All Forum Posts by: Paul K.

@Paul K. I will say I bought a condo in Hawaii in 2020, and many of my friends did the same.  I will say of my 10 friends who bought condos maybe me and one other guy still own them.  A lot of the HOAs make it hard to rent, aren't AIRBNB friendly, and are expensive.  Additionally the Taxes Hawaii charges (Transient Income Tax, and General Excise Tax) really eat into your bottom line, and additionally Hawaii State law requires you to hire an on island property Manager when you ultimately PCS.

I will say, I got lucky as ultimately I just wanted a mortgage that came out less than my BAH as I had no idea what I was doing and that just seemed like a conservative thing to do.  Afterwards I pivoted, left the apartment furnished and I find all my renters from the Oahu travel Nurse Facebook groups. I've been renting it out for 5 years at this point, but frankly after I pay taxes I end up losing about $50 a month but it has appreciated nicely and I anticipate I'll start breaking even with the next renter.  In hindsight, I wish I had just bought a small house and house hacked it with some coworkers.

Hi @Paul K.

It looks like you've thoroughly thought this out and that you are also getting some good advice from other BP members.  

Throwing my two cents in:

* I agree that if you decided to buy here, plan on selling the unit when you PCS off O'ahu as the most likely outcome unless you want to feed the property.  Depending on type of property, overall real estate historically appreciates on O'ahu from 4.3%-4.7% annually (can be higher in the more desirable neighborhoods) - but obviously no guarantee this will continue.  However. . . 

I'm amazed how strong the market is still on O'ahu despite the higher interest rates. I've had quite a few buyers postpone their goal of buying here because of the higher rates, but I still have many clients looking and I'm still seeing high demand for real estate and multiple offer situations are not uncommon. I just listed a nice 1 BR non-STR unit in the Ala Moana area - seller had multiple offers and is in escrow in under a week. If the deal closes, it will be the highest priced selling unit in the building in over 1 year.

So the market is still very strong despite the higher rates.  And with the lack of inventory, if rates do go down, and there is no major US or global down turn, it seems like demand for housing on Oahu will only increase - thus leading to higher home prices.  

* Also, please note it is very difficult (but not impossible) to find quality off-market opportunities on O'ahu.  I regularly solicit off-market properties hoping to find opportunities for clients but opportunities are few and far between and only very rarely are they "deals."  

* Lastly, if you think you'll likely be here 4+ years, and eventually want to retire here, personally I don't find it that risky to acquire a home here while you are based here.  Based on historical data, you could have a nice chunk of equity by the time you PCS off O'ahu.  

Wish you well and if I can provide you any information to help you with your decision, I am here to serve you.  Good luck 

Quote from @Paul K.:

Hey BP family! I'm in the process of moving to Oahu and would appreciate some advice. I'm military and will be moving there for a minimum 1 year assignment, likely will extend to 4+ years.

[...]

Is there anything I’m missing or other things/strategies I should be considering?

Thanks in advance!

Paul, we've lived on Oahu for 34 years, and prices are still at a pandemic peak.  

I'm a military retiree, and it used to be quite convenient to invest where you were stationed.  However with today's tools on the Web you can invest in real estate all over the country where it makes sense.  You don't have to sift through Oahu listings trying to find a place that *might* cash flow as a rental... *after* you get a refi... and *if* the HOA fees don't go up too much.  You're going to be a long-distance landlord on your Dallas SFH anyway, so why not buy more real estate there (or anywhere else) on the Mainland that'll have a higher cap rate from the very start?

If you're insistent on buying a place here, I'd suggest renting for 6-18 months while you network and personally dig into the local markets.  The rental market is also tight (and expensive) here, but you're probably getting the housing allowance (and COLA) to afford it.  During your lease (with or without a roommate) you can find the off-market listings or the desperate sellers to buy a live-in rehab that you can turn into a cash-flowing rental or a flip.

 
But I wouldn't buy here and count on historic appreciation bailing you out of an expensive carrying cost.

@Paul K.  I'll try to assist using your numbers. 

Okay, when I run your $630K VA with 0% down and at 7% over 30 yrs the P&I (principal/interest) payment I get is @ $4,191.41/mo. ------- Once your taxes and insurance are added your PITI monthly payment is $4,391.41 ----- HOWEVER, I don't know if the $200/mo. for taxes AND insurance you have listed is accurate or if that is for each but $200/mo. for BOTH taxes and insurance together SEEMS EXTREMELY LOW... please double check.

Okay from there $4,392 (PITI) + $700 (HOA) + $200 (Elect/Inter) = @ $5,292 / monthly

Of special note: I noticed that you included electricity & internet (utilities) but nothing else i.e. gas, garbage, water, etc. -- I don't know if they are included in the HOA or if they were overlooked. Also, unless cashflow from your current SFH covers these utilities in full then you should not include them in your current condo calculations either if you want a true apples to apples comparison, if that makes sense.

I don't really like the numbers of using this new condo as a rental later down the road, it just depends how much later down the road since rents typically tend to increase and outpace your expenses but as it stands, at @ 3,500/mo. rent potential you would be Cash Flow negative by about $1,500 a month !!! You would be LOSING $1,500/mo. if the 2/2 condo was a rental today... not an investment... the likely scenario would be for you to sell the condo later unless you were able to get the rents to cover your expenses and ideally actually come out on the other side as positive CF.

Now considering a more affordable condo of say... $540K that equates to a PITI of @ $3,793+700 /mo. + $700 (tentative) + $200 = $4,693/mo............. Now assuming this $540K condo is a 2/2 and follows similar rent numbers and now excluding eletc./internet from expenses that means that you would have fixed expenses of @ $4,490/mo. --- you would receive @ $3,500 in rents which still equates to a loss of @ 900/mo. BUT I like these numbers much better than the first... projecting that you will try to turn it into a rental in the future when rents are higher and assuming you can push rents a bit higher, you may be able to decrease the $900 loss into a $0 loss and maybe even a CF positive. 

One major thing that concerns me is that we haven't even factored in other expenses such as vacancy, maintenance, CapEx, etc.

Personally, if you are set on buying a condo as a primary residence, I would buy in the more affordable range and would go in with the PRIMARY likely exit strategy to sell later down the road... my SECONDARY strategy which would hinge and be dependent on timing, rents, market, etc. etc. would be to rent... it's one of those scenarios where... it might make a great rental for you down the road but as of RIGHT NOW, it does not. 

I hope this helps. I'm a Veteran but I want to thank you for your service. I sent you a DM, I hope you can assist.

@Paul K.

You’ll be permanently dealing with lower tier tenants and definitely at least a 20% rent reduction. Sell now and take the loss or keep and be prepared to manage challenging tenants with higher turnover.

@Paul K.  You need to dig in to your local laws to find out exactly what the agent's legal / fiduciary obligations are.  In the two states where I was licensed (MA and ME), this would absolutely require disclosure.  In fact anything that would influence a buyer was a required disclosure, but that may not be the case in TX.

If it was required and not disclosed, the agent (and his E&O insurance) could be on the hook for damages.

If you're in a caveat emptor (buyer beware) state, it's all on you and not to pile on, but shame on you for not even looking at a Google Map image!