All Forum Posts by: Reed Sasamura

I'll first disclose that I'm not a real estate attorney, nor am I incredibly well-versed with wholesaling in Hawaii beyond "what it is" and the concept behind it. I can only provide you with my current understanding which may or may not be entirely accurate.

My understanding (which could be slightly wrong) is that in Hawaii you need a real estate license to receive "compensation" for the sale/transaction of someone else's house/condo/etc... Moreover, referral fees are illegal if given to an "unlicensed" individual. I'm glossing over some of the more intricate details here, but basically my understanding is that compensation/referral fees need to travel from brokerage (eg. Keller Williams, Century 21, Locations, etc...) to brokerage (eg. Keller Williams, Century 21, Locations, etc...). It doesn't go from agent to brokerage, brokerage to agent, agent to agent, or ESPECIALLY agent to unlicensed person.

So in short, if you wholesale, you're basically selling someone the option to purchase a property below-market price which is still slightly higher than what you made arrangements for with the property owner/seller, then you profit from the amount in the difference in price. Thus you only profit from the sale of the property. Even if you argued that you're selling a contract (the option to purchase) and not a property, that may likely constitute as a referral fee as you're referring the property to another who is likely to purchase.

I'm not saying it's impossible, but there are certainly a lot of hoops to jump through if you want to do this legally. You're better-off getting your RE license and wholesaling/selling the properties yourself.

Again, this is not legal advice, and I recommend you do your own due diligence and speak to the appropriate agencies/individuals for more formal advice if you wish to pursue wholesaling in Hawaii.

Licensed Real Estate Salesperson (RS-81674)

Hey Lane,

Hoping this event is still happening today. Looking forward to connecting with some local investors. Is this event held in the office's "main" room, or in a separate conference room?

@Cole Jacobs Hawaii is a difficult place to "house hack" as defined by BP podcasts/forums. Generally speaking there are no attached duplex-style properties similar to what you may find on the mainland. Especially no where near the price-point that would validate utilizing the house-hacking technique. The closest alternative would be to purchase a SFR and find roommates, or get incredibly lucky and find a property with multiple detached units already built on it (which in many cases will not be in compliance with modern zoning regulations). On the lower-end, these would likely go for somewhere in the ballpark of $800k+ though (depending on the neighborhood).

To keep this short, Hawaii's strength is the stability, and lately, growth of our market in contrast to most markets on the mainland. Cash-flow, though possible, is generally not something you'd benefit from here (unless you do it via illegal vacation rental).

That said, I would definitely buy a small condo (studio or 1-bed) for myself here, as I'd rather pay myself rather than a landlord, and IF you feel confident enough in doing out-of-state investing, leverage your remaining funds to purchase 1-2 properties that cash-flow elsewhere.

If instead you'd rather keep it local, I'd use your available funds to purchase 2 condos, one for yourself and one as an investment. I've seen condos with 7% ROI in contrast to SFRs which typically only return about 3% (illegal vacation rentals aside). It's true that SFRs generally appreciate in value more than condos, but at least with the condo idea you receive a higher immediate return AND maintain a sense of roommate-free privacy.

It just depends on what you feel most comfortable doing I suppose. Send me a message if you'd like to discuss further and I'll be happy to run numbers with you.

(Hawaii Real Estate Agent - License No. RS-81674)

@Matthew Marcley, 

Not to be a "Debbie-Downer", but if vacation rentals is something you're thinking about on Oahu especially, please consider the local laws before moving forward. I'm not a lawyer but my understanding is that vacation rentals require a certain type of license or legal authorization to operate. Some properties (many in Waikiki in fact) already have this "license", but otherwise if caught without one you can get hit with some nasty fees from the city (somewhere in the area of thousands of dollars from what I've been told). There is/was a huge problem with properties like these in Kailua operating illegally not too long ago.

What you choose to do is of course entirely up to you. I figured you should at least enter the marketplace well-informed in order to make the best decision for yourself. Maybe the risk is worth it, or maybe it isn't. Just keep this bit of info in mind when looking at properties.

I'm in the same boat.

I've been looking for a good RE-oriented CPA for awhile now but can't seem to find one.

Hi Petra,

I wish I could recommend to you some great PM companies, but instead I feel I should warn you in that the government here is cracking down on short-term vacation rentals, that is rentals shorter than 3 months (I believe). Only some properties are authorized to be "vacation rentals", and my understanding is that no additional vacation rental licenses are being distributed at this time.

You could of course do as you please, but I figured you should at least know the risk involved.

Skimmed through this thread.. yeesh. 

Not trying to further the debate or side with anyone in particular really, but hoping for some clarification.

@Eric P, or anyone else who may have an opinion, how is appreciation "speculation" and cash-flow "NOTspeculation"? Both are determined on market variables that are ultimately out of an individual's control.Generally speaking, appreciation rides on overall supply and demand, where as cash-flow is based on cap-ex, vacancy rates, in addition to supply and demand which determines rent price.

I suppose the difference might be in the short term, a cash-flow property MAY be secured via a 12-month lease to thus lock-in rent, but beyond that there's no guarantee of cash-flow, never mind the possibility of what could go wrong in the interim. To be fair, markets that appreciate could also experience similar issues such as the tech industry moving out of SF, Universities building a ton of new dorms or reducing student enrollment in Boston, or the entire developed world going bankrupt and no longer able to purchase homes in Hawaii.

I realize some of these questions would best be suited for a lawyer, but I figured I'd ask the community in the event anyone could offer some insight based off personal experience.

This is my scenario:

One of my family members owns a few rental properties on Oahu. I also own a property that will become a rental in roughly a month or so. I have a few years of experience facilitating rentals and managing property as a licensed real estate agent in another state (prior to returning to Hawaii), so I'm not a mega-expert, but I have an idea of what's required to manage property.

These are my questions:

1) I understand I need to be a licensed Real Estate Agent (in the state of Hawaii) and under a Broker to manage property for multiple individuals assuming I receive compensation for such services. I also understand that without a license, I can act as an "agent" for someone and manage property for that one person, but no one else. Without a license, could I act as an agent for that one person, AND manage my own rental too? Do I count myself as the 2nd person?

2) I'm not currently seeking a real estate license because I don't want to pay $500+ for the pre-license class (as my other license expired in 2014, so I need to take it again), in addition to the test fee and general monthly fees associated with whatever brokerage I join. What really kills it for me is the monthly brokerage fees and the fact that I'd have to split my property management fees with the house even though it's for my own family, and I'm not looking to do this, nor sales full-time mainly because I don't have the time. Am I correct in my assumption of the situation? Does anyone have any recommendations? Again, I don't plan on significantly expanding my management portfolio (maybe just a few more properties of my own), nor do I plan on doing sales other than what "might" fall in my lap.

3) To limit liability, would it be wise to create an LLC for the "managing entity" that will handle the management aspect of these properties? I know I can't call myself a property manager officially, but I can get creative with the name of the LLC.

4) Does anyone know any good real estate attorneys or investor-based CPAs I could talk to about this?

Any insight would be much appreciated.

I'm not a lawyer, but I'd guess that you could pull off what you're suggesting from a legal standpoint without concern for liability or abuse of utility use.

The question you need to ask yourself however, is the headache of drafting a complex leasing agreement/addendum, AND dealing with overages or illicit activities (in the initial stages anyway), worth the extra amount of money you'd be making per month?

Everyone has their price though. For me personally, if I was looking at a potential $100 profit margin for doing what you suggest on my rental property, I wouldn't take it. I'd rather miss out on that $100 and not have to deal with the FBI over an alleged drug ring scandal, nor (which would likely be more common), haggle with the tenant over $5 that exceeded his $200 utility spending limit.

You could say "$5 isn't worth arguing over", but understand that once you set expectations, you need to enforce them consistently or people in general will take advantage.

It's really up to you though. I'm not saying you can't do it, nor that you can't make more money. You probably could do both. I just think you'd be working harder, not smarter.

 Not sure how the state laws are in California, and Sue K. has several years of rental experience over me, but from the rental and management side of things in Boston, I most always recommended to landlords that they rent out to groups rather than by the room for the following reasons:

1) It is/was generally easier to rent the entire place rather than individual rooms (and much easier on the paperwork side of things too).

2) Generally, groups of friends get along better than groups of complete strangers.

3) When a roommate wanted out (which was common given that many of my clients and tenants were students going home for the Summer), the tenant moving out or the remaining tenants agreed to find a "subletter" with the approval of the landlord for the remainder of the lease, otherwise they'd still be responsible for their share of the rent. It takes the burden off you as the landlord to find a new tenant, at least not until their lease is up, which in Boston typically ran for 1 year.

Just make sure everyone, co-signors included are bound jointly and severally on the lease.