All Forum Posts by: Isi Nau

Hi @Rachel Ararasato

Hawaii is a unique place, but you are on the right track by being on BP and jumping in.  @Cassie Chun laid out a very good plan.  She has done an awesome job.  Major kudos to her.  She studied for a while, set up a great team, had countless discussions, analyzed many properties, and then purchased.

The hardest property is the first one. The amount of time put into it prior to purchasing is fairly significant.  After that, you're in the game and your knowledge base widens quickly.  The hands-on learning is invaluable .  Also, your confidence level skyrockets.

Even if you don't purchase an investment property, at a bare minimum use your own home as part of your investment plan.  If done right, you could be mortgage free pretty quickly.

Don't give up on Hawaii yet.  Find those who have done it and copy them.  I love the scene from the Pursuit of Happyness where Will Smith sees the guy pull up in a Ferrari and asks, "what do you do and how do you do it?"  Connect with people here on BP.  As you network you'll meet others.  A picture of what's possible will begin to formulate and you'll see your window of opportunity to enter the market.  Go get 'em!

Hey @Ryan O'Leary

I'd recommend having it partially furnished, meaning only appliances and window coverings.  Assuming this will be a long term rental.  A few reasons:

Most tenants in Hawaii will have their own furniture already, since most rentals are partially furnished.

Tenants without their own furniture usually don't stay in one place for long, meaning more turnover for you.

If you provide the furniture it is more hassle and cost for you to keep track of and replace/repair.

I don't think you'll lose any potential renters by having it partially furnished.

Good luck!

Hi @Roderick Baker Jr  We have 13 doors on Oahu.  Long term rentals.  We acquired most of them from 2004 to 2008.  Over the years we've sold a few and traded up.  We picked up four more last year.

Our current game plan is to sit and wait, but that's only due to our personal finances and comfort level with the amount of growth we can and want to handle.  There are still deals to be found in Hawaii.

The hard part is recognizing them as deals and knowing how to use them in your long term plan.  Most on BP will use cash flow as the primary, and often times sole, measuring stick of a property.  If it doesn't cash flow a couple hundred dollars then it isn't a good property.  Or they'll over complicate it with metrics, rules, percentages, etc.  It's not brain surgery.  It's real estate.  One of the simplest investments out there.  Our first Hawaii property only cash flowed $50.   :)

Buy and hold is a long term play that is not for the impatient or those wanting to retire within three years of starting.  But if done right, retirement will certainly come, being debt free can happen, and building a sizeable portfolio is possible.  Investing in Hawaii rentals is slow and unexciting for the first 8-10 years or so.  After that, things pick up very quickly and never look back.

Many will say long term rentals aren't possible in Hawaii.  They are.

Hi @Kate J.

No problem.  Housing prices are cyclical, with ups and downs over time.

Right now the market in Hawaii is at the crest and is starting to take a breather.  Breather is a good word to describe the down (or approaching down) side of the cycle here because we rarely experience a downturn, fall out, crash, etc. in Hawaii.  Prices may drop 10-20%, not 50-75%.

From a flipping perspective, we are at what I believe to be the most risky part of the cycle, which is at the crest of the wave.  The market and those in it are confused. Sellers think it's still going up, buyers think it's coming down.  Flippers get caught in the middle and have to deal with both sellers and buyers and not get burned.  

When you flip homes, hopefully you do it quickly (ideally in a few months, purchase to sale).  This means you are dealing with sellers and buyers at virtually the same point in the market.  When you are dealing with sellers at this point (the crest of the wave) they are still optimistic about the market and their home, and they keep their prices high.  This may cause a flipper to pay a premium for the property, if they aren't patient or wise.

After the remodel you are now dealing with buyers.  At this point in the cycle (crest of the wave) many of the hungry buyers have already purchased.  Many of the remaining buyers have been sitting on the fence for the past few years for one reason or another.  Their urgency and need to buy is fairly low.  If they don't purchase, they'll likely be okay staying where they are.  This causes properties to sit longer and reduce prices more.

To answer your question succinctly; people get burned at this point in the cycle by paying too much, and then having to sell for less than what they had projected they could sell for. Ultimately it's the ARV that will kill you, projected vs. actual.

In previous years, almost anyone could make money flipping.  The market was very generous and forgiving.  Put a home on the market and it would would sell, higher than the last sale.  Now the market is ready to teach people lessons.   ;)

With all this said, it is still possible to successfully flip in this stage of the cycle. You'll have to look at recent sales with a critical and skeptical eye. Over recent years a flipper could look at a neighbor generally for ARV comps. Now it needs to be done with a finer tooth comb. Also, assume your subject property isn't as awesome or unique as you initially believe. Assume you won't be able to sell at or above what the most recent ARV comp sold for. Increase your profit margin criteria to build in a buffer for sales price adjustments.

Hi @Kate J.

There are definitely opportunities to flip homes in Hawaii, now and in the coming years.  By vacation houses, I'm assuming you mean vacation rentals?  I would definitely not flip a property that is intended for short term rental if you're not on island.  Fortunately there are plenty of traditional housing options that are perfect for flipping.

Which island are you considering?  On Oahu, we are seeing mixed results right now depending on neighborhood and property type.  There are still opportunities to flip, but it is absolutely critical that you or someone on your team can run accurate and conservative comps.

The importance of accurate comps can't be overstated in this stage of the market cycle.  This is the stage where people start to get burned.  In your estimates, be sure to estimate low on your sale price and high on your days on market.

Hey @Joseph Davidson

You would need to look at other duplexes in the neighborhood.  Sq ft, bed count, bath count, lot size, etc.  The type of upgrades will also be important.  Depending on the neighborhood their may be other significant features like having a garage vs carport, or view vs no view, or level lot vs slope, etc.  Even one street over another could make a difference.  These may be factors that will significantly effect value.  If there are no other duplexes in the neighborhood like yours, then it gets tricky.

I would reach out to a reputable realtor in the area to get their opinion of current value and ARV. Even though the property is unique they should be able to come up with accurate values. For the first few deals I would definitely use a realtor, preferably one who is investing or who's clients are investing.

Hi @Catherine Underwood

You are correct about resort zoning.  You're also correct about the policing of short term rentals, in Waikiki especially.   ;)

If a property is outside a resort zone, but is a legal short term rental then it must have a nonconforming use certificate.  This is a unit by unit basis, not building by building, or block by block.  So you could have a few units in one building that are legal and all the rest are illegal.  Hope this helps!

Hey @Joseph Davidson

Zestimates in general aren't very helpful. They are often inaccurate. Besides being inaccurate, they won't help with ARV because they only provide current value, not future value. Although, there is Zestimate Forecast, used to predict future home prices. But if regular Zestimates are inaccurate, I can only imagine that placing Zestimates into the future only exacerbates the flaw!

I would take a wholesaler's estimate with a grain of salt.

You'll want to determine your ARV by looking at recent sales in the neighborhood. The more identical the sold properties are to the subject property, the better. This is where emotion often gets the best of an investor. They think their subject property is way better than the recently sold properties, which leads to an overinflated ARV. This will lead to problems when they sell or refinance. Correctly calculating ARV is one of the most critical steps during due diligence.

Hi @Victoria N Hoffman

Go to Home Depot at 5:30 in the morning.  Any contractor there that early is likely hustling on their current project.  Get their card and contact them later to schedule a time talk.

Starting the day early is a big criteria for me.  My best guys start their day early.   These guys are organized and ready to pound it out!

Hey Fred.  Does your access to the private funds also come with lower than market rate terms and interest?  If so, then you've got something to work with and can bring value to the table to an experienced investor.  If not, then the best you could probably do is use those funds to do a deal on your own.