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  • Ryan O.

November Updates

THE CONVERSATION

One can build their wealth by owning real estate as a longterm investment. Did you know...

  • 1031 Exchange is not a tax loophole. It has been part of the tax code for many years.

  • 1031 Exchange allows you to defer your capital gains.

People who own investment properties will do a 1031 Exchange for these reasons (in no particular order):

  1. Tax deferral.

  2. Appreciation.

  3. Depreciation.

  4. Diversification.

  5. Cash flow.

Here is a random example. Let's say your Popo's (grandma) investment property was valued at $2,000,000. Popo bought the the apartment building for $100,000 decades ago; the property is worth 20 times what she purchased it for.


The property has no debt and Popo can no longer take advantage of the annual depreciation deductions on her yearly tax returns.


After reviewing her financials, Popo receives a monthly net income of $5,000 or $60,000 a year. Like many kind landlords during her time, Popo hardly increased the rentThis only gives her a 3% return on her investment.


In contrast, Popo has $2 million in equity in this one property. If Popo does a 1031 Exchange, she can defer her capital gains by purchasing a like-kind property. The replacement property can provide her with greater income and long-term appreciation potential.

TIDBITS

If your home belongs to a HOA, it is important the board of directors and the association property manager ensures the association is fiscally sound. Every year, the board of directors and association property manager will create a reserve study.


A reserve study is a financial projection to fund all the common area projects. This can be repainting the exterior of the building, to upgrading the elevator system, to repaving the parking lot. Usually, the reserve study consists of things that are not part of the day-to-day operational expenditure. In other words, the items listed in the reserve study are large scale projects that usually have a longterm life.


When your HOA mails you the reserve study, the document will list:

  • A list of all the projected capital components.

  • Estimated life of each capital component.

  • Estimated financial projection to repair or replace each capital component.

It is important to remember that a reserve study is not a crystal ball because things change -- cost of labor, cost of materials, etc. This is why the reserve study needs to be updated annually.

HOME MAINTENANCE

When we remodeled our home, I purchased some quality Hampton Bay ceiling fans. Despite having over 3,000, 5 star reviews on Home Depot's website, the ceiling fans I got were "lemons." In less than two years, one motor burnt out and two fans stopped going on high mode. Sigh...


An electrician, a home inspector, and a property manager all told me that Hampton Bay is a reputable brand. However, after doing some research, I decided to spend more money to purchase a higher quality ceiling fan.

After doing some research, I decided to check out Pacific Ceiling Fans in Aiea. I was thoroughly impressed with their customer service and array of products. Long story short, I decided to purchase the Toyota Camry of ceiling fans -- Minka Aire Veer. This is a $300+ ceiling fan and it is rated for 20 ft x 20 ft space. I wish I had just bought this from the start.

NOVEMBER MARKET STATS

Did you know that residents in Hawaii face the highest housing cost in the nation? According to UHERO, Hawaii's median housing costs are 2.7 times the national level. Over the course of the longterm, median single-family home and condominium prices have more than tripled since the mid-90s. In addition, during the pandemic, home prices soared. Between 2019 and 2022, prices rose by 35%, before leveling off this year.

OPPORTUNITIES

Upcoming Listing - $705,000

Later this month, I will be listing a split-level, 3-bedroom/2-bathroom/2-parking townhome at Club View Gardens (Temple Valley, Kaneohe). The property consists of over 1,400 living square footage! Please contact me for more information.


Masumoto's Okazuya & Restaurant - $195,000 - Price Improvement!

Welcome to Matsumoto Okazuya, a hidden gem in the culinary paradise of Honolulu, Hawaii! This turnkey restaurant business presents a rare and exciting opportunity for entrepreneurs and food enthusiasts to step into a well-established, beloved eatery with a rich history and a loyal customer base. Conveniently situated in the heart of Kalihi, Matsumoto Okazuya benefits from a prime location with high foot traffic and excellent street frontage visibility. Take the reins of Matsumoto Okazuya, continue its tradition of culinary excellence, and embark on a rewarding journey as a respected member of the Honolulu dining scene. Inquire today to secure your place in this thriving food industry! Base rent: $1,500/month, CAM: $1,076/month, GET: $111.97/month. Next rent step up is from January 1, 2024 to December 31, 2024. Lease expires on 12/31/2025. Sale is for Matsumoto's Okazuya-Restaurant LLC, its FF&E, recipes, and assumption of lease only. The real property is not for sale.


Stay safe and healthy.

-Ryan Oda

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