing frankly.

I'm hoping I can get some feedback from the forums since my CPA hasn't been real responsive...I've got an LLC with 6 members, (3 individuals, and those individuals trusts)...so essentially 3 people. The LLC owns 4 pieces of property, 2 with houses on them, and 2 empty lots I'm hoping to sell. The current loan has all 4 units as collateral, (I CPR'd the units after the original financing) and unfortunately the bank won't let me modify my current loan to pull out the two vacant lots. So, I have to refinance. The lender I moved forward with gave me terms I found acceptable, but they neglected to tell me I would have to quit claim the loan into my personal name, close on the loan, and then could quit claim it back into the LLC's name after closing...Now the loan's supossed to close, and they tell me about having to quit claim. Maybe I should have known better...but that's another matter. I see two problems. 1) The Due on Sale Clause, though this is less of a big deal, 2) does this quit claim constitute a taxable event. It seems like it could be interpreted as such, and then I'm taking an awfully big risk. This seems like an unecessarily complicated route, and while I was really looking forward to this refinance being done, I'm inclined to just walk away...I really appreciate any feedback you all have. Thanks!

I can speak as an individual in this position. I have taken a course, be it online, to learn the basics of NPN investing. I have gone so far as to invest in an LLC and set up a bank account. However, I have yet to seriously pursue purchasing notes, despite my continued interest. I am held back by a couple reasons:

1) I am unsure if I want to pursue something that will be as active as NPN investing is. I prefer putting energy into something I can grow, and manage, and then back away from. I don't really want to put energy into creating another job, even if it is on my own terms.

2) I struggle to see how investing, even as a JV partner, ever gets me to my passive income goals. Without the ability to leverage my money, it would take a lot more money than I have. I've considered note funds ( assuming I can get 10-12%, as an accredited investor), but still fall back to rental real estate since I can leverage and grow more quickly. JV is also tough because I have to borrow money to do this. I have access to inexpensive money, however I would want some immediate income to pay off the costs of the money, and I know there's no way to guarantee this.

3) I live in Hawaii, and worry that my distance will end up costing me all my profits.  This is generally what led me to note investing, since it can allow you to be relatively location agnostic.  Still, it's one of my excuses for not starting.  Just the cost to attend seminars, conferences, could cost me the profit from a deal.  Everything I've read says network, network, network...hard to do from here (granted I'm not a natural networker anyways).

These are all mostly excuses...I acknowledge this.  I think the best path for me is to find someone I want to work with, gain a little confidence in the space, and then make the ultimate decision to pursue it more seriously, or find another path.  I think one of the things that would hold people back is the all or nothing expectation.  It is hard to ease yourself into this space.  That, and all my money would be tied up in notes that may or may not work out.  It's hard to diversify without a great deal of capital.

Not sure my thoughts offer you all much, but thought I'd share where my mind is at.

Certainly wasn't intending to ignore your advice, just explaining, perhaps poorly, why a HELOC couldn't work. She's not currently listed on any loans, so I can't just leave her on. Could I just include her on the deed of a new house, but not the mortgage, until she has more income registering in her name. That way her DTI increases, and will start qualifying for better terms on her own

Definitely would need some situation specific advice from a lender given our income is spread between individual rental properties, family partnerships, self employment income, and her w-2 income, though that will probably be less than 5K this year. When I said refinance, I was really just trying to simplify things... we actually just built 2 homes, one personal one rental, using money from a line of credit. I'm in the process of CPRing the properties, so I can individually finance each property. When that process is complete, I will finance them traditionally. I will have the option to pull out considerably more than I owe, and to allocate the debt to my personal residence or rental as I see fit. I have the option to put the house in our living trust also, but not sure how that messes with the 10 mortgage rule. Either way, it sounds like it can be done given the proper planning.

So I'm considering to refinance my home (I could comfortable afford the new payment) and pull out some cash in order to quickly scale in the SFR space. My wife and I file taxes jointly, though almost all of our income comes from me. Will she still be able to get 10 mortgages in her name, while I get 10 in mine? Or will she not show enough income to qualify for her 10? Thanks for the help!

Sean, Having owned one of these on Kauai free and clear (inherited), I've yet to figure out how anyone can make money with a mortgage. If they are making money, they certainly aren't using the condo for personal use much, or sharing it with friends(which is an inevitable expectation). We made money, but the return on equity was downright embarrassing. We ultimately decided cash flow was more important than the emotional attachment, since we had moved home and no longer needed a place to stay when we visited. I keep trying to make it work on paper, to take another stab at it, but haven't had any luck yet. One idea, if you're dead set on Hawaii, and not so worried about where in Hawaii, is to check out the east side of the Big Island. It is the only reasonable priced area left in the state, and the Big Island doesn't limit vacation rentals in non touristy areas. Basically, you could buy a simple home for under 200,000(or less if you don't mind work), and then vacation rental it out. It may not be real high demand...but it may be enough so that you can have a home in Hawaii. The county is trying to limit this, like all the other islands have, to touristy areas only, so this option may be gone soonish(at the speed of government). Granted...there's a reason it's still cheap. But the weather is still Hawaii!

I think I was able to answer my own question through a google search.  Each member of the entity must be an accredited investor for the entity to be considered accredited.  Thank you all again for your help.