Rent or Sell (Single Family House Hawaii)

Buying & Selling Real Estate
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Rent or Sell (Single Family House Hawaii)

Christopher Dizon
New to Real Estate 路 Member since 2021 路 4 posts 路 1 vote

I think I know the answer to my question but I need someone to confirm it.

I am active duty Navy currently living in Hawaii. Bought a single family house in 2019 for $665,000. Fast forward to today, currently the house is estimated at 830,000. (About 25% increase in 2 years) At about this month next year, I will be moving to my next duty station (don't know where to yet), and was thinking of refinancing my VA loan to a conventional since I will have over 20% equity to avoid PMI and to free up my VA benefits to use where ever I'll be stationed next.

However, the past month I have been reading books, forums, and listening to podcasts about renting out single family homes and now I am leaning towards taking the money and run. I ran the numbers if I were to rent it out and I would have a cashflow of $110/month (thats without PM fees). So with PM fee's, the cash flow would be negative. 

Unless someone has a different opinion, I believe the best way to move forward is to sell.

Looking forward to your answers. Thanks!

-Chris

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  • Michael BorgerPro Member
    Rehabber 路 San Diego, CA 路 Member since 2010 路 502 posts 路 208 votes
    5y

    Hi @Christopher Dizon - yes, it may make the most sense to sell, but what about selling it with owner financing on a wrap? I believe as long as the property pays for itself - which it would with the proper terms - then you can have two VA mortgages (depending on your qualifications). That would give you a down deposit and likely better monthly cash flow without the need for a property manager. LMK if you want to go over this in more detail.

    0Reply
  • Christopher Dizon
    OP
    New to Real Estate 路 Member since 2021 路 4 posts 路 1 vote
    5y

    @Michael Borger.

    Thank you for the response. I am not quite familiar how the whole owner financing procedure works. If you don't mind, can you please dumb it down for me? lol. I am a bit hesitant on selling my Hawaii home due to the fact that homes here appreciate faster than in other states. 

    Any information is greatly appreciated. 

    0Reply
  • Michael BorgerPro Member
    Rehabber 路 San Diego, CA 路 Member since 2010 路 502 posts 路 208 votes
    5y

    You'd still sell it but with the mortgage remaining in place (not paid off at closing). As you're now off the deed, you're no longer on the hook for property taxes, insurance, maintenance/repairs, etc. You might be able to find a buyer who needs existing financing without an agent, so you'd save fees there. As you already found out that you'd be cash flow negative, it probably doesn't make sense to hold onto it unless you're willing to be negative every month in exchange for appreciation (which is never guaranteed). It comes down to what's more important to you: keeping it and going neg/month for possible appreciation, or getting out of a neg/month scenario and taking some equity.

    0Reply
  • Jerrold Hew
    Rental Property Investor 路 Honolulu, HI 路 Member since 2016 路 1 post 路 0 votes
    5y

    I sold a property here in Hawaii and did a 1031 into 4 SFH in Memphis free and clear. Knowing what I know now (but I'm still learning), I think I should have done a 1031 into a couple of down payments for small MFH or one large one.

    0Reply
  • Lake Lutes
    Real Estate Agent 路 Fort Walton Beach, FL 路 Member since 2018 路 144 posts 路 114 votes
    5y

    Hey Chris! The cashflow play on Oahu is extremely challenging. There is no doubt that you made a good investment by buying a few years ago, and you're fortunate to be PCSing during one of the best sellers market Hawaii has ever seen. I would lean towards selling and moving to your cash to your next property - let me know if you want to chat about your place and some of the comps, would love to help out! I am active duty AF and RE agent here on Oahu. Best of luck to you - aloha! 

    0Reply
  • Bleys Wright
    Rental Property Investor 路 Kapolei, HI 路 Member since 2021 路 45 posts 路 23 votes
    5y

    @Christopher Dizon Hawaii is more of a equity play and awful for cash flow. If you are leaving the island then you would definitely need to pay for a property manager. Also hopefully you accounted for Capex, Maintenance, and vacancy. More than likely you are further in the negative. It would be a better play to keep if you were 馃挴 going to move back in the future. I'm on Oahu if you ever want to talk

    0Reply
  • Dennis RochaPro Member
    Rental Property Investor 路 Big Island Hawaii 路 Member since 2020 路 9 posts 路 4 votes
    5y

    Aloha Christopher, Thank you for your service, good luck with your next station  location where ever that is going to be. I鈥檓 fortunate to have retired with the guard, so location was not an issue. Not knowing the numbers you ran to get cash flow if you rented your home makes it hard to imagine that you came out in the positive. With the high price of the home, the 1% rule seems out of reach, rents can鈥檛 be that high. Also check that you accounted for all of the monthly expenses that eat away at your cash flow. I would also consult with a tax professional regarding selling your property which is what I would do knowing your brief story. I鈥檝e learned of the 2-of-the-last-5-year rule. This part of the tax code says that if you live in a property for two of the last five years, you are able to sell the property without any capital gains tax up to 250,000 if you are single or up to 500,000 if you are married. Selling sometime next year prior to moving would give you the two years requirement if you don鈥檛 meet that already. Thanks one more time this one for reaching out for help, keep getting educated so you can make the best decisions for you and your family. Good Luck.

    0Reply
  • Bryan Vukelich
    Real Estate Broker 路 Kaneohe, HI 路 Member since 2020 路 193 posts 路 163 votes
    5y

    Hi Christopher - congrats on doing well with home purchase on O'ahu and thank you for the service.  Seems like you thought it out quite well, and getting good advice from others.  I just wanted to share that I agree with many of the others that if your goal is best return on your money, likely the best option is to sell here and reinvest on the mainland.  

    Personally, I'd like to own more real estate here but my brother and I are finding better investments on mainland that offer better cashflow and have been appreciating very well.  

    Good luck and if I can be of value to you in any way, you are welcome to contact me at any time. 

    0Reply
  • Jason Mileshko
    United States 路 Member since 2021 路 151 posts 路 49 votes
    5y

    Right now I would sell it.

    0Reply
  • Duc Ong
    Real Estate Agent 路 Honolulu, HI 路 Member since 2015 路 450 posts 路 196 votes
    5y

    @Christopher Dizon

    I agree with others that you would do better by selling and getting into something that cashflows better, like a small multifamily or a syndication in larger multifamily deals. It just depends on how much time you have and how active or passive you want your income to be. Let me know if you want to chat more.

    0Reply
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