Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
Aloha everyone! I'm new to BP. I have been working as a Registered Nurse for 5 years at a hospital and my wife is a social worker for an insurance company who works mostly from home. If there is one thing I realized since joining BP, it would be that I know next to nothing about money.
About me:
$55,000 in the bank account
$160,000/year in W2 income
$2,000 saved every month on average
$569,000 last appraised value of our townhome
$458,000 @ 3.625% left on our mortgage
$65,000 @ ~4% in student loans
$0 taken from $35,000 heloc on our property
Future debts:
I'm going back to school to get my Doctor of Nursing Practice in August which will cost $80,000 over the course of 3 years (8 semesters) (Stafford loans for school are around 6-7%)
Invitro ferilization, *sad violin...*, with insurance: $8,000 at least
Future W2 income:
our combined income will probably be near $200,000/year after I finish school, however I will have $80,000-$88,000 more debt
Long Term Goals:
Free and Clear our first/current home
Payoff/Purchase Buy and Hold rental property
Pay off loans
Short Term Goals:
Have a baby
Complete my nursing degree
Purchase Buy and Hold rental property
My humble request from the BP community is to please share your wisdom and guidance with me. We do have a financial advisor who has been helping us make decisions thus far, however I want to hear interesting/different ideas on how to maximize our money that only the BP community could produce.
Ideas involving how to pay for college would be helpful as this is where a lot of high interest debt could occur, or ideas about when would be a good time to start purchasing buy and hold RE based on similar experiences to mine.
Mahalo and thank you in advance for your time, I know it is one of those TLDR type of posts.
Inspector · Mililani, HI · Member since 2016 · 170 posts · 31 votes
9y
@Michael Mazzella and @Michael Borger !!! I just graduated from Michael Mazzella's April Honolulu Mentor Training. There is a camp who talk about Real Estate Investing, and there is a camp who do Real Estate Investing. You want to position yourself so you learn from the "do-ers". And might I add both Michaels are very nice, very helpful, and very successful individuals.
Investor · Volcano, HI · Member since 2017 · 18 posts · 8 votes
9y
Aloha Jonny from the Big Island
That is quite a bit of information there. Because you have opened with the statement " I know next to nothing about money", I think first and foremost you should read Rich Dad, Poor Dad by Robert Kiyosaki. You will find concepts within those pages that will give you a different perspective on how you currently think about finances. But don't pay for training, you will find everything that you need on BP.
Review the educational material on the site. There is a wealth of information available through articles and pod casts.
At a high level, this is all about the money in your pocket at the end of the day. For example, you invest 80,000 for your education for a possible increase in your gross of 40,000. How much of that do you get to keep? You will find yourself in a higher tax bracket and be taxed accordingly. Now subtract the loan payment from that amount. Was the investment in time and money worth the return to you? If one of your goals is to achieve financial freedom in the next 10 years (aka quitting the W2 job, which is what most of us here are striving to accomplish) is it a good use of time and worth taking the debt?
Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
9y
Richard Lindman thank you for your input! I will order that book to read this summer, i have heard a lot about it. As for pursuing a nursing degree i am decided for it already despite the increased taxes and liability.
I'm a real estate agent and investor here in Honolulu. It sounds like you have quite a few options to maximize your return. One strategy that I'm planning on applying soon is to do a live-in-flip, where I would buy something using an FHA 203K loan, fix it, move in, and then either rent or sell my current place. Let me know if I can help in any way!
Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
9y
Duc Ong , thanks for the post! Glad to see other Hawaii people trying to get into the RE market here. I'm still really new to REI and all things money in general so I can't add too much to the conversation, but I appreciate the input and your current plans. I'd like to follow you and see your success!
Real Estate Agent · Honolulu, HI · Member since 2015 · 450 posts · 196 votes
9y
No worries, @Jonathan Cheng, there's so much to learn! Let's get together for some coffee some time to chat about real estate. Shoot me an email. Look forward to connecting!
Investor · Honolulu, HI · Member since 2016 · 1 post · 1 vote
9y
Jonathan, I saw this post the day you wrote it and thought for sure it would get a lot of traction... I have been lurking and reading biggerpockets from the sidelines for YEARS, like 5+ years. But your post really intrigued me and I am finally going to post on the forums to give you my thoughts on what I would do in your situation.
First off, for someone who “knows nothing about money” you are doing pretty darn good. Good Savings rate (for hawaii standards), good cash fund, and property owner.
55k in the bank - I am assuming this is all Savings, CDs (if any), Money market, and checking accounts. I would do 10k emergency fund and 10k saved for invitro. That would leave 35k cash to invest + your 35k HELOC (what is your rate?). Total 70k to invest.
65k student loans - 4% fixed interest? If so I would pay minimum and let it ride.
458k mortgage @ 3.625% fixed? I would also pay minimum and let it ride for 30 years.
I like that you are getting your doctorate! Investing in yourself is the best investment you can make. 80k debt to make 40k+ more for however long you want to work is worth it imho. It all depends on your goals. If you want to do FIRE (financial independence retire early) then I would say bad idea. But if you plan to work 8+ years then great idea. Especially if it's something you like to do. As for the 6-7% student loan debt I would refinance it or roll some of it into your HELOC depending what your rate is.
I am not sure how many bed/bath your townhome is or what your rental market is like on the eastside but what I would do is rent out your current townhome (if it cash flows or if it's break even) and then go buy another condo/townhome somewhere else on island. I would put 10% or less down on the next primary residence. If the new place appreciates you can refi to get rid of PMI and/or live in it for 1-2 years and move again. This is actually my plan if I decide to stay on Oahu. I may move to the mainland soon, which I would do this plan or get a multi family home wherever I end up.
If you want to invest out of state for better cash flow I would recommend picking someplace that you are willing or would want to fly to. I made the mistake of buying somewhere for pure cash flow but I would never want to visit. I told myself I would never do that again! Ha! Out of state is definitely cheaper and MUCH better cash flow but harder to manage and build a team. Hawaii is a cash appreciation play.
You mentioned a financial advisor, what advice has he/she said to do? Do you have a IRA (Roth or Traditional) account? 401k plan at work? Taxable brokerage account with mutual funds with your financial advisors firm? Life insurance? Lots of other vehicles that create your financial picture that can help grow your net worth along with RE.
I hope my response helps. DM me if you have any other questions or need help with anything. We have similar stats in income, bank account, and mortgage. My wife and I had around 300k in student loans (currently at around 200k). So I know the feeling of not knowing where to put my money and how to allocate my money as efficient as possible. Dealing with student loan debt can definitely play mind games on you. It’s a heavy burden to carry. But I think smart investing decisions now is better than throwing all your money at the student loans to pay it off. We carry all that student loan debt but still have an out of state RE investment, 401ks, stocks, etc. It can be done, just need to have a plan and be comfortable with the decisions you make.
Ewa Beach, HI · Member since 2013 · 145 posts · 42 votes
9y
@Jonathan Cheng I'm a investor and real estate agent on Oahu as well. Buy and holds that produce any type of cash flow beyond 3-4% on Oahu is going to be very difficult if you're not going to put at least 20-30% down. Maybe specifically try vacation rental investing with self management although most VRs are technically illegal without a permit.
If you want to take advantage of market try flipping. A could strategy could be to purchase, wait a year, rent it out, and flip it so you can take more time to plan and allow the unit to appreciate more.
Hit me up if you have any questions or would like to talk about difference strategies.
Honolulu, HI · Member since 2017 · 9 posts · 5 votes
9y
@Jonathan Cheng your post caught my eye, as I'm also a 28y/o on Oahu trying to hustle my way into REI. You've taken the first step in establishing your goals - I think a great next step is to start getting educated so you can develop your strategy of how you'll achieve them! The bigger pockets podcasts have been a great wealth of knowledge. Listening to them at 1.5-2x speed has let me cram more content into my short commutes... careful though, you might start talking faster too.
@Duc Ong@Jason I.@Joe Sillaman I'd be interested to hear how others Oahu investors are succeeding in our local market. So far, any MLS analysis for buy and holds are producing negative returns... Is Hawaii really just flips and/or an appreciation play?
Ewa Beach, HI · Member since 2013 · 145 posts · 42 votes
9y
@Aaron Y. I would say unless you're buying with very high cash down there's not really a whole lot of positive cash flow opportunities with 0-20% down loans with the market being the way it is now. It's basically appreciation and flips all day.
However, if the military receive another boost like 5-10% in housing allowance it could reinvigorate the market for sales and rentals.
MLS is "retail", no deals to be had unless you have a ton of cash and can buy dilapidated flips lenders or regular buyers wouldn't touch.
It's sad but I'm considering breaking even on a rental a "win" at this point. Granted I buy my properties at 0-5% down VA loans just to get something. I'm getting tired of having older properties that need repairs often. I'm thinking of buying new/newer rentals in military areas like Ewa Beach and actually take negative returns on it because over time I'll be able to boost rents and make pretty solid returns off appreciation. On avg values increase just under 5% a year.
Las Vegas, NV · Member since 2017 · 17 posts · 2 votes
9y
Hi!
Oahu born and raised, here, and also looking to get into REIing. I've been lurking the forums for about 2 weeks now and I've picked up on a lot since then. BP is a gold mine for insight and advice from seasoned investors.
I'm no way an expert, let alone remotely close, but I think I've picked up a few ideas from reading almost every discussion on my freetime. With your current situation, I think the best option for you would be to house hack a multiplex while renting out your current home. If you could find a good deal, it will give you cash flow and equity. it will also give you precious landlord / management experience down the line. You can also cash out refi into another investment.
I don't know how the housing market is on the BI, but I grew up on Oahu and have a slight understanding of how it goes. Prices don't normally fluctuate on Oahu. From what I've noticed, they actually appreciate very well because the supply and demand is so tight. BRRRR, in my opinion, goes along really well with this trend.
Again, I'm nowhere near an expert and these ideas are pretty much at the top of my head, without even looking at the hard numbers. This is just something I, personally, would do with housing market on Oahu.
Hope these ideas help :)
Also, look into local REIA meet ups in your area. Next week will be my first meet up that I'm going to attend. I look forward to it. Good luck on your journey!!
Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
9y
Jason I. Hey bud, thanks for the input! All the interest rates on our debts are fixed, and I agree with renting our 2br/1.5ba townhome when it breaks even or cashflows, but after using the rental property calculator to generate the net operating expenses and taking into account depreciation it seems like we'd only be able to do it after 5 years then a refi. As for retirement, the hospital i work at does matching contributions and I've been putting 10% with 3% matching to a 401 roth. I'm planning on using the heloc to help fund my grad degree.
Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
9y
Joe Sillaman thanks for the advice, i have found the same things that you described in Oahu's market. It is quite frustrating that the investment has to be so high on Oahu to generate any cashflow. I thought about vacation rentals but I do want to provide housing for those that need it locally. Maybe it's the nurse in me...
Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
9y
Aaron Y. Hey, i have been listening to the podcasts religiously. These people do amazing things, most of which I feel would not be doable in Oahu's market, but nevertheless opportunities and deals are somewhere everyday. I feel like in Hawaii is in a little housing bubble that is going to burst in the next 5years for low income families. The rate of inflation and cost of living is outpacing the minimum wage so fast. Part of my gut is telling me to wait for this to happen and buy when it's a buyers market with more inventory. But I'm not good at being patient and waiting for something that may never come... tldr lol
Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
9y
This is excellent advice. Rather than paying down debt, keep it in place and use the money to invest elsewhere. Think of it as a loan for which you didn't have to qualify.
In this very hot real estate market, I'm parking my money on the sidelines in safe, short-term private lending opportunities with low LTVs. I'm still getting double-digit returns and my money is safe. Settling for a breakeven on a rental is a warning sign that the market is overvalued. These are the stories you hear right before a crash.
Jonathan, I saw this post the day you wrote it and thought for sure it would get a lot of traction... I have been lurking and reading biggerpockets from the sidelines for YEARS, like 5+ years. But your post really intrigued me and I am finally going to post on the forums to give you my thoughts on what I would do in your situation.
First off, for someone who “knows nothing about money” you are doing pretty darn good. Good Savings rate (for hawaii standards), good cash fund, and property owner.
55k in the bank - I am assuming this is all Savings, CDs (if any), Money market, and checking accounts. I would do 10k emergency fund and 10k saved for invitro. That would leave 35k cash to invest + your 35k HELOC (what is your rate?). Total 70k to invest.
65k student loans - 4% fixed interest? If so I would pay minimum and let it ride.
458k mortgage @ 3.625% fixed? I would also pay minimum and let it ride for 30 years.
I like that you are getting your doctorate! Investing in yourself is the best investment you can make. 80k debt to make 40k+ more for however long you want to work is worth it imho. It all depends on your goals. If you want to do FIRE (financial independence retire early) then I would say bad idea. But if you plan to work 8+ years then great idea. Especially if it's something you like to do. As for the 6-7% student loan debt I would refinance it or roll some of it into your HELOC depending what your rate is.
I am not sure how many bed/bath your townhome is or what your rental market is like on the eastside but what I would do is rent out your current townhome (if it cash flows or if it's break even) and then go buy another condo/townhome somewhere else on island. I would put 10% or less down on the next primary residence. If the new place appreciates you can refi to get rid of PMI and/or live in it for 1-2 years and move again. This is actually my plan if I decide to stay on Oahu. I may move to the mainland soon, which I would do this plan or get a multi family home wherever I end up.
If you want to invest out of state for better cash flow I would recommend picking someplace that you are willing or would want to fly to. I made the mistake of buying somewhere for pure cash flow but I would never want to visit. I told myself I would never do that again! Ha! Out of state is definitely cheaper and MUCH better cash flow but harder to manage and build a team. Hawaii is a cash appreciation play.
You mentioned a financial advisor, what advice has he/she said to do? Do you have a IRA (Roth or Traditional) account? 401k plan at work? Taxable brokerage account with mutual funds with your financial advisors firm? Life insurance? Lots of other vehicles that create your financial picture that can help grow your net worth along with RE.
I hope my response helps. DM me if you have any other questions or need help with anything. We have similar stats in income, bank account, and mortgage. My wife and I had around 300k in student loans (currently at around 200k). So I know the feeling of not knowing where to put my money and how to allocate my money as efficient as possible. Dealing with student loan debt can definitely play mind games on you. It’s a heavy burden to carry. But I think smart investing decisions now is better than throwing all your money at the student loans to pay it off. We carry all that student loan debt but still have an out of state RE investment, 401ks, stocks, etc. It can be done, just need to have a plan and be comfortable with the decisions you make.
Inspector · Mililani, HI · Member since 2016 · 170 posts · 31 votes
9y
Aloha Jonathan,
Welcome to Bigger Pockets! I was in your shoes 6 months ago. If I may make these suggestions: 1) Connect with Active Investors (those currently putting in offers and doing deals), 2) Learn about the best strategies that work in Hawaii's market, 3) Start off getting involved with Real Estate Investing in small but tangible ways to get your feet "wet", 4) Know who the top investors are and learn from them.
You want to "stream line" your learning curve. You don't want to forever be in the "learning phase", if you know what I mean.
Investor · Pearl City, HI · Member since 2017 · 30 posts · 10 votes
9y
Welcome @Jonathan Cheng! Always nice to hear from a fellow newbie in Hawaii. I totally get the feel about knowing nothing about money. I feel like I'm undergoing a period of financial enlightenment recently....WHY DID NO ONE TEACH ME THIS BEFORE?!?!?! Total Face Palm, but I'm learning and I love it, I need to take control! I have a suggestion about paying down your debt, am involved with a great group here that has taught me a lot, let me know if you are interested and I can PM you their info. Also best wishes with the baby making :)
@Richard Lindman - I've just started reading the Kiyosaki books, they were eye opening to say the least!
The Hawaii market is tough...though not impossible. I've heard of some people doing really well, but when I run my numbers I just don't see it. I work full time so I don't feel like I have the time to invest in a flip, though we do house hack and that works. Recently I've been trying to research turnkey companies in the mainland, there are some cities that appear to have really good cash on cash returns with lower entry points.
That book got me started on this interesting path. After researching options on the islands (and a few conversations with some realtors on the Big Island), I have ended up going the out of state route, built the virtual team and started purchasing. Let us know how the turn key works out.
Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
9y
Evelyn Kop thanks for your input! I'm also reading Kiyosaki books, most recent was tax free wealth by Tom Wheelright CPA, very informative but not extremely useful due to it being aimed at business owners/investors. But I hope to transform my skill set into a business somehow in the future. I also totally understood what you meant about revelations in learning about generating long lasting wealth through RE.
Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
9y
Michael Gayer Jr hey, nice to hear from someone similar, I'm curious who/what you ended up finding on the quest to find successful RE investors on Oahu. All the ones I have met so far are at least twice my age with properties/cash they had inherited from a previous generation.
Inspector · Mililani, HI · Member since 2016 · 170 posts · 31 votes
9y
@Michael Mazzella and @Michael Borger !!! I just graduated from Michael Mazzella's April Honolulu Mentor Training. There is a camp who talk about Real Estate Investing, and there is a camp who do Real Estate Investing. You want to position yourself so you learn from the "do-ers". And might I add both Michaels are very nice, very helpful, and very successful individuals.
Kaneohe, HI · Member since 2017 · 13 posts · 4 votes
9y
Michael Gayer Jr hey, thanks for sharing your mentors with us. They seem like very successful individuals. I think one of the thoughts that inhibit me from joining these mentorship programs is that the inventory in Hawaii is so low right now when it comes time to bid against each other, people like the Michaels you mentioned will have stronger offers than me probably involving cash. This could all be just my paranoia, but I can't shake the idea that this is true.
Inspector · Mililani, HI · Member since 2016 · 170 posts · 31 votes
9y
Oh believe me, they don't have "strong offers"! What I mean by that is ... I know their mindset and they ONLY put in offers that make sense. The higher the offer, the less profit. Graduating from the Honolulu Mentor program taught me what to offer and to move on if it's not accepted. It's a numbers game. In fact, I think less experienced investors will outbid them all the time! So I don't worry about them bidding me up, I worry about putting in offers way more than I should. They make dozens of offers on a weekly basis - consistently and diligently. That's why they are so successful.
Rehabber · San Diego, CA · Member since 2010 · 502 posts · 208 votes
9y
You're assuming that we "bid". Very few of my deals involve another potential buyer - I'm usually the only person they're speaking with. If you market well, you don't need to rely on the MLS where you're competing against the general public, investors and all.