All Forum Posts by: Isi Nau

This statement (and ones similar to it) is probably the most common thing you’ll hear in Hawaii. I would imagine the same is true in other high cost/low cap rate areas like California and some East Coast metro cities.

I'm not wanting to start a debate as to what is better, cash flow or appreciation. My point is simply this; real estate investing is possible (and profitable) in Hawaii.

You give me someone who has a solid job, saves, and is willing to sacrifice for a little bit and I can show them how to become a millionaire in real estate in Hawaii. Man, that comes across so arrogant. But anything more subtle just seems to fall on deaf ears.

Two real examples (both on Oahu) that I think are relatable to a broad range of people:

1.  Kimo and Lani (pseudonyms). Both completed college and started working as humble teachers, with annual salaries of $30k and $40k respectively. For the next two years they lived with Kimo’s parents, drove old cars, never went on vacation, and rarely did any recreational activities that cost money. Basically they lived a simple life and saved every penny they could.

With their money they purchased real estate in Hawaii:

Year 1 – studio and 2 bedroom condo

Year 2 – 3 bedroom condo

Year 3 – Sold the studio and purchased a 1 bedroom condo

Year 4 – sold the 2 bedroom and purchased a duplex

Year 5 – sold the 3 bedroom and purchased a SFH

Year 14 – in the process of selling the duplex to purchase an apartment building

Highlights:

*By Year 14 their net worth was about $800k. All while working as humble teachers in a city where a gallon of milk can cost $8!

*After Year 4 Lani was only a part time teacher, meaning they only had 1.5 incomes.

*They sacrificed for 2 years and lived modestly for the next 12 years

*No out of pocket money was used after Year 3

2.  Kawika and Pua (pseudonyms). Have two kids. Combined annual salary of $100k. Have a small savings of $25k. Purchased a duplex (4 bed / 2 bed) and they rented out the 4 bedroom side. After collecting the rent, their monthly payment was $500. They then saved every penny they could and purchased a studio the next year. Now they save every penny and pay down the studio’s mortgage. The plan is to sell the studio and buy a 3 bedroom condo. Then eventually sell the 3 bedroom and purchase an apartment building.

Highlights:

*Their plan is modest

*Accelerated pay down ends Year 2

*Sacrifice for 2 years

*By retirement age they will have an apartment building netting $8k a month

These families are not wildly rich, but they are comfortable, which is nothing to sneeze at. There are certainly examples of average people becoming tremendously wealthy through Hawaii real estate (like the family of teachers with a $50m portfolio), but that’s for another day.

So much more could be said (and probably will in the comments). Cash flow is better than appreciation, who would want to sacrifice, I want cash flow now, I have too many kids, there are better strategies, my situation is different, etc.

All I want to get across is that investing in real estate in Hawaii (and probably other high cost areas) is completely possible. It is definitely not easy, but it is definitely possible.

For me, it's a no brainer.  Sacrifice for a little while so that you and your children's families can afford to live in Hawaii Nei.  No need move mainland.  You can do it!

Aloha!

Aloha @Farakh Zaman

I am not currently familiar with any markets outside of Hawaii.  If you have made offers here, I may be able to provide some insight, if a few more details are provided on the deals you've approached.

In regards to buy and hold in general and in Hawaii, I agree with the points made by @Zach Quick and @James Wise

It is tough to buy today and retire tomorrow (or next year, or few years).  Hawaii can be a challenging market to break in to, but if you can do it (it is possible), it is a great place to invest.  Patience is a big factor in that success.  Buy and HOLD is key.  AKA, buy and patience.  The monthly returns will be meager at first, but after one cycle of the market, you can be in a perfect position (i.e. sufficient capital) to make some key investment moves that will then allow your financial position to grow exponentially.

Out of state cash flow can be very attractive because it is immediate.  $500 a month on a $60k property is tough to beat.  Retirement is only 10 properties away.  Or is it?  I'm not knocking low buy in, cash flow investing.  I'm sure lots of people have been successful at it.  But I am advocating investing in high buy in, high appreciation markets.  It is definitely possible.

But if you are planning on leaving Hawaii in the near future, then maybe buying in your new state might be a good idea.  It sounds like you are living a great life financially.  No debt and a nice cash reserve built up.  All the best!

Hey @Nicholas Price

Welcome to BiggerPockets.  Thank you for your service and congratulations on working towards your degree.

Hawaii can be a tough market to get in to, but it is totally possible.  You are at a prime time in your life to do it.  With a little sacrifice and effective planning, you can set yourself up well.  It is best to do it while you are young because you have time on your side and can make certain life-style choices that might not be possible with a family or other "adult" commitments.

@Hal W.

Sounds good.  I'll send you a message and get your email.  I can email you a few.

Aloha @Hal W.

Going negative almost $600 a month is definitely tough.

If you wanted to stay in Hawaii, you could take the $150K and get into a duplex and net about $700 a month.  There may be some small multi family options with decent cash flow.  Might take some time to find though.

You'll also want to keep in mind the 1031 exchange timelines, since an ideal property may not be available during your first 45 days.

You could definitely get better cash flow on the mainland, but there are some significant things to consider such as long distance ownership/management and price appreciation.

I don't think one's approach has to be all of one or the other (appreciation vs. cash flow).  Having a mix is good.

As for trying to get your tenants out, how does this fit into your plan?  Is it to have the unit vacant and therefore more attractive to owner-occupants so they can more in right away?  When does the lease end for your tenants?  If it is close to when you want to close on the sale, I'd probably leave them in place so you still have income coming in.  Lots of buyers can wait a little while until a lease runs out.

Aloha Casey Lipe ! Unfortunately I don't have any suggestions for Maryland. But welcome (soon) to Hawaii! Four years is a descent stay. Be prepared to have more family and friends visit you than another time in your life. :)

Aloha @Edgar Gonzalez

You'll want to take into consideration wether you will be selling or holding on to the property when you PCS.  The financials for these decisions will look very different, especially depending on when you sold.

As I'm sure you know, Ewa has a ton of options when it comes to condos.  You'll want to hop around as their maint./assoc. fees vary.  Have you looked at either of the Palm Villas?  I haven't run the number there lately, but they may be a good option.

As for future appreciation, who knows what will happen.  Assuming no global or economic catastrophe, I believe we will see moderate appreciation over the next 2 years (i.e. 10% cumulative).  Not like what we have seen the last few years.  This is where the sale of the property becomes a factor to consider.

Overall, it is possible to make it a good investment, the biggest factor is time.

Aloha @Diana Damian

Glad to see another local member added to our ranks!

Hey @Trevor Yasunaga

Since all of Oahu is the same city/county, we all pay the same rates for these services.  Although there is some variance by property type.  So different property types have different rates (i.e. single family homes, multi family homes, commercial, etc.).

If you analyze properties with maintenance fees, check which utilities the maintenance fee covers.  Almost all of them will cover water/sewer.  Some buildings in town will also include electricity and air conditioning.

From my experience, utility expenses will run $100-$150 per month per unit for water/sewer and similarly for electricity.  Although there are factors that can change this estimate, like number of ac units, number of occupants, etc.

Aloha @Lewis Chart

Are you still losing money on the Hawaii property (I'd be surprised, since the property is free and clear)?.  If you are, and you still want to stay in the Hawaii market, I would recommend repositioning to a better performing building.  If you're not particular on staying in Hawaii then I would recommend selling.  But a winter getaway in Hawaii is probably pretty nice.  :)

I am assuming you rent it as a vacation rental since it is rented when you're not here. A free and clear ocean front property in Hawaii where we've had record breaking visitor arrivals and spending, should be killing it.