Investing outside of Oahu

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Investing outside of Oahu

R Bucka
Mililani, HI · Member since 2021 · 8 posts · 3 votes

Aloha,

Soo much great content and professionalism here! Thank you in advance for giving me a chance. Here it goes, I’m new to the site and I’m new to investing. I have a condo in Mililani Oahu and looking to 1031 exchange it or pull equity to purchase more condos . It’s been a good rental netting me $1100/mo. Im looking for more passive income and I’m more of a long longterm investor. Hawaii is an expensive market and I’m not seeing the real estate prices that will allow me to acquire more property with passive income. I’m wondering if anyone is investing out of state and if so which areas/towns?

Background info:

Condo Value-$300K

Goal: $5000 month passive

Timeline: forever

Aloha!

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
5y

@R Bucka, let's use those numbers above - Forget depreciation for a minute (although it's the 800lb gorilla).   In CA, on a gain of $300K without a 1031 you're looking at around 1/3rd of that being paid in tax.  

I don't know why that guy doesn't think $100K of taxes is significant.  But it would be to me.  Because your 1031 allows you to use that to purchase real estate for yourself.  And what can you buy for $100K??? Maybe three cash flow properties in flyover states using it as a down payment!!  Question to ask is would you pay $850 for the opportunity to win $100K?  

Point is the 1031 is a great tool to move that portfolio into better cash flow.  And that's exactly what we've been doing for a lot of HI clients.  Appreciation has been great.  Now it's time to look at cash flow.

@Paul Welden, your concerns about the timelines are valid.  But there are many ways to mitigate that.  And every year we do an informal internal survey of exchanges that fail.  Even in 2020 it was well less than 10%.  And that's counting several that were designed to fail so the exchanger could recognized the gain in a later year.  So the situation isn't as dire as one would think.  But your point would be that some one should never purchase a bad property just to complete an exchange. And that's exactly right  The cost to start one is so negligible that it shouldn't wed you to the process in the least.  

Paying less than $1000 to spin a wheel with a 90% chance of winning $100K isn't a bad deal when just paying the tax if you fail is your worst case scenario.  No one ever went broke just paying tax on profit.

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  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    5y

    Unless you are looking at a 200-500k capital gain plus depreciation recapture (see your form 8285) 1031s don't make sense. I don't really know why so many people use them.

     Hawaii is a primary markets which is NOT ideal for cashflow investing.

    It could appreciate but I consider that gambling. Sophisticated investors invest on cashflow where the rents exceed the mortgage plus expenses (and enough money to pay for professional property manage to do our dirty work).

    1Reply
  • R Bucka
    OP
    Mililani, HI · Member since 2021 · 8 posts · 3 votes
    5y

    @Lane Kawaoka thank you for your response. What areas do you see this possible? I’ve been looking in the Phoenix AZ but it’s a hot market there as well. Your insight is much appreciated!

    0Reply
  • Paul Welden
    Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
    5y

    trying to complete a 1031 exchange within the timelines permitted seems almost impossible in the current real estate market. 

    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @R Bucka, let's use those numbers above - Forget depreciation for a minute (although it's the 800lb gorilla).   In CA, on a gain of $300K without a 1031 you're looking at around 1/3rd of that being paid in tax.  

    I don't know why that guy doesn't think $100K of taxes is significant.  But it would be to me.  Because your 1031 allows you to use that to purchase real estate for yourself.  And what can you buy for $100K??? Maybe three cash flow properties in flyover states using it as a down payment!!  Question to ask is would you pay $850 for the opportunity to win $100K?  

    Point is the 1031 is a great tool to move that portfolio into better cash flow.  And that's exactly what we've been doing for a lot of HI clients.  Appreciation has been great.  Now it's time to look at cash flow.

    @Paul Welden, your concerns about the timelines are valid.  But there are many ways to mitigate that.  And every year we do an informal internal survey of exchanges that fail.  Even in 2020 it was well less than 10%.  And that's counting several that were designed to fail so the exchanger could recognized the gain in a later year.  So the situation isn't as dire as one would think.  But your point would be that some one should never purchase a bad property just to complete an exchange. And that's exactly right  The cost to start one is so negligible that it shouldn't wed you to the process in the least.  

    Paying less than $1000 to spin a wheel with a 90% chance of winning $100K isn't a bad deal when just paying the tax if you fail is your worst case scenario.  No one ever went broke just paying tax on profit.

    The 1031 Investor5140 Reviews
    WebsiteView Page
    3Reply
  • R Bucka
    OP
    Mililani, HI · Member since 2021 · 8 posts · 3 votes
    5y

    @Paul Welden I understand stand this would be a tight squeeze in this market. I’m having a tough time identifying a property and leaning toward pulling equity. The problem (it seems) is where??

    0Reply
  • R Bucka
    OP
    Mililani, HI · Member since 2021 · 8 posts · 3 votes
    5y

    @Chin Chico I understand the stock market is always an option but I wanted to grow my property investments.

    0Reply
  • R Bucka
    OP
    Mililani, HI · Member since 2021 · 8 posts · 3 votes
    5y

    @Dave Foster I would like to hear more about fly over states and where your HI clients are buying. Very interested! Looking for turnkey rentals with trustworthy property managers. Are these even available? Much appreciated.

    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @R Bucka, That's the art.  finding the areas where there are market inefficiencies.  They're usually temporary but can really ramp your portfolio up.  And that's one of the key aspects of the 1031 exchange.  I just sent you a pm.

    The 1031 Investor5140 Reviews
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    1Reply
  • R Bucka
    OP
    Mililani, HI · Member since 2021 · 8 posts · 3 votes
    5y

    @Dave Foster that’s the unicorn. Thanks for the PM. Now back to the hunt!

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    5y

    I do look in AZ but you can't really cashflow unless you get lucky with a 20+ unit.

    Mom and pop stock are under water in terms of Rent-to-Value Ratio of more than 1% 

    You might want to try Birmingham, Atlanta, Indianapolis, St Louis, Kansas City, Memphis, Little Rock, Indianapolis, Greenville, Jacksonville, Tampa, Houston, San Antonio, Little Rock, Milwaukee, Cincinnati, Dayton, Cleveland, Ohio, or other secondary or tertiary markets.

    2Reply
  • R Bucka
    OP
    Mililani, HI · Member since 2021 · 8 posts · 3 votes
    5y

    @Lane Kawaoka thank you for your input. I agree AZ is tight. I will research the area you mentioned. You have any idea how much higher Hawaii’s prices can reach??

    0Reply
  • Ross Gortney
    Investor · Atlanta, GA · Member since 2015 · 25 posts · 17 votes
    5y

    I'm curious to know better what everyone thinks "cash flow" means.  I've seen many videos and listened to many podcasts, many books, and overall it seems like everyone isn't using the same measurement about cash flow.  To me, cash flow means the amount of money you realize at the end of the month after all expenses are paid -- ultimately the cash left over at the end of the year after all expenses paid including taxes and insurance.  Seems many investors ignore costs that are real.  My investments have been hit hard with expenses -- likely my own inexperience and inability to be on site daily.

    1Reply
  • Ross Gortney
    Investor · Atlanta, GA · Member since 2015 · 25 posts · 17 votes
    5y

    I'm not talking about the epidemic;  epidemic or not, how do you define cash flow?

    0Reply
  • Stephen Resch
    Member since 2019 · 24 posts · 23 votes
    5y

    Aloha! I'm a servicemember living here in Hawaii but grew up in the Midwest -- Iowa! I own 4 MF and 1 SFH in Iowa and Illinois. Currently putting together a syndication of a 41-unit senior apartment complex in Iowa. Offering 8% pref return + 60% equity. Great passive investment in a stable, income producing asset. Would love to bring on some BP investors as partners! Please contact me for details or for more information on Midwest investment opportunities! Mahalo!

    1Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @R Bucka

    You’ll find more affordable prices in the Midwest. A lot of out of state investors have been flocking to Columbus Ohio for the long term appreciation and cash flow due to the cities growth in population and economic importance.

    [email protected]614-363-2787
    Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews
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    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    The "best" and "less headache" 1031 is actually a 1031 from selling your direct REI into active LP based MF syndication like what @Lane Kawaoka had . Unfortunately that's almost too difficult to be established as timing and structure are too complicated.

    The less desirable options is 1031 to NNN DST that's always available.

    There's a 1031-accepted Fund out there that can be used also when selling direct REI but min. is too high and return is constant at 5% cashflow only.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    @Account Closed: I've developed many 5-8% cashflow strategy from portfolio selection using m1 finance and like you said, achieving > 5% is not difficult the key is 80% portfolio must consist with stock that beats the market and 10-20% you use bearish underlying as hedge ( can be UVXY or SH for example).

    Otherwise one can use simple plain CEF and options writing CEF.

    You could also take a look at IVOL. These days when market goes up IVOL goes up, when market goes down IVOL goes up too. IVOL uses complicated interest rate term structure as way to invest/hedges.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    However, Chin Cho. The most thing that's difference between real estate and stock is these: the accuracy of real estate investment is about 80% correct while for stock,even if it's hedged, at best is 40%. At the very least, investing in real estate, you don't see underwater position that much. With stock you need to stomach 60% paper loss not to mention the infamous margin call.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    If you want the portfolio that keeps coming up, the usual portfolio usually consists of 1/3 S&P, 1/3 Bond and 1/3 UVXY/long volatility. But if one want to play safe best bet is just move everything to cash when VXX is going higher or when VIX term structure is not favorable. 

    When I said about CEF you don't even need to do options trading as some CEF is doing covered call as income already.

    0Reply
  • Elin Trinh
    Honolulu · Member since 2020 · 134 posts · 51 votes
    5y

    Hi @R Bucka

    I am here on Oahu too trying to invest out of state. It pretty overwhelming but I know we can do it!!  I am currently reading David Greene's book - 'Long Distance Real Estate Investing' - it really gives a lot of info.

    Best of luck!!

    0Reply
  • Elin Trinh
    Honolulu · Member since 2020 · 134 posts · 51 votes
    5y

    @Stephen Resch

    Hi - I would love to hear what you are doing.

    0Reply
  • R Bucka
    OP
    Mililani, HI · Member since 2021 · 8 posts · 3 votes
    5y

    @Elin Trinh yes it is overwhelming. Let me know where your thinking of buying, so many options.

    0Reply
  • Stephen Resch
    Member since 2019 · 24 posts · 23 votes
    5y

    @Elin Trinh sure thing. Just sent you a message. I can send you info on our current apartment syndication in Iowa.

    0Reply
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