An update from Kauai

[Mike V.]

It's been a while since my last post so I thought i'd post an update on how things have been going for me in Kauai.  In the last 6 months i've acquired two more short term rentals in the Poipu Beach area and completed a 1031 exchange. Both were off market deals.  The rental market is still extremely hot and prices are high with inventory low, but I have still been managing to cash flow on the new purchases.     

Purchase 1: 3 bedroom 3 bath condo in a *luxury* complex. Paid 1.85m with about 1m down. (I sold a unit that I purchased for 485k about 10 years ago for 1.7m and did a 1031 exchange and used a little on the second unit) Total carrying costs of approx. $8450 a month. Kauai is a high occupancy area and I average 95% occupancy among my units. With this occupancy rate, I will average $18,500 a month in rent netting around 10k a month. At 120k profit per year, that's about a 12% CoC ROI. This is typically lower than I aim for but using the proceeds from a 1031 that had massive equity, and given the desirability of this complex, I made an exception. Another unit in this complex just sold for 2.2m. Up $350k in equity based on that comp.

Purchase 2: A 3 bedroom, 3 bath house a short walk to Poipu Beach. Super cool location on a half acre lot. Paid $2,150,000 which was about $350,000 under market rate. I put down ~40% using the remaining 1031 proceeds and some savings and have a ~$11,000 mortgage but only a 300 HOA fee with misc bills etc around $1000 a month. All in carrying cost ~$12,500 a month. House was in rough shape and required an extensive renovation. I put in ~$500,000 in repairs, upgrades, furniture, etc and converted to a 4 bedroom. This property will net ~$27,500 a month leaving a profit of ~$15,000 a month. At $180,000 profit per year, this one will be a 13% CoC ROI. Again, a bit low but I can resell this unit post renovation for ~$3,200,000 so it is up about $550,000 in equity in the 6 months I have owned it. The renovation finishes in ~2 weeks. Maybe i'll make a separate post on that process if there's interest.

My other units continue to do very well with steady rate increases over the last few years. I have enjoyed MASSIVE appreciation with great CoC returns and will continue to purchase as deals are found. I self manage all of my units using my team of connections on Kauai to keep overhead lower. Its been a busy but productive year for me. I'm heading back in two weeks to finish setting up the remodeled unit so if anyone else is on island would be happy to chat then. In addition to the returns, I get to enjoy writing off all my (and family) trips as work expenses as well. Kauai is an expensive market with high overhead but I have 15+ years of solid returns so ignore those who say its an impossible market. They're just doing it wrong. :)

[Warren Bullock]

interesting info. Thank you for shairing.. Currently sitting in a Kapaa Condo looking at the pool and beach, trying to figure out how this all works around here.