Hawaii Housing News

News, Tips and Opinions About Hawaii Real Estate and Housing

Building a Buyers List — How to Get Started (Part 2)

by

Ready for Part 2 of building your Hawaii real estate buyers list? Ok, so if you read the last post, you know that it’s important as a Hawaii real estate investor to build your real estate buyers list. Makes sense, right? If you’re planning to sell the properties, you want to have buyers lined up ready to go instead of worrying how long your house is going to sit on the Hawaii MLS (multiple listings service).

The first thing you need to realize in building your buyers list is that there are different kinds of buyers out there. Each type of real estate buyer is looking for something different and each will make different types of offers for your Hawaii real estate sale:

1. Owner/Occupier — These are the people that obviously are going to buy your property as their Hawaii home. Because they are likely more concerned about having a nice home than near-term profit, they will generally pay the most for the properties that you sell.

2. Landlords / Cash Flow Investors — The Hawaii landlord or passive income investor is naturally looking for a profit. However, this profit is envisioned to be realized over a long timeframe. They are more concerned about the potential for cash flow over time and less about upfront equity. Therefore, they will likely settle for less than a homeowner but may not seek the deep discounts that a rehabber will seek.

3. Rehab Investors — The last type of Hawaii real estate buyer is the rehab investor. This person is looking for enough upfront equity to rehab the property and flip it on the open market or to their own list of buyers. Remember, they are looking for a nice profit even after paying your wholesaling price, so you better come with well-discounted properties. Naturally, this buyer will pay the lowest of the three buyer types since upfront equity is the key factor.

Rehabs Only...

This becomes very important because the type of buyer you attract or build a relationship with is directly tied to your exit strategy. Are you looking to wholesale for quick profits? If so, then having Hawaii cash buyer investors who can close quickly may be your best type of buyer, even if they pay the least amount for your deals. If you’re a rehabber instead, then you may want to concentrate more on seeking landlord investors or owner/occupiers who will pay you more, justifying your rehab cost. Know what kind of investor you are first so you focus on the right type of buyer for your Hawaii buyer list and overall investment business.

So now that we have that out of the way, what are the best tips of actually building the buyers list?

Great question! Here are some useful methods for getting started:

1. Google/Craigslist/Facebook. It’s almost cliche today to direct someone to Google to find something, but there’s no getting around the fact that just about everyone worth doing business with today is online. Search Google, Craigslist and Facebook for “I/We Buy Houses” in your area. These are investors actively looking to buy more property and will generally pay you fair compensation as long as you’re presenting an investor-friendly real estate deal.

2. Visit Your Local Real Estate Investor Groups. Every city has a few different local REAs (real estate association). Go and network. See who’s buying and who’s selling. Find out who the big players are. See who’s actually taking action and who’s just kicking the tires. Get business cards and call them the next day.

3. Advertise. Post ads yourself on Craigslist asking for people who want to be on your buyers list for early notification of the deals you find. You can also set up a Squeeze/Lead Capture Page to bring in traffic and leads to a back-end database. You can order lead capture templates for a low price per month from a company like Aweber or choose a more robust lead management software package. Additionally, you can post a small ad in the local newspaper, print or online, titled “Fixer Uppers” or “Handyman’s Special”.

4. Network. In addition to the REAs, so much of business is about networking. In this case, you probably already know people who buy investment property and rent it out to others. All you want to do is ask them if they’re looking to add to their portfolio of Hawaii real estate property. If so, you can put them on your list. If they’re not, then they can likely refer you to others.

Show your Ewa condo deal to landlords? Yes. To your Kailua rehab investor? Nope.

Remember when you speak to someone, no matter what type of Hawaii real estate buyer they are or how you found them, you need to get some critical information:

1. Phone number and email address. If you have everyone’s email address, then you can blast out your deals to everyone on your buyers list at once. It also becomes an efficient way to stay in touch with everyone, even if you don’t have deals to sell. Let them know you’re still out there hunting down deals for them.

2. Areas they are interested in. Not everyone is looking to buy another Waikiki condo. Likewise, some people will not buy on the North Shore because of the smaller buyers pool between Haleiwa and Kaneohe. Don’t waste time talking to someone only interested in Honolulu condos about your great Ewa Beach fixer-upper.

3. Price range. It doesn’t do much good to find a great deal on a million-dollar house in Kahala or Hawaii Kai if your buyers don’t quite have that amount of money at their disposal. At the same time, some people may have those funds but instead prefer the deal structure of a Waikiki condo and will buy 10 of those before the year is out.

4. Exit strategy. Find out what their business model is. Will they rehab or do they want all the repairs done before closing? If you know they want to buy Hawaii property for cash flow, then you better analyze local rents so you can relay that information to them to help seal your deal. Contact a nearby property manager or realtor if you can’t find this information on your own.
I think that’s enough to get going. Remember, persistence is key. Every market is different. What works in Hawaii may not work in some mainland markets, but the general ideas are the same. If you have more tips, share them in the comments section below!

Building a Buyers List — Why You Need to Start Now (Part 1)

by

If you really want to break it down, being a real estate investor, in Hawaii or anywhere, is just about buying and selling. Sure, the strategies change as do the timescales on which these happen, but it’s about buying a piece of property at one time and (hopefully) selling it at a higher price at some point down the road. It could be three to six months for a standard flip or maybe several years if you’re holding it for cash flow as passive income.

While there are many attractive deals out there to be had, remember to think about who your end home buyers are going to be when you have Hawaii real estate for sale. Many investors when starting out focus so much on finding the property that they ignore the other end of the transaction. Of course when analyzing a real estate deal you’re going to look at the after repair value (ARV), required renovations, financing fees, title/escrow costs, etc. to determine your maximum offer and profit spread.

But it’s also critical to think of who the person is that’s going to buy this piece of island real estate from you. Is it a homeowner? A landlord? Another investor? Local or mainland? Who’s looking for investment property in Hawaii? Different buyers look for different prices or discounts. A homeowner will generally pay more for your property than a landlord. Understanding your buyers is critical to getting the price you want at the day of closing.

Having a list of interested buyers ready to go solves many potential problems. One, they have already indicated they’re looking for property to purchase. So while you can still list your property on the Hawaii MLS (house listings for sale) to attract a greater pool of potential buyers, and therefore a possible higher price, you may also be able to ‘pre-sell’ the property to one of your buyers. Just have them place a deposit in escrow with a contract ready to go. This saves you time, marketing and other holding costs. Two, by selling to your repeat buyers you establish a business relationship that you can go to over and over again. If the previous closing with a buyer went smoothly, you can likely eliminate some of the worries that come about as you approach the next closing with the same buyer. Three, repeat buyers will often come to the table with cash, facilitating your closings even more.

So if you have a pool of qualified cash buyers who can go to contract on your Hawaii properties for sale before you’ve even completed a rehab, saving you significant time and holding costs, wouldn’t that be worth a discount to them? This, in turn, helps ensure a happy buyer who is more likely to purchase from you again. It’s much better to sell your properties this way than to go to the open market every time not knowing if your new buyer is going to close or not. Having a qualified buyers list helps eliminate these worries for smoother closings and greater profit for your Hawaii real estate investment business.

Click here for Part 2 of How to Build Your Hawaii Real Estate Buyers List!

What Is a Self-Directed IRA and Why Do You Need One?

by

Hello and welcome to my first post as a contributor to Hawaii Housing News! If you’re like most people you have either never heard of Self-Directed IRAs or you may have heard the name but have no idea what they are. So relax, I’m here to explain the basics in layman’s terms!

In the eyes of the IRS, Self-Directed IRAs are the same as any other IRA. They are retirement accounts that have special tax benefits to encourage individuals to save for their retirement. The difference between the IRAs sold by Schwab, Fidelity and all the other large securities companies is not the name but the actual investment. Most people who have an IRA are invested in Stocks and Mutual Funds. Self-Directed IRAs are invested in Real Estate, Notes, Precious Metals, LLCs, Private Placements and any investment not prohibited by the IRS.

People are often shy about calling themselves “investors”. If you’re putting your hard earned money in a retirement account, then you are investing in something, hoping it will grow so you will have more in the account when you retire than just the money you contributed to it. You want growth in your investment.

Let me give you an example: IRA #1 invests in $150k of Stocks and Mutual Funds which go up and down according to the whims of the financial markets (of which you have no direct control). You hold them and hope when you get to retirement that you have listened to the right advice and it pays off.

IRA #2 is a Self-Directed IRA. You happen to have an interest in Real Estate, so you find a Waikiki condo for $150k. Your IRA buys the condo and rents it for $1,200 for the next 10 years. 10 years later, your IRA #2 still owns a condo, probably worth more than the original price of $150k. Hopefully, there will be some appreciation over a 10 year investment, but even if there was no appreciation your IRA has $144k in growth from the rent and the condo can be sold for the market price 10 years from now. Of course, this is a simplified example, but it shows you that you can mathematically plan the growth of your Self-Directed IRA.

My company, New Direction IRA, is the administrator for our client’s accounts, so we do not sell any investments nor do we give any financial advice. The relationship between our clients and us is the opposite of what most people think of when they think about retirement investing. Most people are used to being sold Mutual Fund A, B, or C by their financial advisor. Our clients come to us with their investment ideas and we make it happen. We are the administrators of the accounts. We buy and sell what they want, when they want. They can still use their favorite Realtor, Title Company, Escrow Officer, Appraisers and everyone else involved in the purchase and sale of Real Estate. It’s just that the buyer is an IRA instead of an individual. We handle the record keeping of what our clients decide to invest their IRA funds in.

There are many options of investments with a Self-Directed IRA and over the coming months I will continue posting on the subject of Self-Directed IRAs. I encourage your questions and feedback, it will add to this discussion.

Thanks for reading my first post on Hawaii Housing News!

Get the Big Picture with a Self-Directed IRA

How to Choose the Best Offer for Your Hawaii Flips

by

Choose the Strongest Offer!

It’s exciting, isn’t it? You acquired a property at a great price. Your contractor or handyman turned that dingy vacant house into a beautiful Hawaiian home just ready for a nice family to make their own. You’ve put it on the market, had an open house or two and are now watching the offers come in.

So how do you choose which offer to take? Highest price, right? Not necessarily. You’ll often people in the industry refer to a strong offer. What exactly makes an offer strong? Not only is it in the higher end of your total offers, but just as importantly the buyer has shown a clear intent and ability to close on the offer and terms in the purchase contract they submit. Some people will just throw out random offers but when push comes to shove, they will walk away. Or even worse, they never had the funds to begin with! What good is that??

Remember, you have holding costs. If you are wasting time chasing high but ultimately weak offers, it’s a drag on your bottom line. In the meantime while you’re being led on a wild good chase, your stronger buyers may have moved on to the house down the road.

So what’s a savvy Hawaii real estate investor to do? Ideally, you’ll have a list of cash buyers ready to go, waiting to hear that you have another property ready to go on the market. If you don’t have the house pre-sold in this fashion, then look for the offers that come with all or mostly all cash, can show proof of funds, are willing to put down a strong deposit and can close in 30 days or less. This may not lead you to the highest offer, but that’s okay!

Remember, there are always more real estate deals waiting, even in Hawaii. There are many more short sales, REOS and other attractive investment properties around the corner, so don’t worry if you didn’t get the ultimate price you were hoping for. Often times, it’s best to take your profits, congratulate yourself for a job well done and move on to the next flip.

And if you’re on the other side of the equation — as the potential real estate buyer — use the above tips to make your own offers strong to get into that next great deal!