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