Hawaii home-buyer's mortgage math

[tryan]

and over $60,000 in collected rents.

hono, how much of that can you keep (after deducting: condo fees, mortgage, taxes, maintenance, vacancy, insurance)?

Just curious about hono rentals ... thanx in advance.

 

[JB]

Maui County 2007 median sales prices:
Single Family homes -9%
Condos 6%
Land -30%

 

[honobob]

hono, how much of that can you keep (after deducting: condo fees, mortgage, taxes, maintenance, vacancy, insurance)?

Just curious about hono rentals ... thanx in advance.

Tryan I cash flow better than 50% but because of the 9% annual appreciation I'm very under leveraged. I do real well at tax time also.

Here's an example of my last purchase in 2003. I bought 2/2 $272K, I just made an offer at $410K for another similar unit that was rejected. I'm still up better than 11% yearly appreciation. Rents are $2500 less $474 (Maint. fee/taxes/ins.) I'm renting long term since I'm off island but three of my properties qualify for short term vacation rentals. When I'm on island I will check to see if it is worth it to me to rent vacation. An owner at one of my Diamond Head properties rents for $3500 a month whereas I rent long term for $1500. Alot of upside!

Of course you'd have to paradigm shift to invest here. No cash flow to start but good appreciation you can set your watch to. I did stated income on two properties just because it was so easy. Maybe I can feather my return with some sub-prime bail-out money

 

[tryan]

Hono, just triing to understand ...

50% but because of the 9% annual appreciation I'm very under leveraged. I do real well at tax time also.

These are past price appreciation gains (?) .... tax time gains are due to monthly negative cashflow (?)

I just made an offer at $410K for another similar unit that was rejected. I'm still up better than 11% yearly appreciation. Rents are $2500 less $474 (Maint. fee/taxes/ins.)

I have to believe a seller (at +400k) will be much happier than the buyer/investor (receiving 2500/mo. rent). The negative cashflow would take the wind out of my sails.

Best I can see: it's a bet on future price appreciation (and bleed while you wait for results).

 

[honobob]

Hono, just triing to understand ...



These are past price appreciation gains (?) .... tax time gains are due to monthly negative cashflow (?)



I have to believe a seller (at +400k) will be much happier than the buyer/investor (receiving 2500/mo. rent). The negative cashflow would take the wind out of my sails.

Best I can see: it's a bet on future price appreciation (and bleed while you wait for results).

9% 1978 to present 2004 purchase 11%, 2004 to present. Was 50% in 2005, then 25% in 2006. Expecting long term appreciation of 9%!
I have earned income..see depreciation and expenses.. I am an active manager. You with the IRS?

Believe it! The seller said no to $410,000. I think he was used to 10-11% appreciation in his shorter term of ownership and wanted to price accordingly. But then what would he do with the money? 5% CD barely matches the 4.8% appreciation he got last year plus he got a place to live or gross rents of $30,000!! Put it in the market and lose 10-15%? Oh, that's right he's not losing money he's buying at a discount. Why would anyone sell stocks at a discount if the price is sure to go up?

Why can't you understand long term appreciation? I've had 9% in Honolulu for 30 years, same as just about every other person on the island. We must all be Captains of Industry. In CA I had 50% yearly,(I won the freaking real estate lottery!!!) OK just for the first two years, 1986-1988 but I didn't go around planning purchases on 50%. My 20+ years has resulted in 11% annualy. LG4NB did the math in Florida and I think it was roughly 8-10%.

In Honolulu if someone tells me their purchase year I can pretty much quess their purchase price if I know their current market value. I wonder if I can make money doing that at carnivals?

Tryan, I sense you don't want to hear anything that doesn't conform to your experience. I don't want to convince you of anything. It's easy enough to check historical sales prices. I still think we need to get you out here and fill you with tofu, yogurt, and poi. You'll be a believer.

 

[tryan]

Tryan, I sense you don't want to hear anything that doesn't conform to your experience. I don't want to convince you of anything. It's easy enough to check historical sales prices.

This conforms perfectly to my experience. Question is: What is the annual return after factoring in the monthly negative cashflow? Historical returns are no where near reality if your hemoraging a couple k/month to subsidze someones housing. And how do you buy groceries with half a dozen leeches sucking on your wallet ... or does one just plan to keep working?

 

[honobob]

% RETURN ON INITIAL EQUITY 45.02% 48.90% 53.07% 57.54% 62.33% 67.48% 73.00%78.92% 85.29% 92.12%
True Gain or loss 6,392 41,591 79,607 120,663 165,004 212,893 264,612320,469 380,794 445,946
This is the result from the Twaddle chart(thanks dude) using a $420,000 purchase price. Hope this shows correctly.

This is a 10 year projection and I only used a 8% appreciation. You guys must have beat me down that day!

 

[tryan]

Yeah, anything bought 5+ years ago will look rosy using the last few years of appreciation (my 6 remaining units certainly do) ... My point is, anybody paying +400k for a condo that rents for $2500/mo is simply the "greater fool". Accepting a negative cashflow of 2k/month is no way to retire - nor a plan for retirement.

 

[honobob]

How smart am I? My first picture post. Not my apartment but no matter what the market does this is worth 1 CA home plus a Vegas home or a Waikiki condo + a Diamond Head condo.

 

[honobob]

Well a 1 bedroom just came on the market for $340,000 in the same building I offered $410,000 for a 2 bedroom. The last 1 bedroom sold for $300,000 at the beginning of last year. There's usually about $100K difference between 1 & 2 bedrooms.


Tuesday, January 22, 2008 - 10:51 AM HAST
Honolulu has 4th least-affordable housing


Pacific Business News (Honolulu)

Honolulu has one of the least affordable housing markets of major urban markets, according to a recent survey.
Three California markets -- Los Angeles, Salinas and San Francisco -- are the least affordable housing markets, noted as severely unaffordable. Honolulu ranks 4th.
The fourth annual Demographia International Housing Affordability survey covers 227 markets in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States using data for the third quarter of 2007.
The survey, by a St. Louis-based public policy organization, compares the median house price to median household income multiple to rate housing affordability.
Thunder Bay in Canada has the most affordable housing market, followed by Youngstown, Ohio, and Fort Wayne, Ind.

More Good real estate news. Can you believe it was purchased almost 4% below asking!? Damn lowball offers! It was only assessed at $11,000,000!!! So, 6 trillion - $11,000,000.........Get out there and buy folks


Friday, January 18, 2008
Kailua estate sells for $22 million


Pacific Business News (Honolulu)

The sale of a two-acre beachfront estate in Kailua set the record for highest sale for 2008 less than one month into the new year.
The estate at 51 Kaikea Place, which has a four-bedroom main house and a two-bedroom cottage, sold for $22 million after four months on the market. It was listed on Sept. 10 for $23.7 million.
Tracy Pflueger Allen of Coldwell Banker Pacific Properties represented the seller in the cash transaction. The buyer, who is reportedly from Japan, was represented by Jeannie Fogarty and Hideo Mita of Fogarty Realty.
Pflueger Allen also brokered the $24 million sale of a two-home property at 145-Kailuana Loop in July 2006.

 

[Nords]

Well, the end of the story on the original post is that the home sold for $633K last month... after nearly eight months on the market and a discount of over 10%.

 

[honobob]

They won the effing real estate LOTTERY or NOT!!

So Honobob predicted (in a TWADDLE like fashion, although maybe 100% more correct) a slightly under or slightly over $600,000 sales price based on his 30 year historical annual appreciation rate of 9% but also predicted an increase on this rate because of factors outlined in his book..buymybookbuymybook....so now the appreciation rate is TEN % annual compounded RATE, well based on this sale. And this property is as about as far as you can get from the BEACH on Oahu so I wonder if there's any 50% off beach front property available??

free4now.....10% long term appreciation.
Marquette...Miliani Town, vegetarian tolerant!!

Honobob??......Kahunabob.....him one akamai akole!O0

TODAY IS A GREAT DAY TO BUY REAL ESTATE IN HONOLULU!


4% appreciation my *ss

 

[Marquette]

So Honobob predicted (in a TWADDLE like fashion, although maybe 100% more correct) a slightly under or slightly over $600,000 sales price based on his 30 year historical annual appreciation rate of 9% but also predicted an increase on this rate because of factors outlined in his book..buymybookbuymybook....so now the appreciation rate is TEN % annual compounded RATE, well based on this sale. And this property is as about as far as you can get from the BEACH on Oahu so I wonder if there's any 50% off beach front property available??

free4now.....10% long term appreciation.
Marquette...Miliani Town, vegetarian tolerant!!

Honobob??......Kahunabob.....him one akamai akole!O0


4% appreciation my *ss

Hey man, I distinctly remember saying it was location dependent. Where I'm living and I'm looking, 4% would be a godsend. On the other hand, we have this stuff called "snow" and it keeps the appreciation rates down.

Oh, my wife wanted me to tell you about the Sweet Water Cafe in Marquette... it's very vegan / vegetarian friendly and, to our knowledge, there have been no wiccans turned away or killed there. Sweet_Water

 

[honobob]

Oh, my wife wanted me to tell you about the Sweet Water Cafe in Marquette... it's very vegan / vegetarian friendly and, to our knowledge, there have been no wiccans turned away or killed there. Sweet_Water

I'm sure the transvestites take great comfort in that.


4% APPRECIATION MY *SS!

 

[honobob]

On the other hand, we have this stuff called "snow" and it keeps the appreciation rates down.

Yeah, we have "snow" here also. Prolly affects the ability to make the monthly payments more than the appreciation rate (depending on if you're a buyer or seller).

Totally cool that Sweet Water is a smoke free restaurant.

 

[Texas Proud]

Different ends of the market: I got a call from my bank after doing the deposit - they adjusted my deposit because two of the hundreds were counterfeit. First counterfeit bills i'm aware of recieving. I co-mingle the cash, so the bills could have been from several different people - can't prove they were from the new tenant i suspect they were from. We bought a bill checking pen and took it down to the bank - no help, turns out these bills had been "washed", that is, someone stripped the ink from a $1 and reprinted it as a $100.

Remember.... they might not have known it was counterfeit either... but since you were the one who deposited the cash you got stuck... I know of someone who passed a fake $20... was just embarrassed as heck that they gave it to someone they knew...

 

[Texas Proud]

MAN..... now I know why I live in Houston.... I am bidding on a 3500 sq ft house... first bid was $170K.. and probably will get it for maybe $180K...

I can not see paying $340K for a ONE bedroom condo with a high monthly fee... nor renting one from someone...

 

[Notmuchlonger]

MAN..... now I know why I live in Houston.... I am bidding on a 3500 sq ft house... first bid was $170K.. and probably will get it for maybe $180K...

I can not see paying $340K for a ONE bedroom condo with a high monthly fee... nor renting one from someone...

I just got back from League City last month. Walked through a few houses that were beautiful and for respectable prices in good neighborhoods. Similar prices to what you describe. Where I live in CA the same exact houses would be around 600 if you were lucky. Maybe more since I do not even bother to look at my local area housing prices anymore.

 

[clifp]

Obviously an almost double is nice in 6 years (although after commission fees etc it is probably closer to 80% increase in total appreciation) The number from 1991 to Jan 1998 don't look nearly as good in Honolulu.

Frankly the appreciation pale next to stock returns even using index funds. For instance on the same day that you bought Condo in Honolulu you could have bought Vanguard emerging market index fund for $8.02 it now worth $39.53 including modest dividends and capital gains it would be more than 400% increase.

The assessed value of my house in Honolulu dropped 18% this last year, is up at lot from when bought the first 1/2 half yes but it down slightly from when I purchased the 2nd half from my ex-girlfriend a couple of years ago.

 

[Texas Proud]

Obviously an almost double is nice in 6 years (although after commission fees etc it is probably closer to 80% increase in total appreciation) The number from 1991 to Jan 1998 don't look nearly as good in Honolulu.

Frankly the appreciation pale next to stock returns even using index funds. For instance on the same day that you bought Condo in Honolulu you could have bought Vanguard emerging market index fund for $8.02 it now worth $39.53 including modest dividends and capital gains it would be more than 400% increase.

The assessed value of my house in Honolulu dropped 18% this last year, is up at lot from when bought the first 1/2 half yes but it down slightly from when I purchased the 2nd half from my ex-girlfriend a couple of years ago.

But... in RE you use leverage most of the time.... so the real money 'invested' is a lot less than what you could put in the stock market... but to me, I can not afford to invest in a bunch of RE around these places as the 'risk' just does not make it for the return...

For me, you have the risk of not renting, or renting to a deadbeat... since you do not live there you have to hire someone.. Also, concentration risk... if I owned just one house in Hawaii, and did not have a mortgage... it would be half my investments..... no thanks...

And RE in Houston just does NOT go up fast at all... yes, you do get spurts at times, but then it might be 'flat' for awhile before another growth spurt.. they just keep building more and more houses..

So I am happy for the people who buy RE and become rich... it is just not in my universe...

 

[saluki9]

Frankly the appreciation pale next to stock returns even using index funds. For instance on the same day that you bought Condo in Honolulu you could have bought Vanguard emerging market index fund for $8.02 it now worth $39.53 including modest dividends and capital gains it would be more than 400% increase.

Well, at least you aren't data mining!

Using the highest performing index (and one of the riskiest) and comparing it (after a bull market no less) to RE isn't exactly a strong argument.

 

[honobob]

But... in RE you use leverage most of the time.... so the real money 'invested' is a lot less than what you could put in the stock market...

Well, at least you aren't data mining!

Using the highest performing index (and one of the riskiest) and comparing it (after a bull market no less) to RE isn't exactly a strong argument.

Thanks guys.

4% Appreciation my *ss!

 

[honobob]

Since Schiller doesn't report on paired sales in Hawaii I thought this information posted in another thread was interesting. What is even more interesting is the attitude of the OP towards the Hawaiian market. The subject property enjoyed 10% yearly appreciation and was listed at 10% over his sales price in a year that saw +13.9% YOY appreciation but yet this is touted as "the turn of the tide" and sold at "a discount of over 10%". I'm thinking the glass is more than full.


FACL’s “paired sales” pricing indexes track gains or losses on individual homes that sold vs. watching changes in an overall median or average of all homes sold. (Read latest report HERE!) It’s monthly snapshots are based on the first three weeks of activity in a given month and are later updated to full-month reports. After California in January came …
Florida, -13.87%
Nevada, -11.83%
Arizona, -11.06%
Louisiana -6.72%
Rhode Island, -5.95%
Maryland, -5.70%
Minnesota, -5.34%
Ohio, -4.99%
Illinois, -4.83%
And the best state? Hawaii at +8.38%.
As for metro areas, FACL put LA/OC’s 15.43% annual rate of January decline near the bottom of the heap …
Riverside-San Bernardino, -18.24%
LA/OC, -15.43%
San Diego, -14.05%
Cape Coral-Fort Myers, Fla. -13.26%
Oakland, -13.07%
Phoenix, -12.97%
Las Vegas, -12.95%
Miami, -12.34%
Orlando, -12.16%
Tampa-St. Pete, -12.13%
And the best town? Honolulu at +13.9%. Anybody for a Hawaiian-like real estate vacation?



4% Appreciation my *ss

 

[clifp]

Well, at least you aren't data mining!

Using the highest performing index (and one of the riskiest) and comparing it (after a bull market no less) to RE isn't exactly a strong argument.

Guilty as charged. But that is exactly one Honobob is doing also, look at his next post

And the best state? Hawaii at +8.38%.
And the best town? Honolulu at +13.9%. Anybody for a Hawaiian-like real estate vacation?

Why not set the clock back to 1991 and compare 7 year Hawaii RE prices? I didn't live here back in then but I pretty sure that over that period Real Estate was a flat or down in Hawaii.

As Texas Proud said you get to use leverage in real estate typically 4x (20% down) or even 9x (10% down). Which makes it even better in a raising RE market but as millions are now learning your 10 or 20% down is now completely wiped along with your credit score... It is possible to lose all your money in the stock market and your credit score, but it is really difficult.


I am not sure what Honobob point is. I think he is saying that real estate is always a great long term investment, if you pick the right location. Which is no different than saying the stock market is always a great long term investment if you pick the right stock/fund.

Frankly it should be no surprise that Hawaii has been a great Real Estate market in the last few years, the state has had one of the lowest unemployment rates over the last 5 years (<3%). Oh and did I mention the weather is great...

 

[tryan]

Today is a good day to buy real estate in Honolulu!

... and keep your day job. You'll need it to subsidize your tenants housing.