How I made $600,000 doing live-in flips in Hawaii

59 Replies

The purpose of this post is to provide hope to those trying to make it in a high priced market such as Hawaii, California, New York, etc.

My wife and I made $600,000 doing live-in flips in Honolulu. It took us 11 years and three homes.

We purchased a 3 bedroom condo, sold it and purchased a 3 bedroom single family home, sold it and purchased a 5 bedroom single family home.

We have put in $80,000 along the way (down payment on Property #1, rehab of Property #1, and rehab of Property #2). That's roughly a 20% ROI per year ($80k invested, $600k return, 11 years).

Property #2 was purchased at the last peak of the market. Which is noteworthy because if you're doing it (REI) correctly, you can make money in any market.

Some take-aways:

1. Be ready to move

This plan will work best through multiple moves and trading up, but moving can be a pain. Unfortunately it is an unavoidable part of the plan. When a great deal comes up, you may have to be ready to move in a month.

2. Live below your means

This is where a lot of people slip up. It’s not fun or easy. It requires sacrifice and delayed gratification. Super unsexy, super unexciting, but super effective.

3. Lose sleep

Study your market, do some or most of the rehab yourself, talk to people in the industry, work two jobs (or one higher paying one). Everyone is busy and no one has the time, so how do people do it?  Delayed gratification.  You can always sleep (and watch Netflix) tomorrow.

4. Recognize a great deal

Know your market! Spend time each day (or at least 4-5 days a week) studying your market. What does a 3 bed/2 bath sell for, or a small house with a large lot, or the Eastside of town versus the Westside of town? You'll have to be an MLS junkie, but this will allow you to recognize a great deal within a few minutes of seeing it. When you see one, submit an offer that day.

5. Run the numbers

A lot. Know exactly what your home is worth at any given time. Know current terms and rates for financing. Run the numbers on 100s of homes. Again, this will help you to recognize a great deal instantly and determine if it will fit into your investment plan. It will also allow you to act quickly, which is essential in today’s market.

6. Get a realtor

One that’s doing it in your market. A lot. On Oahu, most realtors do not invest in real estate. If I had to guess, I think it would breakdown accordingly:

90% don’t invest

9% invest on the mainland or have one property on Oahu

1% are actually investing significantly on Oahu

Would you go to your dentist to get braces? She knows about teeth. Or maybe even your Uncle Louie? He has teeth. Or course not. You’d find a reputable orthodontist in your area who knows exactly how to do it. They can do most of the heavy lifting on Items 4 and 5 above.

You have to live somewhere, so why not make money while you’re at it. Live-in flips (and house hacking) can be tough with a spouse and/or children. Certain minimum quality of life standards have to be met. But a lot of money can still be made without inconveniencing the family too much.  My wife and I have five children, so we had fairly significant nonnegotiable life style criteria (schools, commute, good neighborhood, space, etc.), which limited how crazy we could get.  Others could, and have, seen much better results than ours.

To own a home in Hawaii is a blessing. If that home can earn you more money than your fulltime job, that’s the winning lotto ticket.

To those in Hawaii, find someone who is doing it! There are a ton of people who will tell you it’s not possible to make money in real estate here, let alone owning your own home. It is possible! It takes work and sacrifice, but it is possible.

This gives me hope! I'm a married Maui mama, new to BP and posted about my current situation if you have any inspiring thoughts/comments.

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Hi @Zasha S. You can do it!  All too often people in Hawaii say it isn't possible to make it or get ahead here.  It's hard, but it isn't impossible.

I was talking to my wife the other day about the scenario in the original post.  If we moved two more times we could be mortgage free with close to a million dollars in equity!  Not too bad for a "side hustle".   :)   I forgot to mention in my post that none of our moves took us out of Mililani, which means we didn't have to move schools, leave friends, etc.  But my wife told me if we have to move again we are hiring movers.  Non-negotiable.  Hahaha.

Hey Account Closed

I have driven a Honda Accord for the past 22 years.  Not the same one, but close enough.  To put it into perspective, on my last visit to my mechanic he gave me a shirt (he had a bunch made with the company name and logo).  It's actually a pretty nice shirt.  He said I could have it for free since I am his number one customer.  Hahahaha!  Last year I finally purchased a Honda that will keep me out of his shop for a while.

3 homes in 11 years?  I had to do a background check for a job once and the HR person said I had more previous addresses than anyone they had ever seen before.  And I don't even house hack.  Just have to move a lot for work :-)

Great job, though!  

@Isi Nau I noticed one of your points is to be an MLS junkie. Are you a realtor as well? From what I understand, you need to be a realtor to have access to the MLS. I would love to be able to scan through the MLS on the daily but don't have access

@christian 

@Christian Cody Yes he is a realtor for many years now.  He does it full time.  Check out his website listed above!!!

Hey @Christian Cody not sure what sources are available in PA, but over here there are several MLS-based websites that provide a pretty healthy amount of data that are pretty much as good as having full access to MLS. All the best!

And you used the $500K exclusion three times and paid no taxes?

Hey @John Acheson

Correct, we have not had to pay any taxes in this scenario, which has included the sale of two homes.  We are now in our third home, which we will likely live in for a while, or forever.  The net proceeds from the first two homes did not exceed $500k.  This current home would if we sold it.

If we decide to sell our current home and move into another one, we will have to plan ahead (a year or two) to make sure we are positioned in a way so as to not exceed the $500k limit.

Isi, thanks for the fast tax update! I do believe that the $500K exclusion for married couples filing taxes together applies to the net gain as opposed to total proceeds but if there's a CPA, EA or Tax Lawyer on BP that can verify that would be great. You've done well in a very expensive market!

@Isi Nau Aloha Isi! I can't believe I only came across this post now. Awesome and inspiring story! I too have started a similar path as you here in Hawai'i. We are currently living in and flipping our second home here on Oahu. Would love to meet up with you sometime to talk REI and my options going forward if you have some time. Let me know!

Isi, I am currently following your same path. In fact what scares me is that we may be buying our second home at peak market just as you guys did! How did you manage to still make a profit on that second flip? Would you do anything differently? Any advice would be much appreciated, thanks.

That’s awesome . I have done a live in flip in L.A bought back during the crash (2010) . Looking back I should of probably sold every couple years and moved on to a new project . On the market at least not really any deals that make sense here today . There are fixers with asking prices not much less than move in ready homes which is nuts .
Eventually things will change but most likely nothing like the last crash. It feels like people are starting to believe real estate never goes down again , at least over here .

I don't have anything to add about how you have done what you have done other than to applaud your dedication.  I just wanted to share how painfully jealous I am that you are doing it in Hawaii :).  My family and I went there a year ago for a couple of weeks and can't wait to return.  Aloha ! 

Hey @Chris Chantavong .  Glad you found it!  :)  Maybe if I included dramatic pictures of the before and afters it would have gotten more traction.  Hahaha.

Congratulations on being into your second home already!

I am always happy to meet up and help where I can.  Especially for people in Hawaii.  I hate seeing local families move away due to cost of living when there are ways to make it work.  There's too many voices chanting that its not possible.  I'll message you.

@Isi Nau nice!

I love seeing success stories in Hawaii.  Far too often people claim its impossible to make much over there and are quick to write the islands off.  Glad to see i'm not the only working killing it there.  Mahalo

Hey @Kyle Leslie

Our second home definitely required some luck. We purchased at the peak of the market, but fortunately were able to get it 20% below the ARV. We did all the work ourselves, which wasn't very fun. I didn't want to spend the money to fix it up, so I had to spend my time, which was fine. A little less sleep never hurt anybody. :)

Another factor that worked for us is that prices in our market didn't drop 20% during the recession.  Even if they had, we probably would have been okay since we didn't sell until the market had fully recovered and exceeded previous highs.  This one is a little tricky and would require a local expert in your neighborhood.  I knew/know our market extremely well and was confident going into this second home, that with an assumed downturn coming we would still be okay.  I had no idea how bad the recession would be, but I did have historical market cycle data for our area.  So it was a mix of study and luck.

I would purchase at the peak of the market again in a heartbeat.  If I was confident I wouldn't need to sell for five years, I could purchase the home at least 20% below the current ARV, and the repair costs would be 5% or less of the purchase price. This timeline and percentages will vary widely from neighborhood to neighborhood, so a proven expert in your area will be critical.

In our current market, these types of properties require some serious/daily searching and quick action when you find them.

Good luck!

Hey @Joseph M.

I can only imagine the competition in LA right now.  Same here.  Sellers are putting stuff out there that is rundown, but their asking price is the same or barely below excellent homes in the neighborhood.  But what's crazier than that....their homes are actually selling at those prices!  Like you mentioned, a belief that prices will keep going up.  Also a belief that any ugly house is a good buy.

I also see some people flipping here who are listing their properties 10% higher than the highest ARV comp. Scary to think they went into it assuming/calculating a resale price that high. Definitely some concerning signs.

Hi Isi Nau,

Thank you for sharing. I understand that the $600,000 you have made is in equity, which is awesome. What are your thoughts on turning your equity into income, or just on generating passive income in general for those who live in Hawaii?

My interest comes from the perspective of someone who lives in Hawaii and who has had 2 strokes which has made me very aware that at anytime my ability to provide for my family may be compromised. If I cant go to work there is no income. So this is why I am interested in what your thoughts are for those who live in Hawaii in regards to securing passive income.

Thanks!

@Isi Nau yeah it’s nuts . Mostly have to find off market but then everyone is fighting for those too.
I hear of people doing a deal for 10% profit of sale price seems pretty risky.
Besides my own home I’ve mostly focused out of state besides some land deals in SoCal .

A lot of foreign buyers that have cash too . L.A is now the top investment market for foreign investors above NYC now .

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