All Forum Posts by: Chivas Miho

@Matt McConkey - Congratulations!  I also just bought my first out of state rental too in Michigan just before Christmas.  I like the way you broke down the deal, showed pics of the property, and my favorite was the lessons learned section.  I definitely can relate to the "Stop being scared" line item - going through the process was terrifying for me until it was over and now looking back it wasnt so bad.  Great job, hope you can continue acquiring OOS properties in 2018!

Hi @Liz Weiss - I live in the Honolulu area just outside the entrance to Waikiki and I can tell you this market is tough to make any return.  While yes, it is true that our main industry is tourism and we get a ton of vacationers here, the price of any kind of property is beyond anything that makes any sense for an investor looking for a return.  Many play the appreciation game but you'll be tying up a lot of your money and potentially derailing your ability to expand your business.  

I'd say a 1 bedroom condo in Waikiki can range in long term lease rent from $1,000/mo to $1,500/mo depending upon the condition of the property, amenities offered, etc. The major downside to Waikiki is the parking situation, sometimes condos will have 1 stall (max) available but if they don't cost of renting a stall is steep. The purchase price for a condo like this will be in the $300k to $400k range and expect to be paying anywhere from $700/mo to $1200/mo in additional HOA/maintenance fees. Waikiki has no real SFR properties and if you do find one for sale, it'll be well over $1M purchase price. If you're looking to AirBNB, you could get a little more in rent to compete with the Hotel industry but it's likely not enough to offset the PITI + HOA fees. The other thing to note on condos, many local banks here will say you must provide 25% downpayment on any condo AND pay 1-2 points extra. I haven't studied the Condo-Hotels very much, but if they operate similar to Ala Moana Hotel, they operate based on the landlord giving a cut of the rent back to the hotel to act as the property manager, and it's extremely heavy.

Even the smaller communities outside of Waikiki have difficulty making numbers work, if you're lucky you break even on just paying expenses on PITI and HOA, once you tack on vacancy, repairs and capex you're negative.

I can't really speak about Colorado, but Hawaii in general is a tough market to crack.  In general, we have a good amount of homeowners that have high equity positions in their properties, after the early 2000's, the home prices started escalating and never came down.  So the real winners are those who held on to property from the mid 80s to early 90s and sold for 500%+ appreciation today.  I hate to be a naysayer here, but wanted to give you an idea of the market before you made any major decisions.  Hope this helps, good luck in your future investments!

@Matthew Paul - yeah I'm not exactly sure what happened either, the PM is supposed to send me some photos so I can get an idea of what kind of cover is over the pipe (AC Paving, concrete, landscaping) and how long the length of replacement will be.  The previous owner was a mom & pop type landlord, ran the property pretty loose, they didn't have any P&L statements or even any leases on file for the tenants.  It is possible they themselves were not aware of the depth of the pipe even though it was freezing year over year.  Not expecting to get very far but my agent said he would ask for an explanation from the seller.  

@Steve McGovern - ah, unfortunately, I did not review those documents.  Being a newbie I'm still green at the due diligence process, but thanks for the tip, I'll be looking in to those on the future purchases to anticipate the proper repairs ahead of the purchase.  I'm definitely grateful for having the property manager, if I had to do this myself I would be going bald.  

Thanks @Steven J. - I asked the realtor for some advice, he said he could reach out to ask for some details from the seller's agent.  After reading a bunch of other forums on BP, seems like it's not worth the cost to take the seller to small claims court and it's a long shot to prove they were intentionally being fraudulent.  The PM said they're still working trying to dethaw the line and I feel terrible for them having to work out in this kind of weather.  But glad they are willing to do what it takes to help get the tenant back online.  

Hey BP, so I landed my first OSS rental property a week ago in Michigan and while I'm celebrating my victory as a new RE investor, I find out yesterday that the main water line to the building froze and the tenants have no water.  The water company came to inspect the situation and found that the part of the line that is frozen is between the street and the main water meter underground.  The water company also told my Property Manager that my building has this issue every year and we found out that the water line was installed only 12" below grade and not below the frost line.  This wasn't disclosed by the seller and I'll need to spend some cash to excavate the line and repipe it 4 to 5 feet below grade.  Has anyone experienced issues where the seller did not disclose information that caused a repair bust and any recommendations on how to go back to the seller to get some assistance in the repair budget?

Aloha @Allyn Wijnveldt!  Been here on Oahu all my life as well.  It's good that you had the initial experience house-hacking, one step ahead of many people on the island.  I've tried searching for properties on both Oahu and Maui but can never make the numbers work, always negative cashflow.  I can't tell you how many times I hear people looking to buy a 2nd condo, lose at least a couple hundred a month (without even accounting for any vacancies or repairs) and they believe its a great investment by gambling on appreciation.  For people like us, out of state rentals are a best chance at success, just need to do your homework, stay motivated, and take action.  I myself just closed on my first OOS rental last week.  Now I've caught the bug and looking for the next deal.  Good luck, let us know how it goes!

Thanks @Ty L. & @Account Closed!  Wishing you luck on your upcoming investment ventures!

Hi @Nate R., thanks for the response!  You are spot on, I do plan to refinance with a conventional mortgage as soon as I can so I can cut down on the interest payments and shed the risk from the banks providing the LOCs.  This has definitely been a concern for me which is why I made a conscious effort to purchase properties that were no more than $100k.  

What's funny is, I had to keep reminding myself throughout this entire process why I had to get this deal done.  Even when the final closing docs came in for signing, I started getting so nervous, thinking "is this really going to cashflow?" and "what if I lose everything?" Eventually, I forced myself to sign the papers and get it done.  Weird how your mind plays tricks on you.  

For the inspection items, I was lucky because the previous buyer had already conducted an inspection report and my realtor just forwarded it to me, so I didnt conduct another, I used that report.  In my initial numbers, I had held about $6k in anticipated repairs and held another $3k for closing costs, but I was fortunate that the existing tenants' rent for the month was partially credited back to me so I really paid nothing in closing costs and those funds just moved over to the repair budget.  I was also really lucky in the fact that my realtor already knew the previous contracted offer from the last buyer, which was actually less than I was planning to offer.  So I could instantly send the same offer and everyone was happy.  I took the deal as is because I already had access to the previous inspection report and I felt comfortable with my budgets.  I wasn't able to get any quotes from Contractors, but I'm an estimator for a large commercial General Contractor at my day job, so I felt I could hold a reasonable budget.  My PM is having a couple of contractors look at the unit now to provide a couple of quotes.  I'm expecting to take a small loss on the addition of laundry equipment in one of the rooms since I didn't anticipate adding this, but in the long run, I believe it'll bring better value and better tenants.  I guess it was beginner's luck for me so far.  

@Kevin Yi - thanks for replying.  My PM is charging the coordination of the repair effort as part of the monthly fee which is nice.  I guess if it were major structural repairs for full renovations, that might be a different story.  The way we set up the repair budget is we set aside $200 in reserve so that she can pull from that budget for minor repairs and she will provide receipts after the fact just to get the easy stuff completed quickly.  For anything more than $200, I will need to approve the cost after an estimate is provided.  The intent for the $200 fund is mainly so that I dont hold up anything in the process, say there's a leak and she can't get in touch with me, she'll just draw upon the $200 reserve to get a plumber to fix it and we replenish the fund thereafter.  In theory, this should work well especially since I'm 5 hours behind the Michigan timezone, many time's I'm receiving emails between 1-3AM and I can't respond until 7 AM.  Has anyone else had experience with this type of repair fund?