All Forum Posts by: Patrick Franta

Aloha Jeremy,

Congratulations on narrowing your search to one of the greatest places on earth!  These questions are definitely geared more towards an accountant but I will give you my insight.  Your assessment is pretty accurate in that all of your operating costs & interest on your debt servicing will be deductible from your gross revenue.  This is whether you buy it as a second home or investment property.  If you buy as second home you cannot use any of the rental revenue to qualify and you must stay in the property for at least 14 nights a year.  Also, when you plan to sell it you will not be able to 1031 the property unless it hold it as an investment property for 2 years.

I'm not sure you should consider what you are saving in taxes on your deductions as income though? To me when you are analyzing any income property you should focus on what the NOI/Purchase Price is or your CAP rate. If you want to go deeper you can factor in the annual appreciation rate to determine your IRR. To me with the example you provided your net income would be $2K. Honestly, with most VR condos here on Maui if you are financing with 25 -30% down and can break even it is a good deal.

A few thing to keep in mind:

I highly recommend using a local lender on Maui when purchasing a VR here.  They know the product and the underwriters see these condos day in day out.  I have seen too many national lender end up not being able to close on these condos because the owner occupancy rates are too low, or that they operate as a condo-tel.  If you need any recommendations on lenders here I have a few great ones.  

Second home and Investor loans have different down payment requirements, typically 25-30%.  Also some complexes here will require 30% minimum no matter how you purchase.

There are a lot of different routes you can go with management.  My wife manages over 100 units here so I know how that breaks down very well.  For most investors a la cart style management seems to be the best option, this is where you manage the bookings and the management company handles all the turnover and maintenance for 10-15%. 

I hope this helps.  If you have any additional questions I would be more than happy to help.  I have a pro forma p&l template I can run on any VR condos here for you.  Just let me know.  Mahalo.                   

Congrats Thierry!  You got a great deal on that Kihei Villages condo.  Those are rental machines, especially the renovated ones.  Welcome to Maui!  

Aloha and welcome to Maui Michelle!  I would love to talk digital marketing with you sometime.  I am going to try to make it to the next investor meetup on the 21st, hopefully I'll see you there!  

Looking forward to it!

Aloha @Ben Vandorn!  I am available and would be open to grabbing a coffee.  You can reach me at eight zero eight two eight zero seven seven two eight.  

Aloha @Kris Klark

A great way to get started in to come to the investor meetups that Christian puts on.  You will be able to get advise from people in all aspects of the business.  

Hope that helps .

Also great advice from  @Michael Borger!  

Aloha Shiv,

I would be more than happy to assist you in finding the right property and resources. You will have a tough time finding 10% COC here unless you self manage the property which it sounds like you want to avoid. Please let me know the best way to get in touch. Mahalo.

@Shon Drennan if you do a HELOC it would be in addition to your original loan. If you do a cash out refi then the new loan pays off your existing loan. The HELOC is a more short term solution, usually 10 yrs or less. The refi can be a 30 yr loan so it is more of a long term solution.

You could take out a HELOC or do a Cash Out Refinance. Both of those tools will allow you to borrow up to 75-80% of your appraised value.

Keena,

The Buyer should be able to use the financing contingency to get out of the contract with their EM deposit.  A loan can not be approved for a whole host of reasons.  If they can get their lender to write a loan denial letter that would be their out.  If the Sellers don't agree to the cancellation then they can't proceed with seller their house to someone else so it is in their best interest.  I hope this helps.