What bank do you use?

Question

Hi All,

About to close on my first property in Hawaii. My LLC is setup and ready to take the title of the LLC after the mortgage closes (I discussed this with my lender and no concerns over the due on sale clause).

However, I have yet to select a bank and credit card for the business. I did not realize I couldn’t open a chase account because they do not have any branches there. I’m thinking an online bank might be best.

Any recommendations? I just need an account that my property manager can deposit/withdraw funds from. I don’t expect a high volume of activity.

Jeremy

Account Closed · Answer

@Greg Gaudet My broker has a brand new program that enables him to offer conforming loans on some vacation rentals that can be considered a 2nd home. There are some unique restrictions, such as the condo cannot have a front desk and a few others. PM and and I’d be happy to put you in touch or provide additional details. Although it might not help you because you live on the island. I can qualify for the same type of loan again as long as I “upgrade” and my next property is more expensive than what I purchased.

And yes, very familiar with the on island representative requirement. That is why if I ever did take it over, my PM fees would not go down to $0. I still would want to pay someone to be a proper on island host and not just put the cleaners’ number down.

Jeremy

Account Closed · Answer

@Greg Gaudet

I purchased on Maui for the purposes of a STR. This is going to be managed by a property manager who will manage everything.

Purchase price: $450k

Expected gross annual income: $65k (I’ve stress tested this many different ways and under much more conservative assumptions)

25% down, 4% 30 year fixed.

$16.6k cash flow, 8% cap rate.

My break even cash flow is at about $44k gross (mortgage, taxes, property management fee, insurance, AOAO etc.).

At some point I may consider managing the unit myself and obviously my cash flow would go up significantly.  Overall very excited about my first deal and ready to do some more!

Greg Gaudet · Answer

Bank of Hawaii. I've always used them. And even though they are big for a local bank, I use them for a lot of mortgages. Right now I have a heloc expected to fund next week with them. They're doing fixed rate 4.7% over 25 years at 85% LTV on an investor unit (since there's not first mortgage, but still those are pretty sick terms for a heloc!!). Anyway, their standard banking products are good too and their convenience is unbeatable.

Account Closed Which island did you buy on? What's the deal? Vacation rental? What kind of return are you expecting? Cash flow?

Greg Gaudet · Answer

Wow... 4%??? On a condo-tel??? Please explain how you pulled that off!

Typically condo-tels (condos that have a front desk and are designed to be STRs, and make up 80-90% of the condos on Maui) get even higher interest rates than long term rental/investment properties because they are based on vacation rental income)

Keep in mind, you cannot legally self manage a STR (or any kind of rental) on Maui unless you live on island year round. If you don't live here, you need to have an on island rep that is available to respond to emergencies. Some people have found ways around this. But this came about due to all of the mainland investors buying STRs on Maui and self managing from the mainland. Then their condo would get flooded at 11pm, the guest calls the owner who doesn't answer because they're sleeping, and the guest ends up screwed. Or the owner does answer, but can't find someone to respond and address the issue because they don't know the local vendors or who to call that will actually show up. Anyway, lots more on this, but just wanted to make sure you knew about that.

Which condo building did you buy at? Did you buy on MLS? Who's your PM?

(I'm just curious because it's a small market so I'm sure I know your building, and I probably even used to manage STRs there)

Chris Chantavong · Answer

Bank of Hawaii

Duc Ong · Answer

If you want a business checking account, BOH has a free one.

Michiko Gladman · Answer

I am a newbie however I used to live in Hawaii and big banks are First Hawaiian Bank, Bank of Hawaii, and Central Pacific Bank.  I think biggest bank is Bank Of Hawaii.   This bank is everywhere in Hawaii.