300k to invest, unsure what to do

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300k to invest, unsure what to do

Sequoia Heuer
Hilo, HI · Member since 2017 · 5 posts · 6 votes

Hi so I’m on the big island of Hawaii and I have a house that currently appraises for around 390k. It’s my primary residence and I own it outright. Lenders say they will give me 300k as a refinance. I have some experience in the new construction world so I’m considering build to rent. If I can buy the land and build for 300k and the after build value will be 400 or more then I could borrow against that one and do it again and so on. The only problem with that I see is it’s a little bit slow. Building in Hawaii can take a year or more mostly because of permitting and sometimes materials are hard to get quickly. 
The other option I’m considering is using the 300 to buy properties out of state, where there are better deals for using the brrrr strategy. With 300 I could buy 2–3 houses at a time, hire some contractors to fix them up and get them rented. 
The second option seems harder to me but potentially more profitable. I’m currently reading the book on long distance real estate investing by David Greene so that’s helping some. 
What would you do with 300k? Thanks!

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Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
4y

WIth this type of question, you will get all kinds of answers leaving you with the same question again. Everyone has an opinion, so it is imperative that YOU analyze what your goals are, what skills you have, what you like and don't like. If your goals are cash flow only (as in you want mail box money to live off of), then finding that cash flow market would be your best bet. If your goals are wealth building, then finding a market with great appreciation can be the better play (Hawaii being a decent choice for that and much of CA being some of the greatest for that). 

Another thing to consider here (that went unmentioned above) is that your $300k comes in the form of debt from your primary residence so if you lose any of it in a bad investment, you will be paying on that debt out of your pocket to keep your primary home. That is something you really need to be careful on in what investments you choose and ensure you mitigate risks through proper due diligence, education in the investment strategy you choose, & proper team building to accomplish the goal. Borrowing from your home at a lower rate and investing that capital into a higher return is the process of arbitrage and some will say not to do it while others will give the thumbs up. I am somewhere in the middle on that and only do it when I know my downside risks are fully covered in the investment.

Podcast Guest on Show #130
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  • Bryan Vukelich
    Real Estate Broker · Kaneohe, HI · Member since 2020 · 193 posts · 163 votes
    4y

    Hi Sequoia,

    Congrats on having that kind of equity to work with.  What is your long term objectives?  Do you want to build up a portfolio of SF homes as rentals?  Do you have any interest in owning multi family property?  What is the most important investment criteria for you?

    Regarding your question, I personally believe it is hard to go wrong owning real estate in Hawaii.  That said though, although I own a primary residence on O'ahu, I only own investment property on the mainland because I get a higher cap rate and fortunately I'm in areas were appreciation has been very good (Boise, ID and Tacoma, WA).  But if I was like you and had knowledge and experience building new, I'd definitely consider doing that in Hawaii if the risk to reward was favorable. 

    It's great you the options you have with the $300k, but realize it is difficult to try to figure out what is the best path to choose.  Wish you well and if you want to chat real estate sometime, you are welcome to contact me.  Aloha 

    2Reply
  • Jayson Cain
    Lender · Manhattan Beach, CA · Member since 2017 · 423 posts · 268 votes
    4y

    Aloha @Sequoia Heuer! 

    I'm from Hawaii, but now based in Los Angeles and invest Out-of-State in Indianapolis, so I would definitely recommend investing oos if you're looking for immediate cash flow. I'd be happy to connect if you have questions regarding investing out of state. 

    Blessings,
    J

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    4y

    Go long distance for prudent cashflow. Hawaii is a primary market NOT ideal for cashflow investing.

    Let me know if you have specific questions.

    0Reply
  • Chris Davidson
    Real Estate Agent · Boise, ID · Member since 2016 · 1k+ posts · 888 votes
    4y

    @Sequoia Heuer congrats on being in such a good position! Like @Bryan Vukelich said property on Hawaii is hard to beat. With how remote things have been OOS investing is becoming much easier. With the 300 you could double or triple down on a few places in many markets.

    If you have any questions about OOS investing be more than glad to help out as work with a lot of remote investors for the Boise area.

    1Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    4y

    WIth this type of question, you will get all kinds of answers leaving you with the same question again. Everyone has an opinion, so it is imperative that YOU analyze what your goals are, what skills you have, what you like and don't like. If your goals are cash flow only (as in you want mail box money to live off of), then finding that cash flow market would be your best bet. If your goals are wealth building, then finding a market with great appreciation can be the better play (Hawaii being a decent choice for that and much of CA being some of the greatest for that). 

    Another thing to consider here (that went unmentioned above) is that your $300k comes in the form of debt from your primary residence so if you lose any of it in a bad investment, you will be paying on that debt out of your pocket to keep your primary home. That is something you really need to be careful on in what investments you choose and ensure you mitigate risks through proper due diligence, education in the investment strategy you choose, & proper team building to accomplish the goal. Borrowing from your home at a lower rate and investing that capital into a higher return is the process of arbitrage and some will say not to do it while others will give the thumbs up. I am somewhere in the middle on that and only do it when I know my downside risks are fully covered in the investment.

    Podcast Guest on Show #130
    3Reply
  • Trevor Reilly
    Investor · Coeur d'Alene, ID · Member since 2015 · 28 posts · 15 votes
    4y

    Hi Sequoia! I happen to be in a similar position myself. I'm over in Boise and am working on putting $300k into action here soon. I've started building a team over in Indianapolis and intend to BRRRR a few multi-family units over there. Since the appreciation over there is pretty slow, I feel the best way to make it work is to improve the value of existing properties.

    In your shoes, I would be very tempted to make your build & refi in Hawaii plan a reality! Construction experience in an area that is prime for appreciation? Pretty awesome setup!

    That's my two cents at least, if there's anything I can help you with please reach out!

    0Reply
  • Bleys Wright
    Rental Property Investor · Kapolei, HI · Member since 2021 · 45 posts · 23 votes
    4y

    @Sequoia Heuer I'm investing in Kansas City, MO and KS. Cash flow in that market makes more sense. I have a ground up construction project in process on Big Island. Not a lot of lenders will lend to new construction on primary residence and it can be a pain; they will lend on an investment property. You will need a GC for the build or you will have to hold an additional year for owner builder. Your budget is also a little low for a new build. Feel free to message.

    1Reply
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