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Now you are just adding a bunch of ridiculous fees. $330 property mgmt. - who said it needed a property manager? $200 maintenance? Huh - way out of line for a 1,100 sq ft property - you want to add a bunch of fees - set the record straight with all the depreciation and other deductions (hint GET is deductible), etc.
Vacancy fee? You aren't going to have vacancies at that location.
Ridiculous fees? LOL. Classic. Do rental properties just manage themselves? Are you saying property managers (in general) are ALL "ridiculous"? If it suits your narrative, you'll completely forget the aspect of "time is money", right? If you self manage the property this takes time and effort and there is a strong element of inconvenience that comes with managing rental property. Trust me, I know. There are a lot of million dollar condo owners that don't want to be bothered at 7 a.m. on a Sunday about a leaky toilet.
Set the record straight with deductions and depreciation? Sure, you can depreciate the building and sure you can deduct GET (you can deduct ANY and ALL costs associated with your rental, why would GET be excluded? ). But we are talking about CASH FLOW, aren't we? Deductions and depreciation only have a benefit when it comes to taxation. We are talking about operating expenses and how they will impact CASH FLOW. That's why you will never see deductions or depreciation on a Cash Flow Analysis.
And you again failed investing in real estate 101 if you don't take into account a vacancy factor. Every smart investor factors in a MINIMUM 5% for vacancy. In most places, they factor 8-10%. To factor in ZERO is not only irresponsible - it's dumb.
Please do not ever give advice to a potential real estate investor. Your advice is reckless. Again, on a typical, standard, conventional, every day cash flow analysis, you will always see a line labelled "repairs and maintenance". This means that things INSIDE a condo actually break and wear down. Shocking, I know. Nothing lasts forever.
Here is a list of things that actually need to be either fixed or replaced at some point -
Appliances (fridge, microwave, cooktop, stove, dishwasher, washer, dryer)
Bathroom fixtures
Lighting fixtures
Ventilation fans and ceiling fans
Cabinets (kitchen)
Bathroom vanities/cabinets
Countertops
Flooring
Window treatments (curtains, blinds, etc)
Air conditioner
Water heater
Doors and associated hardware (entry, bdrm, bath, closets which can include closet systems)
A full set of appliances (incl ac and water heater) ALONE could easily cost at least $8,000 in a luxury condo like that. The average appliance lasts about 12 years (some more, some less) or 144 months. $8k/144 months = $56/mo. Then factor in the REPAIRS necessary for these appliances. Who's servicing the ac? Fridge break down? Washer stops spinning? PAY UP. Factor in at least $300/year for services on any of the aforementioned appliances (that's only two service calls a year). That's $16/mo. So we are at $81/mo JUST ON APPLIANCES. And sorry to say, we haven't even scratched the surface.
How about the flooring? What does it cost to clean carpet? Paint the walls? What about actually remodeling? Did the cost of this ever cross your mind? Every think that those 24 year old cabinets in that $250K LH condo will need to be gutted and replaced at some point in the next 30 years? The average cost to gut and remodel a 1,150 SF condo is about $70/SF. You are going to have to keep that property refreshed and in good condition to stay competitive (rent wise) with the other units in the same building. Factor $50K (that is WAY below average at only $44/SF) for a simple refresh of the kitchen and bath. And some new flooring, paint and updated fixtures. It will take 21 YEARS of putting away $200/mo before you reach $50K. In my opinion, $200/mo is WOEFULLY short if you want to have a nice unit and keep it competitive with rents in the same building. Oh, and guess what happens to your vacancy rate when it comes to remodel time. Grab those knees!!!
But let's hear what you think that "repairs and maintenance" number should be for a 2/2 1,150 SF luxury condo. Maybe you're OK having a 40 year old fridge in your $4,500/mo rental? LOLLLLL But seriously, please don't skip this question like you usually do. What's the number?
Even if you removed my "ridiculous fees" the owner is STILL cash flow negative. But hopefully you learned something from my post anyway.
Quote:
Originally Posted by whtviper1
30 years to save $250K - uh, first - how sad if it takes someone that long - because retirement will not be all that much fun.
If someone started working at 22 and had $250K IN CASH (not including 401K and other long term investments that incur penalties if tapped early and other non liquid assets) at the age of 52, they are doing pretty darn good. But then again, I actually have middle class friends. So I can respect that and not think it's sad like you do.
You have way to much time on your hands so skimmed that ridiculous post - replace the air conditioner? It is central air at the Landmark. What do you think the maintenance fees cover.
$50K to refresh a bathroom/kitchen in a 1,100 sq ft unit - you need some new contractors. I mean - you seriously need new contractors.
At my luxury rental downtown - far more luxury than the Landmark - lets see....
I've had it roughly 6 years - lets see - what has needed replacing - or what looks dated.....
Uh - uh - exactly nothing - in fact 10 years from now, it still won't look dated - especially the bathrooms and floors.
My tenants certainly know better than to call me at 7am for a leaking toilet (and none of mine have ever leaked) - because that call is going to voice mail. I don't have any high maintenance tenants at my properties.
And anyone who has saved less than $10K year for 30 years is absolutely in trouble financially.
Ridiculous fees? LOL. Classic. Do rental properties just manage themselves? Are you saying property managers (in general) are ALL "ridiculous"? If it suits your narrative, you'll completely forget the aspect of "time is money", right? If you self manage the property this takes time and effort and there is a strong element of inconvenience that comes with managing rental property. Trust me, I know. There are a lot of million dollar condo owners that don't want to be bothered at 7 a.m. on a Sunday about a leaky toilet.
Set the record straight with deductions and depreciation? Sure, you can depreciate the building and sure you can deduct GET (you can deduct ANY and ALL costs associated with your rental, why would GET be excluded? ). But we are talking about CASH FLOW, aren't we? Deductions and depreciation only have a benefit when it comes to taxation. We are talking about operating expenses and how they will impact CASH FLOW. That's why you will never see deductions or depreciation on a Cash Flow Analysis.
And you again failed investing in real estate 101 if you don't take into account a vacancy factor. Every smart investor factors in a MINIMUM 5% for vacancy. In most places, they factor 8-10%. To factor in ZERO is not only irresponsible - it's dumb.
Please do not ever give advice to a potential real estate investor. Your advice is reckless. Again, on a typical, standard, conventional, every day cash flow analysis, you will always see a line labelled "repairs and maintenance". This means that things INSIDE a condo actually break and wear down. Shocking, I know. Nothing lasts forever.
Here is a list of things that actually need to be either fixed or replaced at some point -
Appliances (fridge, microwave, cooktop, stove, dishwasher, washer, dryer)
Bathroom fixtures
Lighting fixtures
Ventilation fans and ceiling fans
Cabinets (kitchen)
Bathroom vanities/cabinets
Countertops
Flooring
Window treatments (curtains, blinds, etc)
Air conditioner
Water heater
Doors and associated hardware (entry, bdrm, bath, closets which can include closet systems)
A full set of appliances (incl ac and water heater) ALONE could easily cost at least $8,000 in a luxury condo like that. The average appliance lasts about 12 years (some more, some less) or 144 months. $8k/144 months = $56/mo. Then factor in the REPAIRS necessary for these appliances. Who's servicing the ac? Fridge break down? Washer stops spinning? PAY UP. Factor in at least $300/year for services on any of the aforementioned appliances (that's only two service calls a year). That's $16/mo. So we are at $81/mo JUST ON APPLIANCES. And sorry to say, we haven't even scratched the surface.
How about the flooring? What does it cost to clean carpet? Paint the walls? What about actually remodeling? Did the cost of this ever cross your mind? Every think that those 24 year old cabinets in that $250K LH condo will need to be gutted and replaced at some point in the next 30 years? The average cost to gut and remodel a 1,150 SF condo is about $70/SF. You are going to have to keep that property refreshed and in good condition to stay competitive (rent wise) with the other units in the same building. Factor $50K (that is WAY below average at only $44/SF) for a simple refresh of the kitchen and bath. And some new flooring, paint and updated fixtures. It will take 21 YEARS of putting away $200/mo before you reach $50K. In my opinion, $200/mo is WOEFULLY short if you want to have a nice unit and keep it competitive with rents in the same building. Oh, and guess what happens to your vacancy rate when it comes to remodel time. Grab those knees!!!
But let's hear what you think that "repairs and maintenance" number should be for a 2/2 1,150 SF luxury condo. Maybe you're OK having a 40 year old fridge in your $4,500/mo rental? LOLLLLL But seriously, please don't skip this question like you usually do. What's the number?
Even if you removed my "ridiculous fees" the owner is STILL cash flow negative. But hopefully you learned something from my post anyway.
If someone started working at 22 and had $250K IN CASH (not including 401K and other long term investments that incur penalties if tapped early and other non liquid assets) at the age of 52, they are doing pretty darn good. But then again, I actually have middle class friends. So I can respect that and not think it's sad like you do.
Hey PJ how many decades have you lived in Hawai'i? Just wondering for credibility sake? It's been awhile huh?
You have way to much time on your hands so skimmed that ridiculous post - replace the air conditioner? It is central air at the Landmark. What do you think the maintenance fees cover.
$50K to refresh a bathroom/kitchen in a 1,100 sq ft unit - you need some new contractors. I mean - you seriously need new contractors.
At my luxury rental downtown - far more luxury than the Landmark - lets see....
I've had it roughly 6 years - lets see - what has needed replacing - or what looks dated.....
Uh - uh - exactly nothing - in fact 10 years from now, it still won't look dated - especially the bathrooms and floors.
My tenants certainly know better than to call me at 7am for a leaking toilet (and none of mine have ever leaked) - because that call is going to voice mail. I don't have any high maintenance tenants at my properties.
And anyone who has saved less than $10K year for 30 years is absolutely in trouble financially.
You just can't stop with the bad information...
Just because the air conditioning is central does not mean there aren't components of the ac system that are not the responsibility of the individual unit owner. Many "central" ac systems in high rise condos exclude components like duct work, air handlers, fans, thermostats and associated wiring and plumbing. The items that are part of the reserve study (and therefore covered by maintenance fees) would include things like a chiller or condenser. And often the pipework that runs exclusively inside common walls. But many people (including yourself) incorrectly assume that 100% of the ac unit's maintenance and replacement cost is covered by the AOAO dues. The worst part about these hybrid common/individual ownership of an overall system is that the cost to repair and replace them is extremely high. Most condos now install split ac units so that the cost to maintain and replace units drops by 70% or more (and responsibility is put on the owner, not the AOAO). Just replacing an air handler in a central system can cost as much as a brand new split system because the contractors hired to do the work on central systems charge incredibly high labor rates because of risk and liability. You can't call "Hawaii Budget AC" to do the work. Try Alakai Mechanical, Commercial Plumbing, Shobu's etc. Add in mold as another potential problem and costs skyrocket even more.
Need new contractors? You have got to be kidding me. My definition of refresh is to replace the cabinets, countertops and appliances. Same for the bathroom - replace the vanities, shower/tub and fixtures. You can tell me you can remodel a kitchen and two bathrooms, replace all the fixtures (electrical and plumbing), repaint and redo the flooring (in the entire unit) for less than $50K? 1,150 SF unit? In a strict, difficult to work in building that requires licensed contractors (and possibly permits) to do any work? Find me one contractor that is willing to do that. I just remodeled a 390 SF studio in a strict condo building. Cost me $35K. And that was cheap. To think a place 3 times the size with an extra bathroom wouldn't cost at least 40% more is just nuts.
6 years? LOL. That's nothing. Wait until things get to 15-20 years old. Unlike you (who buys only "new stuff"), I have exclusively only purchased properties that have finishes that are anywhere from 15-30 years old. And ALL of them needed to be gutted and refreshed (most were in desperate need of a refresh). You can only fix and maintain a finish of anything for so long. Eventually it needs to be replaced or the rental income you receive on a unit will be far below market. You need to keep a place constantly rehabilitated over time in order to command comparable market rents. We are talking about a luxury condo in Waikiki - not some walk up building in industrial Kalihi
Your tenants know better? LOL You had better hope your tenant calls you on a Sunday. A leaky toilet can lead to a massive disaster. I had a tenant in a condo a few years back leave to work for the day when the supply line to the tank started leaking. Despite the relatively small amount of water that leaked out, it caused over $30K in damage to the unit directly below. Because there was no matching flooring to replace the 40 SF that was damaged, I was forced to refloor the entire unit. This was in addition to replacing all the drywall in their bathroom, two light fixtures and paint. Thank goodness I had additional insurance or I would have come out of pocket on that. Just a year ago, I had my OWN rental unit flooded from a toilet that had a small crack in the tank from a unit above. The tenant was gone for the day. That caused only about $4K in damage but only because there was no flooring to replace. Clearly you have no understanding of toilets and assume a "leak" can ONLY be a malfunctioning fill valve or hardened/defective flapper. This is when actual construction-related experience can he helpful in life.
Less than 1 in 5 people actually put away AT LEAST $10K/year for retirement. I agree that, in general, people don't save nearly enough. But to say everyone that doesn't save at least $10K/year will be in absolute financial trouble is extremely presumptuous. Not everyone has the need to wear bougie shoes, drive $100K Teslas and live in over-sized mansions in Kailua. Some are quite happy with much less.
Leasehold definitely makes sense for a lot of people.
Let's take the Waikiki Landmark - a 2 bedroom can be had for $250,000 or less (versus nearly $900,000) for fee simple. That's $500/month over the life of the lease.
It has 40 years left on the lease at $1,600/month. So for someone who plans to hold the unit over the life of the lease is only paying $2,100/month + monthly condo fees (which everyone pays anyway).
Lenders used to require quite a few lease years past the loan term. It's possible that you could only get a 15 year mortgage.
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Slightly off topic but related: have any of you bought, tried to buy, or thought about buying the fee on a leasehold property without also buying the unit ? My understanding is that by law the fee must be first offered to the unit owner. And most I've seen would have a very small return on investment. But perhaps as a longer term investment with the prospect of buying the unit at a very low price as its value drops while approaching the end of the lease ?
Slightly off topic but related: have any of you bought, tried to buy, or thought about buying the fee on a leasehold property without also buying the unit ? My understanding is that by law the fee must be first offered to the unit owner. And most I've seen would have a very small return on investment. But perhaps as a longer term investment with the prospect of buying the unit at a very low price as its value drops while approaching the end of the lease ?
Mostly a question for theoretical discussion.
I have had fee-only acquisition opportunities in the past where the LH owner prefers not to purchase or simply cannot afford (or qualify for a loan) the acquisition cost. Most of these opportunities were through a network of friends that work closely with KSBE. The return is generally in the 5-8% range which is quite good. But most of the people I know buying them are hoping to take the property back when the lease expires - that's when they really see their investment yield. To me, it's an unethical and predatory form of real estate investing because of the significant negative ramifications to the leasehold owner. But there are a lot of people out there that don't have any issues with that.
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). But we are talking about CASH FLOW, aren't we? Deductions and depreciation only have a benefit when it comes to taxation. We are talking about operating expenses and how they will impact CASH FLOW. That's why you will never see deductions or depreciation on a Cash Flow Analysis. 
