All Forum Posts by: Isi Nau

Aloha @Kory Sheldahl

Sorry to hear!  Not sure why the unit didn't rent in December or January.  Those are slower months, but we rarely have a unit sit empty for more than several weeks.

As for the market now, it's pretty tough.  A few things we're seeing:

-a big impact has been the stop movement order by the DOD.  Basically very few new military personnel are moving here.  May through August is usually pretty heavy with military movement.  With none coming here right now, things are extremely slow.  The military members who are already here, waiting to PCS out of Hawaii, already have housing and aren't looking to move.

-The local people are sitting tight.  Many are wanting to wait and see.  This applies to buying and renting.  So there's very little movement with this group as well.

-We usually list our vacancies on Craigslist, FB, and MLS. FB is quickly becoming our best source for bringing in applicants. MLS is good because all the big real estate websites (Zillow, Realtor, etc.) are populated from the MLS.

-I did a quick search, and I don't think your listing on MLS mentions the first month rent discount (assuming I found the right listing). This may be why it isn't showing up on Zillow and other sites.

-$1795 is a pretty good price for the neighborhood, but it looks like things are changing.  You may need to come in at $1695.

-I would consider allowing Section 8, especially in the current economic conditions.  We have very good tenants who receive Section 8, and the rent is virtually guarantied.

Hope this helps!  Good luck!

Hey @James Joyce,

Strategies - house hacking and live in flips are a great way to get into the market here.

Timing - I'd recommend watching how many properties go into escrow each day.  A lot of the properties moving in the market right now were already in play prior to COVID-19 (very few new transactions happening right now), so watching the number of sales won't be very helpful in the short term.  Today there were nearly 3000 properties on the market on Oahu, only 11 went into escrow.  I believe this number will begin to increase (i.e. market is picking up again) about 30 days after the stay a home orders are lifted.

Prices - In the last recession most prices dropped 10-20% on Oahu, depending on the neighborhood and property type.  I think it's too early to know now what prices will do in this environment.  If the stay at home order is lifted within the next 1-3 months, I believe the economy could pick back up pretty quickly.  Depending on how fast we can get tourists back here.

Protection - the three best ways to protect yourself here are time, remodels, and income.  First, you'll need to hold a property for at least 3 years in a good market and 7 years in a down market in order for the investment to make sense.  Second, purchasing a run down property that can be fixed up is another excellent way to protect yourself.  Lastly, purchasing a property that produces income.  It sounds like you have the last item incorporated in your plan.  If your time is limited to 3-5 years, and in light of the uncertain economic future, I would definitely recommend purchasing a unit that needs some work.  The 3-5 year timeline is a little tight, but buying a fixer upper will help to hedge against that.

Summary - Look at your target market every day.  Deals will come up.  When you find one, buy it.  If you follow the three strategies above, your chances of losing money are pretty low (outside of any major unforeseens).

Hey @David Valladares

I would recommend purchasing your own home before investing.  House hack, live in flip, etc.  If done right, it can be the single greatest investment you make.  Especially in Hawaii, where appreciation will either make you or break you.  The median home price is currently 10+ times greater than the median income.  This multiplier is only going to get higher, making it harder to afford to purchase a home.  Or if you already own a home, it will set up you and your family very well for the future.  A couple live in flips can make a world of difference in your financial position.

I noticed you're in Kapolei.  If you're flexible in living on the West side, you can get ahead extremely fast by house hacking and doing live in flips there.  I'm happy to discuss more if you're interested.

@Dawn Brenengen a rabbit hole is a perfect description! I'm amazed at the depth and breadth of content. I'd be surprised if there was a REI niche that hasn't been explored and discussed here.

Thanks @Tony Wooldridge for sharing!  Great story that I think many could relate to.  BP provides a wealth of information, but also an invaluable social connection.  For example your son moving to Hawaii.  Just like that, you have a source in Hawaii to discuss and bounce ideas around with.  Something Barnes and Noble never provided me with!    ;)

@Brian Garrett crazy how it seems to have appeared out of no where, but yet been around for so long!  I'm just bummed I didn't find the party earlier!

When I started investing, I would spend hours at Barnes and Noble reading every book I could find on real estate investing (my poor wife). I didn't attend any REI groups because the few times I went I felt like someone was trying to sell me something to help me get rich quick, at an insane cost (both rub me the wrong way). So there I was, a lone wolf in the wilderness. Until I found BiggerPockets.

In 2016 I was doing some research online for a flip we were considering and came across a post in one of the forums on BiggerPockets. I couldn't quite figure it out at first because it was so novel to me. A platform with the largest source of REI information I've ever seen, no get rich quick gimmicks, and it's free?! The unicorn of real estate investing! The information and connections I've gained since 2016 have been invaluable.

What's your story?

Hey @Gary Komenaka This is always a bummer!  Who contacted the inspector?  If it was the AOAO, you may want to check with them if there are any fines or citations.  These could add up over time, especially if their lawyer is involved in writing letters and reviewing the case.  They charge $300 an hour and have little incentive to work fast.   :)

You'll want to hire a permit expediter to help move the permits along, although this isn't a magic bullet.  Honolulu permits are ridiculous.  I have an expediter we've used if your interested.  You'll also likely need an architect for the drawing.

Since it's a small property the scope of the renovation was probably small, and if it's after the fact permits, you could likely get away without hiring a GC, but you'll need to hire licensed guys to sign off on the different phases of the permit.

Good luck!

Hey @Caleb MacDonald

This is multi-layered issue.  Permitting, zoning, and appraisals.

If I had to guess, I'd estimate that 90% of all single family homes on Oahu with multiple units are nonconforming.  Meaning they are zoned and permitted for single family/unit use, but the home is now split into multiple units.  This could be done by adding on to the home, by re-configuring the interior, or both.

I am only aware of the ADU laws allowing for one additional unit to the main home. I'll have to look into it to see if two additional units are now allowed. ADU laws definitely do not allow for four units.

The kitchen/wetbar issue deals primarily with the appraisals.  When you sell the property an appraiser will come in and will want to see things set up for a single family use.  Meaning one kitchen, one unit, etc.  Wetbars do not count as a kitchen, so usually they don't raise any flags on an appraisal.  If there were two kitchens, one of them would have to be removed, or reduced to a wetbar.

The issue in Hawaii is enforcement and housing shortage.  Oahu's housing shortage is at a critical level, unfortunately.  The estimates change, but I've read that in order to meet demand we'd need about 30k housing units right now, but we are only building 3k units per year.  It does not benefit the government or construction industry to meet this demand.  Higher prices equal higher revenues.  So I don't anticipate this issue ever being resolved.

What does this have to do with nonconforming homes?  They are a very practical way of meeting the housing demand.  It allows for more housing units without building more houses.  I have not heard of the C&C cracking down on nonconforming homes.  I assume it's because they know it would lead to exponential rent increases and eventually quadrupling homelessness.  The only time they'd probably investigate is if the neighbors complain of it's a "monster house".   :)

Hey @Benigno Cunanan

Cash flow is possible in Hawaii.  The best I've seen for long term rentals are condos, $30k-40k down payment, giving about $250 a month in cash flow.  Then there's the appreciation.   ;)   I can't wrap my mind around how it is considered speculative.  Maybe in other parts of the country, but in Hawaii there's the historical data (annual housing reports, etc.) and also anecdotal data (multi-generational family portfolios) that make it difficult to argue against.  Before joining BP I had never heard of appreciation being described as speculative, especially not in Hawaii.  Anyways, on to your other questions.   :)

As for cap rates on multifamily, you're looking at 4-5%, maybe 6-7% on the Westside.  This is for legal mutlifamilies.  Nonconforming homes can get 7% pretty regularly.

Vacancy rates can be kept pretty low without much sacrifice on rent rates.  The housing shortage on Oahu is unfortunately at a critical level.  Our units are vacant on average for a week.  On average our tenants stay in place for at least 2 years.

Hawaii is a solid place to invest.  Even though it's expensive, it's definitely possible.