All Forum Posts by: Isi Nau

Hi @Cathleen Hutchins

Thanks for the comment.  Great insights.

For our clients right now, looking to purchase a rental in Hawaii, the best cash flow deal we can find (traditional, not STR or house hack) is a minimum $40k-$50k downpayment. Cash flow of about $200-$250 a month. This does not include strategies for owner occupants turned investor. ;)

For our live-in flip strategy, yes all our profits are in equity.  Our rentals are in cash flow.  For our live-in flips, since it's our personal residence, the peace of mind of a low mortgage is priceless for me as the provider.  Knowing my wife and kids can be comfortable should something go wrong.  If I were single, the plan would be much more aggressive!  Hahaha.

Hey @Benjamin O'Brien

Sorry to hear of the stokes! Good point on using the equity. We are just about to finalize a sizable HELOC on our home. We will use the HELOC for investing for a while.

At some point (20 years from now) we will sell our home to purchase a smaller home with no mortgage and put the rest into an investment property.  This will give me piece of mind that when I die, my wife and kids can survive without my income.

For now, our kids are young and our home fits their needs very well.  And, my wife said she'll leave me if I make us move again.  Hahaha.  But, if my health was a concern, one option I would seriously look into is downsizing to no mortgage, so my family would only need minimal income to survive should I pass away.

Or I would sell, downsize into a small mortgage and use the rest of the proceeds to buy a small investment property.  Something where the rental income could over or come close to covering the mortgage.

These options would vary depending on the flexibility of the family needs (the more flexible the better) and also the amount of equity.

I don't think the equity in my home would be sufficient to allow us a place to live and generate enough rental income to cover all expenses.  But it could definitely make a sizable dent.

All this being said, I have a file on my computer titled "Code Red".  It's a document for my wife that gives details on how to arrange our investments should I die unexpectedly.  It addresses things not discussed here, like other investments, and life insurance.  The goal is to simplify and survive.  With five kids, my wife will have her hands full, so the name of the game will not be growing the business.  Simplify and survive.

(Sorry, this was kind of long)

I am happy to sit down and talk about specific options that may work for your situation.

Thanks @Mike V.!

I always appreciate your posts and encouragement regarding the market here.

I recently met a guy who runs in races here that are 100 miles long, in the mountains, and are 24 hours nonstop!  I couldn't even fathom what he was telling me.  My legs started cramping up just listening to him.  Lol.

If someone wants to get into running, they need to find someone like this guy!  Not your couch potato office-mate.  My point?

If people want to make it in Hawaii, they have to find people who have done it!

Hey @Joseph M.

I can only imagine the competition in LA right now.  Same here.  Sellers are putting stuff out there that is rundown, but their asking price is the same or barely below excellent homes in the neighborhood.  But what's crazier than that....their homes are actually selling at those prices!  Like you mentioned, a belief that prices will keep going up.  Also a belief that any ugly house is a good buy.

I also see some people flipping here who are listing their properties 10% higher than the highest ARV comp. Scary to think they went into it assuming/calculating a resale price that high. Definitely some concerning signs.

Hey @Kyle Leslie

Our second home definitely required some luck. We purchased at the peak of the market, but fortunately were able to get it 20% below the ARV. We did all the work ourselves, which wasn't very fun. I didn't want to spend the money to fix it up, so I had to spend my time, which was fine. A little less sleep never hurt anybody. :)

Another factor that worked for us is that prices in our market didn't drop 20% during the recession.  Even if they had, we probably would have been okay since we didn't sell until the market had fully recovered and exceeded previous highs.  This one is a little tricky and would require a local expert in your neighborhood.  I knew/know our market extremely well and was confident going into this second home, that with an assumed downturn coming we would still be okay.  I had no idea how bad the recession would be, but I did have historical market cycle data for our area.  So it was a mix of study and luck.

I would purchase at the peak of the market again in a heartbeat.  If I was confident I wouldn't need to sell for five years, I could purchase the home at least 20% below the current ARV, and the repair costs would be 5% or less of the purchase price. This timeline and percentages will vary widely from neighborhood to neighborhood, so a proven expert in your area will be critical.

In our current market, these types of properties require some serious/daily searching and quick action when you find them.

Good luck!

Hey @Chris Chantavong.  Glad you found it!  :)  Maybe if I included dramatic pictures of the before and afters it would have gotten more traction.  Hahaha.

Congratulations on being into your second home already!

I am always happy to meet up and help where I can.  Especially for people in Hawaii.  I hate seeing local families move away due to cost of living when there are ways to make it work.  There's too many voices chanting that its not possible.  I'll message you.

Hey Hyun.  You can make money in Hawaii.  I've done it.  My clients have done it.  All the best!

Hey Andrew.  I've been on that street, but haven't seen inside any units.  Just a few thoughts/questions:

How much longer will you be living here?

Do you think you'll sell when you leave?

Separate electric meters is good.

I'd assume it's on one water/sewer meter.

Your numbers at the bottom of Page 1 look pretty accurate.  You could remove the management fee.  Water/sewer could run you close to $600 a month.

It looks like your calculations are based on all units being rented.  If you house hack, I think you'll be paying about $1000 a month out of pocket.

It's a funny little road.  You'll want to double check ownership when you get the title report.  Also, not sure if there is a maintenance fee for the road/neighborhood.

As for capex, the biggest ones to be aware of are the roof and cesspool.  Somewhat unrelated would be mold/moss on the exterior.  That area stays pretty wet and that street is in the shade a lot.  You'll see quite a bit of it on some of the properties on that street.

The property is legal non-conforming.  This will be something to consider if the property were to ever burn down or when you go to resell.

I think your rent estimate is pretty close at $1300.  The units are a little on the small side at just under 500 sq ft., but they aren't in a big building which is nice.

Overall, it's definitely better than renting.  The exist strategy will be a big part of the puzzle as well.

Abimael Rivera-Lopez That’s awesome you have that much equity. I would definitely sell. $650 a month is pretty significant. If you wanted to keep your money in Hawaii there are some good options that will allow you to capitalize on the appreciation and also significantly improve your cash flow.

Hey @John Acheson

Correct, we have not had to pay any taxes in this scenario, which has included the sale of two homes.  We are now in our third home, which we will likely live in for a while, or forever.  The net proceeds from the first two homes did not exceed $500k.  This current home would if we sold it.

If we decide to sell our current home and move into another one, we will have to plan ahead (a year or two) to make sure we are positioned in a way so as to not exceed the $500k limit.