All Forum Posts by: Trey Brown

@Nate Rohlf

You are correct, I also own in that building (personal residence) and have a pretty good idea of the market. Days on market are a lot higher than usual, even for December.

Overall house prices have come down, so condos are even worse. There’s also a unit in the building that’s been listed for over a year. It’s a 3bedroom, but priced below $600. I think that’s causing some issues in this building in particular. 

There’s also a brand new, fully leased apartment complex in Kailua, which brought rents down. I think that investors are seeing that as well. The numbers never made sense as rentals out here, but now they’re even worse.

Kailua does have a lot coming in the beginning of next year. Roy’s and the brewery will hopefully bring in more prospects. So there’s some hope I guess.

PM me if you need anything, as I’m about as local as can be.

@Daniel A Lee Kim

Any updates on your condo rehab?

@Chris DeMello

https://www.attorneyinhawaii.com/hawaii-agreement-...

That's a link that briefly describes an Agreement-of-Sale. Might help to explain it if you go that route

@Chris DeMello 

Did they say why they weren't open to a Wrap? Are they just looking for cash now?

And either way, they'll have a hard time selling before Christmas. Call them back in January and present your offer again. You should also look into an Agreement of Sale. Similar to a Wrap, except they keep title until you pay them off. Your payments are still deducted from the balance owed, but they hold Title. Keeps you from having to put up all the cash on a non-performing house. 

And lastly, if this is your first flip, make sure you run those rehab numbers several times. You can spend 30k pretty quick.

I use Diane at Sandlin and Associates. She’s based out of Kailua, but worth the drive. She’s also an investor, which helps.

@Luan Becerra

I've got just a few comments that you should keep in mind. 

1) You aren't going to be able to find an FHA lender who will let you CLOSE in an LLC. As you pointed out, FHA is for your primary residence, not your companies.

2) You and your wife have to use the property for the 1st year as your primary residence (or at least not earn an income on the second side) so if you live in the cheaper side, you're income for the first year is only going to be $40,000. You still get live for basically free, but your rental income isn't going to be $69,000.

3) I think your electricity bill will be double. I run a dishwasher, dryer, and the occasional TV on Oahu, and my bill is almost $150. Kauai charges $0.07/kwh more than here, and you're going to have 2 units, with tenants who aren't going to be concious of their electrical use at all. 

4) Does your association cover Cable/Wi-Fi? Because that's still another $125 you have to account for if not.

5) I didn't see where you accounted for transient income tax, which is 10.25% plus 4% GET. So don't forget to subtract that from your income. 

6) What are you planning on doing as far as living arrangements after your 12 months is up? Rent somewhere else? Or try to buy another house, because then you're going to have to come up with a full downpayment, or refinance out of the FHA, which you won't have enough equity for in only 12 months.

This still looks great for a place to live for basically free while you're stock piling cash for your next down payment, but there's a lot more to consider if you plan on using both sides as a rental. 

Good Luck!

@Cassie Chun

I'm no expert at all, but are you sure you can have an ADU on a property with multiple units? I've looked over the laws on Oahu, and it explicitly states you can only have an ADU on a lot with an existing single family home. You can convert the additional living space (ohana or 2nd unit) into an ADU, but you cannot have both.

Section 1.2.4 on this link states something similar 

https://www.kauai.gov/Portals/0/Planning/Ordinance... 

This really only applies to new permits, but if the property doesn't currently have a permit for the ADU, and you or the seller attempts to get one, I would imagine it falls under this direction.

If the unit can be declared a rec-room (for instance, doesn't have a stove or refrigerator at the time of inspection) then it's not really considered an ADU, and you shouldn't have an issue of getting a permit for it.... but again, I'm no expert, but I'm sure you could find one at the permit office.

Hope that helped a little,

Trey

Daniel,

Those are pretty high prices, even for Hawaii. I'd look into another GC (or two).

For the most part, building materials don't cost THAT much more than on the mainland, maybe 15% more at most. Labor is usually more expensive, but again, not that much more. 

There's actually a really good program out here called Habilitat Inc. They're a rehabilitation treatment facility, and fund themselves through labor services, and are usually pretty reasonably priced. You may want to look into them. I've only heard good things. 

Feel free to reach out if you need anything, I live in Kailua, just a few minutes from Kaneohe. 

-Trey

@Geoffrey Pritchett Gotcha. That's what I was curious about. I also doubt that there's many lenders who will do a refinance at less than $50k either. You could possibly do a HELOC, but non-owner occupied HELOCs aren't that easy to get either.

Usually anything priced less than $62,500 is difficult to get a loan on. 80% LTV is $50k, so that's typically the minimum, but I've heard of the elusive lender who will go less than that, just never met them.

If you decide to pass on this one, don't let it discourage you from the next one. 

Good luck,

-Trey 

@Geoffrey Pritchett, I wasn't trying to discourage you from not following through with this deal, just showing you how I evaluate properties. Those numbers may look high, but I'd rather have the reserves set aside and not need them than need them an not have them. 

You're asking for a 25% cashflow on a $625/month rent. That's just really hard to get and still have reserves. 

But, if you're only out $5,000 (10% of $50,000) for your down payment, then you're not paying a whole lot to get started, and getting started is the hard part. Use this one as a stepping stone to get in the business and learn. Plus, down the road when you need rental history on your tax returns, this little house could solve a lot of headaches. 

I'm still curious how you're bank is financing this, but if you can get in for only $5,000 - then you're paying lot less than those who pay gurus to teach them half as much. 

Good luck

-Trey