Are There Good Fixer Uppers In Hawaii Real Estate?

Adrian from New Jersey asks:

Hi, my partner and are looking to invest in fixer upper homes/condos. Is there a market for that in Hawaii?

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Show Transcript:

ey there my partner and i are looking
to invest in fixer-upper homes and
condos is there a market for that in
hawaii so thank you adrian for sending
us that uh that question i think it’s a
good one i scott you know i kind of was
thinking about you just because i’ve
known that you’ve done a lot of
fixer-uppers over your i remember a long
time ago scott many many you know folks
scott and i go back like something like
20 years and i remember way back in the
very beginning you were sending me some
photos of condos that you were
renovating and you were redoing and
fixing and flipping etc so i’m sure that
dylan has done a few of those too but
scott why don’t you lead us up on this
what do you what’s what what do you
think is the what what’s the market
where is the fixer-upper thing looking
like right
uh so i love oahu for this because it’s
a mecca it’s an oasis of old old homes
you know that if you look at oahu it was
basically built from the urban core
outward from like 1940 to 1970 there was
a massive boom in the 60s and 70s of
condo
construction and housing construction
where they added like 14 000 new units
per year just to give perspective we’re
only adding like 3 000 units per year
now
so it went nuts
and because hawaii is so expensive most
people don’t tear down and build new
they they fix up and we got a lot of
single wall construction or they add on
um so there is an oasis of opportunity
here
as far as you know buying a condo buying
a home and fixing and flipping it
there’s a lot of very old inventory and
and we have a significant amount of our
population that’s older that’s living at
home that
deferred maintenance is coming around
because they don’t have the
physical capabilities to be able to take
care of those homes now so yeah
i’m always always got my finger on it
down there so what do the numbers look
like in terms of uh is there is there a
profitability there i mean because i
know like a huge part of the expense of
course the massive part of the expense
is the land you’re really paying for
land for a lot of these a lot of these
structures their their value is next to
zero compared to the value of the real
estate how does the you know how does
that kind of the profitability work how
much of a premium you know house a
versus house b let’s let’s let let’s
talk about that you got two homes same
everything’s the same same neighborhood
same everything two homes one of them is
one of those you know old homes built in
the 50s where the folks that are
living in the home were the ones that
bought it new right they’re still there
and they’re moving out there they’re
retiring etc um versus one that’s right
next door let’s say uh same age but it’s
been completely remodeled it’s got all
the modern everything to it it’s totally
redone how does how did the how did the
premiums and the and the dollars work on
those guys
yeah i mean you know i’ve noticed
when i’ve run my numbers like when i
was doing the new construction stuff uh
the further out of the urban core
the better the profit margin for you
because you’re less capital in and you
know you’re in a more affordable price
point with more buyers
if you when you get into in town
honolulu you’re paying such a premium
for land and and stuff that you got to
be a little more careful but it at the
end of the day is there money to be made
yeah if you’re willing to roll up your
sleeves and get dirty and get out there
and grind on it then you’re you’re
essentially eliminating the labor
component of of that and you’re carrying
that on and you can make money doing
that if you’re going to sub it out and
give it to a contractor guess who’s
going to make all the money the
contractor is not you so
you got to be willing to get in the dirt
and roll up your sleeves and and go at
it
and that’s one of the things i’m willing
to do right it’s it’s like those it’s
like the thing as they uh during during
the gold rush the people who sold
shovels made a lot more money than the
people who were who who were digging up
gold very good so uh so look so adrian
uh you want to get a hold of us uh
there’s a link in the description uh
click through get a get on the contact
form um and uh we will and well i
believe you yeah i emailed you adrian so
if you want to go further with this uh
uh scott’s the guy at least on oahu
dillon fill us in what’s uh what what’s
the what the what what’s the fixer-upper
market looking like on
here’s the biggest construction this is
i mean the biggest consideration you
know
hawaii wide for if you’re doing you know
fixer-upper fix and flips type stuff is
your initial risk is way higher than it
is anywhere else right so it’s just a
matter of of of uh
of
ratio right i mean somewhere else maybe
you can buy a fixer for 200 put 50 grand
into it and make a 50 or 75 thousand
dollar profit right it’s the the risk
level is is relatively low and you don’t
have a huge return necessarily but in
hawaii
a fixer-upper is gonna cost you six or
seven hundred thousand and now you gotta
put a hundred or two hundred thousand
into it and yeah you may make a hundred
two hundred thousand dollar profit at
the back end but
you know when you’re getting it when
you’re first starting off do you have
that much capital to get you started and
to do the renovations and then um
realize the benefit on the back end so
just something to think about from
business planning process
yeah definitely uh that’s a really good
points uh
what’s it it has what has what’s your
take i mean what what is what is your
take on on the fixed ripper part on the
big island uh dylan is it there are
there dynamics that are different like
you know uh scott was uh i don’t think
there’s i don’t think there’s real
great margins to be made um you know i
just i just sold a house that was built
in 1964 had zero upgrades i mean it was
you know pretty well
you know some old japanese people lived
in it was pretty well it was pretty well
maintained but zero those old japanese
are so those old job i gotta say those
old japanese are so good at their homes
are like imprisonable
out there cutting the yard right yeah
yeah
but
you know we listed it for we listed it
for 4.99 it sold for 5.73 so 74 000 over
what we listed it for and you know maybe
maybe it’s worth 650 or 700 if it was
really decked out really nice i mean in
an old neighborhood south kona like you
know not
um not anything fancy so
you know you paid
for it and you still gonna you probably
need to put a hundred thousand into it
to upgrade the whole house that’s kind
of conservative estimate if you’re gonna
do all the bathrooms and flooring and
paint and roof and
kitchen and everything and
um you know now you’re at you know 675
somewhere in there and you know you’re
kind of back in market value you know
you’re not going to make a 100 grand off
that house so
and the other consideration is you got
to have cash you know if there’s any
deals to be had and you need any type of
financing
good luck okay
i don’t you know in this market you got
to be real careful because you know
you’re you’re basically buying on
tomorrow’s value right because otherwise
you know you got to pay a premium to get
in on the property if you’re buying it
on the market
and then you’re expecting the price to
be higher when you finish with this
thing so there’s significant risk i i
actually am not a huge fan of fixers i’m
more of a long-term hold kind of guy and
the risk on the long term holds i can
make almost the same kind of return as i
can on the fix and flips but i got a
property that’s going to produce for me
for years and years and years and the
risk level is significantly lower so you
just got to be really careful
you know and who you work with you know
you got to have people that you trust
that you that can work with you and do
the work
uh otherwise it can be difficult unless
you’re doing doing all the labor
yourself
and this this market you’re competing
against people who don’t want to fix and
flip they want to fix and live right so
they don’t care if there’s a profit
margin on the back end they’re willing
to buy it
spend the money and be at market value
and they’re good to go because they’re
going to live in the house for 10 years
so that’s the other dynamic right now
that you put you at a disadvantage if
you’re looking for that deal on that
good profit margin on the front end
it’s going to be hard because there’s
people that don’t care about that on the
back end that you’re going to be that
you’re going to be making offers against
especially in today’s market especially
in today’s market
i’m getting ready to renovate a condo
here and um man it’s been a nightmare uh
just even even the kitchen cabinets i
was like i had my whole layout set up i
went to go put the deposit down and
whatnot they’re like oh by the way we’re
out of this we’re out of that and it’s
not going to be until uh potentially end
of october before we get that in and
then i’m trying to get my my kerdi
products for the shower pan for the
shower surrounding stuff they’re out at
doll tile i had to order it off amazon
i’m like picking over here picking over
there and trying to set this timeline up
i’m like man this is a mess it’s it’s a
headache right now
yeah and look and and and tom kerr
concurs scott is established and correct
i would be terrified to buy a
fixer-upper in hawaii where you know no
one labor is unpredictable and
everything has to be shipped in exactly
versus
i mean again i mean you know a adrian
you know god bless i’m you know it
sounds like you folks are probably
experienced and you’ve done this before
and you kind of know what what you’re
doing and you connect with someone like
scott or dylan and you can kind of get
yourself set up but but you know for the
regular for the regular person
i just want to move into the darn house
i’ll renovate it you know i’ll do all
the renovations you know like you know
when we moved into our home uh 20
somewhat almost 30 years ago you know we
did a bunch of renovations to it it was
one of those old ones it was one of
those classic old homes uh it wasn’t
maintained by old japanese couple but it
was made maintained by a a little greek
lady and uh uh and she was just you know
she was right there too but uh you know
we did like a ton of renovation to it
but again it wasn’t because we’re gonna
flip it it’s because we wanted to to
live in it excellent