All Forum Posts by: Royce Talbo

Hey guys, I bought my home for $550k its a 3 unit multifamily and I plan on selling for $800k.  My tax person splits it 50/50 due to sq footage.  So my gains will be about $250k, which from what I understand i can do a 121 for $125k and 1031 for the other $125k.  

My question is, since I am only using half for 1031 do I have to find another property that is $800k or can I find a property for $400k or 2 $200k or 4 $100k properties?  

Also If the latter applies from my previous question, after I acquired a new property(s) can I refinance or get a HELOC to get money out? And how soon can I do it? For example (not including closing cost) I could only find 1 $400k property within the 45 days. I put in the $125k giving me 31% equity. I refinance or get a HELOC to get it down to 20% equity ($80k) and later find another property for $225k to put down the remainder $45k as a 20% downpayment.

@Jonah Molina Rich dad poor dad is just a guide that has many flaws, but in general it is correct, but not in every situation. 

Rules are not rules but guidelines. real estate is local and every location is different. You will never find 2% rule in hawaii, its more like .5% unless you are looking at vacation rentals. 50% rule is again a guideline for quick analysis, when you actually start crunching the numbers this rule goes out the window. 70% rule is for after repair value, not what a fixer upper is listed for. so $600k ARV house at 70%= $420k-$80k for reno= $340k, which is not far off from $350k that you listed, assuming comps are $600k

Keep reading everything you can and researching.  To get the jist of real estate investing will be a good 6-8 months.  To really know what you are doing will take years, but you learn along the way, trial and error.  

@Jay C. I think importing your guys and material will reduce cost by a lot.  Good contractors/workers are hard to find.  Its so busy that they will all over bid and you either take it or leave it.  Some dont even get back to you if you want them to bid because they dont need your money, plenty of other jobs out there.  Dont know the laws on if you need someone local though.

You cant do short term rental in Kaneohe.  I think if you get busted the fine is something like $1000/day.  Plus its not a tourist town like Kailua, Haleiwa, or Waikiki.  

Permits can take a while. I heard some people take almost a year to get approved.  The city is so backlogged and under staffed that it just goes in a pile. Then the person approving it makes corrections and gives it back to you. once you made those corrections, it goes back in the pile.  Its best to know what is needed and get it right the first time.  Good luck.

Ok thanks for the input guys, I guess I'll just have to wait on this one.

Can anyone tell me if I as a beneficiary, can take out a HELOC on my mothers property that is in a revocable trust for me? She is the the trustee and I am the beneficiary, I have a stable job and can qualify for the HELOC, but she just started her own company this year and doesnt have the years of experience to qualify for a HELOC on her own. Also she doesnt want to be on the HELOC or loan if possible, but wants me to be able to access the money for my investments.

@Al Ball lf you are building up and adding Sqft, then it might be worth it as it adds value.  If you are just talking about converting your existing 2nd floor to a rental, then it might not be worth it, unless you can easily convert it back to a single family later.  Most people buy houses because they want privacy, converting it into a duplex is almost like buying into a small condo.  Most people are not investors so they dont want to house hack and live with someone.

Run your numbers with both, checking comps with the additional sqft and estimate the cost of construction. also run the numbers on what rents you can get and your ROI of the conversion. Nobody will be able to tell you what is good or bad unless they are in the same neighborhood as you, as it heavily depends on your local market. It also depends on how long you are going to hold it before you sell. Typically what I have seen in my market is that homes with an additional in-law suite, guest house, duplex that was converted from a single family typically only go for a little more than a stand alone single family. They are not worth 2 single family houses or 2 condo units, as they are just 1 large house with a dividing wall and extra kitchen.

Real estate is local that's why some cities were affected more or less by the last recession, so some might have tops sooner or later than others. There is no way to predict if we are at the top, but there are some indicators that I noticed in my market.  past several years appreciation was crazy and homes would sell above list price with multiple offers.  This year though the price continues to rise it does so at a slower pace and even though there is little inventory, I noticed some properties have dropped their asking price.  Also rental prices are stagnant or dropping with higher vacancy rates.  With higher purchase prices and lower rents, we have to look at purchasing power and see what people can afford.  if they cant afford to buy and the rents are cheaper than a mortgage they will rent.  there are many new developments that have finished or about to start that will increase the supply side and help the correction.  Do i believe we are in a bubble, nope, but are we overpriced and due for a correction soon, yes.  

@Andrew Johnson i get the second part, what threw me off is that when you said 360 degrees of development opportunity and not 180 degrees, to me seemed to imply that you would rather have somewhere like the midwest that you can keep expanding development and not limiting it.  your reply clears things up for me on what you initially meant.

@Andrew Johnson Im a bit confused at your first point.  I see it as a simple supply and demand situation.  Yes you cannot build to the west because there is an ocean which limits supply.  Anywhere in the world there is a demand to live in a coastal city.  Take hawaii for example we have appreciation because of high demand of strategic location for the military, good weather for tourist and some other factors.  We have very little supply because its an island and there are lots of preservation and ag land limiting the amount that can be built out.  Where as the midwest land is super cheap and endless supply that you can keep developing 360 degrees, hawaii having limited supply has super expensive land.  So only being able to develop 180 degrees in Cali limits supply that doesnt keep up with demand and pushes prices up versus the midwest where you have endless supply that will easily meet demand keeping prices low.

@Brian Nakagawa The only time to invest in a lease hold is if you are planning on making it a vacation rental and the numbers work or if the lease is at lease 40+ years and the lease rent is low.  This is so you can sell later on.  LH with short leases will not sell because noone wants to take that chance that the Fee holder will not renew and just take the property back.  If you have a long lease the value will slowly go down but because of the high appreciation in hawaii you might be able to make a profit or break even. Also banks wont loan on LH with short leases because they know they cant get their money back, so the range you are looking at will probably not work.  

Right now I think you should hold on to your money because the market is crazy right now.  The prices I feel are overpriced (just my opinion) and the rental market is down across the island.  Many landlords are dropping prices from what they used to ask and occupancy is taking longer to fill.  So with buying prices going up and rental prices going down, the ratio is not good at all.

I suggest you just continue your education and watch the market.  You could also look into house hacking, if the numbers work, do Lien sales, find off market deals to flip, or wholesale.  Dont get suckered into investing out of state until you know what your are doing, thats how many people lose money.  They think they are good investors just because they are making money in an upmarket, acquiring property after property, then when a storm hits or there is a down market they get screwed.  Good luck.