The Beginning - Deciding to Invest
Back in 2002, I became curious about investing in real estate and thought that the best way to find the deals as an investor would be to become a REALTOR and get first-hand information on properties. I quickly got my real estate license and joined Prudential Locations at the recommendation of a REALTOR friend who said that Prudential Locations has the best real estate training. Even though sales were not my primary focus at that time, the income from helping others buy and sell homes while I searched for my own investments didn’t hurt either.
The idea that I had in mind for my investing approach was property “flipping,” which involves buying an undervalued property in poor condition, fixing it up, and selling it for a profit. After a few months of learning the market and locating buildings and neighborhoods that would fit into my investment strategy, I came across what looked to be the perfect property.
I was looking over the “Hot Sheet” one morning for new listings that had just hit the market and saw what I thought was a good deal. I went to view the unit that morning, and submitted an offer before noon the same day. My offer was accepted, and just like that, the adventure began. It all happened so quickly!
My first investment was a 739 square foot, one bedroom unit in a 40 story building in Waikiki. This unit had good amenities including central AC, roof top BBQ area, fitness room, sauna, on-site security, and more. The only downside to this unit was that it was on a low floor and it was Leasehold.
My investment condo "before renovations" picture
Is it a Good Investment?
As an investor, I felt that all the terms of the lease were good with a low monthly lease rent of $44 and a lease expiration of 2049 which was long enough for a potential buyer to qualify for a 30 year mortgage. This meant that my monthly outlay would be relatively low while I renovated the property, and that I hopefully would not lose potential buyers because it should be easy for a buyer to obtain financing.
At that time, other units in the building were selling for $235,000 in “above average” condition and I got my unit for $180,000 in “fair” condition. The one-bedroom unit had gold wallpaper that might have been there since 1974, and reminded me of a scene out of Austin Powers. The kitchen and bathroom were both original, and had eight inch deep drawers which could not fit anything of normal size, rendering them nearly useless. Everything was filthy. It looked like the unit hadn't been cleaned in 10 years. At a glance, it seemed to be the perfect project.
Renovations: Do it yourself vs. Contractors
Being a beginner flipper at that time, I thought I could do most of the work myself and keep costs low. Boy, was I wrong! I took the wall paper down myself, which seemed to take forever and I ended up actually peeling concrete off the wall after being there for so long. After a few days of removing wall paper, the walls ended up looking like a topographical map of the Hawaiian Islands because of the missing concrete. I had inadvertently added the extra step of filling and smoothing out these gaps, which took another few days.
I took my frustrations out by demolishing the kitchen, bathroom, and floors with some friends, which went surprisingly well. This was by far the most entertaining part of the project!
I hired a contractor friend to do the labor intensive work. He installed matching cabinets and granite counter tops in the kitchen and bathroom, and we laid 18 inch ceramic tiles in the kitchen and bathroom in addition to carpeting the living and bedroom. We put on a fresh coat of paint, changed all lighting fixtures, outlets and switches throughout. Lastly, we put in a new stove, refrigerator, and microwave hood. The washer and dryer were still in good condition, so I left it at that.
The condo after renovations, so much nicer!