All Forum Posts by: Isi Nau

Gilbert Julian If the care home is purchased as a second home, you could do 10% down (although debt to income ratio may be an issue since your current home isn't paid off). If it's purchased as an investment, you'll need at least 25% down. A principle residence could be 3.5%. As for REI groups, there are three that I know of. Micheal Mazzela, Jordon Sunshine, and Jasmine C. Heads those up. They are also on BP. All the "how to" about real estate investing can be found on BP. The only thing you'll need outside of BP is someone who knows the market.

Hey @Gilbert Julian

Sounds like things are going well so far.  Good job!

$1300 for a studio in Makakilo?!  Impressive.

For your plan, you're looking at two different components; real estate and the care home business.  There is a huge need for care homes in Hawaii, so as long as that part of your plan is done right, then the real estate side should be fine.  I have several friends who are in the care home business (Ewa Beach, Mililani, and Kaneohe).  They've learned some valuable lessons along the way, and are doing really well now.

For a large home in the areas you mentioned, you should be able to find a decent one between $1m - $1.2m.  If you're looking for something larger (like 10 rooms), it'll be closer to $1.5m.

The biggest part of the real estate side of your plan is going to be financing.  How to get $250k+ for the down payment?  And is your income sufficient to qualify for a $1m+ mortgage?

You could do a care home in a more affordable part of the island, but this will have some effect on the residents you'll be able to attract for the care home, which will effect what you can charge and how they are paying (i.e. medicaid, cash, etc.).

The best option would be to keep your home and get the care home.  Then you have two assets appreciating and having the mortgage paid down.  But if qualifying for the care home mortgage will be tough or take too long, then selling your home would be the next best option, to put the funds towards the care home.  If you sold, you wouldn't do a 1031, since it is your primary residence.  You could sell and take the cash tax free (to a certain limit) and use it for the downpayment.

-Hawaii properties only

-Rental listings in the past 0-3 months

-Any residential property type

-Anecdotal data ok

If you wouldn't mind sharing what you've seen recently for your rental listings (time on the market, drop in list price, number of applicants, etc.).  Specifying which island, which neighborhood, and property type/size would be helpful.  We've asked around in our circle and have received mixed responses from across Oahu. Figured I'd tap the BP circle and see what people are experiencing.

For us, we've seen a drop in calls/emails inquiring about our rental listing.  What made it noticeable was how quickly it changed.  For example:

April - Oahu (Mililani) - numerous applicants - rented in 10 days (this has been typical for quite a while)

May - Oahu (Mililani) -  4 applicants - rented in 22 days

June - Oahu (Wahiawa) - 5 applicants - rented in 25 days

All three units are 1 and 2 bedroom condos, competitively priced.

Looking at Mililani Parkway for example.  In April/May most Craigslist listings were around $1800 and within 2 weeks they were down around $1700.  We listed ours at $1660.

We have another unit in Wahiawa coming available in late July.  Should be interesting.

I'm not sure if 3% is an actual average, but it is an average for what we and our clients are seeing with current properties and potential properties.  This is for condos on Oahu.  Unfortunately my knowledge regarding other islands or states outside of Hawaii is minimal.

Mililani is a great neighborhood with a range of building qualities and thus renter expectations.  I'm assuming Property #3 is valued at about $150k, based on the numbers you provided.  I'm also assuming the property is in the valley (which provides the best cash flow opportunities in Mililani).  If the property is in the valley, you may be able to get away with the unit's current condition.  Dated, but clean materials are fine for most of the units in the valley.  For the items you mentioned, I'd recommend changing out the carpets if there are stains, holes, burns, etc. (even if it's just a few).  An original kitchen with linoleum is fine, again, as long as it is clean.  If there are holes. dings, stains, burn marks, broken cabinets, etc., then repairs or replacement will likely be needed to get maximum rent.

I think keeping your Hawaii properties is a good idea.  As for doing a refi, that could also be a good idea, but you probably wouldn't know for sure until you viewed that decision in relation to your overall investment plan and portfolio, along with your goals.  Taking a bird's eye view of your portfolio through the lens of your goals, will help you determine if a refi is the best option.

But this step would require specifics, which may not be ideal for a forum post.  Feel free to message me if you'd like to discuss further and bounce some ideas/options around.

Aloha

Aloha @Andrey Y.

Interesting discussion, mahalo.

If you compare your numbers to other condos on Oahu with 50% down, your numbers seem pretty good for the first two properties. Property #3 is closer to the average (~3%). I have seen a rare few that would reach 8%.

Obviously there are multiple ways to analyze an investment property, the best one depends on what one's goals are. Based solely on a Return on Equity:

-Properties #2 and #3 are pretty close to their max if you keep the money in condos in Hawaii. You may be able to reach a higher percentage in a different building, but it probably wouldn't be worth the costs and hassle of moving your money.

-Both properties have equity at around $100k, which would limit you to a purchase price of $500k (20% down) if you did a 1031 exchange. You may be able to find a duplex for that amount (although they are getting harder to find), but your ROE would be about 2.5%.

-$200k is the point where things can start to improve noticeably. At this point you can look at multi families at or under $1m. Some could provide a ROE between 10% and 12%. But your only property at this time that would work in this plan is Property #1.  Or you could sell Properties #2 and #3 at the same time, but that would be tough if they're not in the same building and if you wanted to do a 1031.

Overall I am bullish on Hawaii. The market will definitely take a breather, as will all markets, but in the long run I think Hawaii will continue to do well.  Overall it seems like you're doing as well as everybody else here, with the ability to improve starting at the $200k range.

Aloha @Mike Demmitt

There are two that we have been using recently that have been working out well:

Celeste Tanabe with Smart Money

Koa Chai with Homestreet

Feel free to let them know I sent you.

Good luck!

@Russell Brazil good question, which will add some clarity.  The client's primary goal was cash flow.  Obviously there is a wide range of properties one could purchase, but just a quick comparison between the single family home and a four unit property nearby.  The single family home would have a monthly cash flow of -$400, while the multi unit would cash flow $2000.

This ties into the point made by @Aaron Lovett that there are as many investment strategies as there are investors.  The client presents their strategy and the investor friendly realtor provides quality guidance and support to make it happen.  In the case above, the client was looking for cash flow and the single family home was a pretty bad option for meeting that goal.  Being able to align strategies and the right properties is another great skill/service an investor should look for in a realtor.

Mahalo for your contributions!

I met with a couple recently who was interested in investing on Oahu. They mentioned how their previous realtor told them that purchasing a single family home here (in a middle class neighborhood) would be a great investment. I was shocked. For the amount of money they had, a single family home in that neighborhood would be borderline terrible. I wish I could say this was the only experience I’ve had like this. Realtors buy and sell properties. Few are good at real estate investing.

What's your definition of an investor friendly realtor?

If someone is looking for a realtor who will write lots of offers for them, then any realtor will be fine. But if they are looking for a realtor who will help to grow their portfolio, then most realtors will not work out.

For me, the biggest criteria would be a realtor who personally invests in the market they cover. As in most things, it is difficult to lead from behind. Ideally, they will have been investing since before the recession. The last few years have made everyone look smart. Second, a realtor who is more concerned with growing their client’s portfolio than they are about selling properties. They’d prefer to have no sale than the wrong sale (i.e. one that makes poor financial sense). This would assume the realtor could decipher between a good and bad investment. Unfortunately in Hawaii, realtors who meet these two criteria are found in isle 10, next to the unicorns. ;) I would imagine this is true in most states.

My intention for this post is to help those starting out in investing. I hope the comments on this thread will produce a collection of helpful criteria in identifying a truly investor friendly realtor. One that will help a new investor grow their portfolio and not just sell them properties.

Aloha Steven Charles Welcome to the group. Getting started can be a little intimidating, but it is definitely possible. If you are looking to invest in Hawaii or to talk about investing in general, I'm more than happy to talk story. Unfortunately I'm of little help when it comes to out of state investing specifics.

Mahalo all for your positive feedback.  I always hate to see good local families leave Hawaii or struggle while being here.  Hopefully we can help as many as possible improve their situation, whatever the details may be.