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The Titanium Vault hosted by RJ Bates III
Cory Nemoto: Flipping Houses with an Aloha Spirit
March 01, 2019 Cory Nemoto
The Titanium Vault hosted by RJ Bates III

Cory Nemoto: Flipping Houses with an Aloha Spirit

March 01, 2019

Cory Nemoto

Cory Nemoto is a real estate investor based out of Honolulu, Hawaii that primarily focuses on rehabbing properties and new construction developments. He also has a partner in Seattle, Washington where they flip houses and also accumulating long term cashflowing assets. Cory and I discuss some of the differences and similarities of flipping houses in Hawaii compared to the rest of the country. We also go into detail of how to "CPR" a lot and also to add an "ADU" to increase the value of your real estate.

Cory Nemoto is a real estate investor based out of Honolulu, Hawaii that primarily focuses on rehabbing properties and new construction developments. He also has a partner in Seattle, Washington where they flip houses and also accumulating long term cashflowing assets. Cory and I discuss some of the differences and similarities of flipping houses in Hawaii compared to the rest of the country. We also go into detail of how to "CPR" a lot and also to add an "ADU" to increase the value of your real estate.

Episode Transcript

Speaker 1:0:01Listen up real estate investors, entrepreneurs and agents, long white place, unlocking the secrets to real estate investing and entrepreneurship. Welcome to that titanium vault hosted by RJ Bates for third. Here's RJ.

Speaker 2:0:24What's up guys? Welcome to the titanium vault. I'm your host, Rj Bates. Today I'm sitting down with my good buddy from the Aloha state, Cory. Demato. How you doing buddy? I'm doing good. How's it going, RJ? Oh Man. Uh, I would say just another day in paradise, but you're actually in paradise and I'm, I'm sitting here in Fort Worth, Texas. Not Quite as, uh, is is paradise like,

Speaker 3:0:48yeah. Yeah. I mean, I, I got to say it. It's not bad.

Speaker 2:0:54Yeah. You don't live in the goodbye, right? Yeah. They'll watch. Take a second to kind of introduce yourself and tell everybody what it is you do in real estate investing.

Speaker 3:1:04Sure. Uh, so yeah, my name is Cory. Any modal? Um, I mainly flip houses, uh, here in Hawaii and also in the Seattle area, the greater Seattle area. Um, and currently right now we have about 14 projects going on. Um, and about four on market. I mean, just sold. One of our duplex is out in Seattle and actually I just got an email right before we started. I don't know if you saw an RJ, but we just closed on our, our deal out in Kiowa. Yeah. New. Right. So, yeah. Yeah. So we, um, thanks again man for wholesaling, not one that's gonna be an awesome project. And uh, and also congratulations on selling your, your, our project is like, like right across the street.

Speaker 2:1:55No, man, it's so funny. I've had, you're like the third or fourth person has reached out to me and they're like, hey, thanks for setting the comp side and the neighbor, I guess those way out of our intentions. But uh,

Speaker 3:2:06yeah. And it was a, it was a very nice renovation. You guys did. I mean, my realtor, Ashley, um, she, she sells for us, right? And she's like, you gotta go check out that the house down the road. You know, you guys gotta do it like that. Like, okay.

Speaker 2:2:26Lija did a great job out there for you guys that, uh, don't know Alijah della guards that he's my partner out in Hawaii. And, uh, he's in charge of all the rehabs and stuff. He did, he knocked that one out of the park. Uh, probably a little bit too much. I think we probably could've gotten away with a little bit less, but, uh, you know, he, he loves to pretend like he's playing a little bit. HGTV. I give him a hard time about it, so. Awesome. Yeah, I appreciate that. So let's go, uh, let's go back to, to your start. How did you get into real estate investing?

Speaker 3:2:58Oh yeah. So, um, I got into real estate investing. I, I kind of just stumbled into it, to be honest. I knew nothing about real estate. I started from the very, very bottom and, uh, you know, I, I was in my last, my final year in college. I was living in Riverside, California at the time. And Oh, I didn't know what I wanted to do, you know. Um, I, it was kind of getting to a point where I was getting kind of scared because I was about to graduate with a degree in exercise science and marketing and pretty much did not want to do that. So I was like thousands of dollars in debt and you know, kind of scratching my head thinking like, is this what my life's going to be? You know? And so I, you know, my dad was, I think he, since I had the entrepreneur spirit, um, along time ago, because I did have like an internet marketing business, I had an email marketing business and, um, I would always dabbled into things here and there.

Speaker 3:3:57And so he was telling me to read Rich Dad, poor dad from Robert Kiyosaki all for a long time. And it took me a while until I find my final year in, in college to actually pick it up. And I read that thing. I swear I might've read it in like two days, you know? And like I probably would have read it in one day if I just, you know, if I, if I had, it wasn't being pulled from school or something, but every word in that book kind of just spoke to me, you know? And it Kinda opened my eyes and gave me a sense of relief that it's, it's okay to feel like you don't want to work for the rest of your life, you know? Cause I, I felt a little bit of a shame because I grew up in a traditional household where everybody gets a nine to five, you know, and works and saves for retirement and hopefully you have enough to get you to the end.

Speaker 3:4:46And all, I, I didn't want to do that. You know, I'm not a lazy guy, you know, I'm a hard worker. I'm very driven. I'm ambitious. But when I had that feeling, I felt shame, you know, I was like, oh, I feel lazy. I don't want to do this and I want to work. But when I read that book, you know, it opened my eyes, it's like, okay, I'm not, my feelings are not wrong. Like I, I, it's not wrong to feel that you want something more, you know? And, uh, so I read the book and it's a business book, write a rich Dad, poor dad, but he talks a lot about investing in real estate. Um, and so he, I think in the book he recommended going to the local meetup groups. So I went there, met a couple guys, and, uh, they, they asked if I wanted to get in, you know, if a lot of the word.

Speaker 3:5:37And I was like, absolutely, you know, and, uh, I'm an introvert and I'm the guy that sits in the back, you know, and I don't talk to nobody. And, um, you know, I, they approached me, you know, so I, I talked to them and I told him I'll do anything, you know, I'll do anything to make it and learn and all. So they day, uh, got back to me and they, they wanted me to, you know, meet with them and I met with them. Um, and he, they, they basically told me that, you know, I'd be door knocking, um, for them. And that the, the first guy I talked to, he was kind of laid it out straight from me. Like, look, if you're not in this for the right reasons, you're not gonna make it, you know, and uh, and you might as well just turn, turn around right now because what you're going to be doing is not pleasant. You know, and if you don't got it in you, and if you're not doing it for the right reasons, you're going to quit at all though his words stuck in my head and I'm very glad he was hard on me on the first meeting because he was right. He was 100% right because I door knocked for them for a year and it was brutal.

Speaker 2:6:54But we're not going to, as one of the hardest things I've ever had to do, and I've done it before for two different industries. I've done it in the roofing industry and done it in real estate in man, you can only handle so many times where the door gets slammed in your face, you know? But it's, it's a beautiful thing when you find a either a motivated seller or a client and it's, there's nothing more exhilarating than that moment when they're like, absolutely, I want to sell my house.

Speaker 3:7:19Oh yeah, yeah. I that's, I agree with that 100% because like, you know, for, for the hundred no's that you get are the thousands of rejections. Like that one person that you help, it's soul fulfilling. You know, like our work is so fulfilling. Like we touched so many lives in what we do. And that's why like I, I gravitated towards real estate as well. It was because I had an email marketing business he was doing, it was doing well, you know, and um, but I didn't have that connection. They'll face to face, you know, it wasn't cutting deals face to face with people like we are now, you know, and, and, uh, I was just crunching numbers and looking at metrics on a screen. And A, I was providing a service, but you know, I don't know what that service is doing and for somebody, whereas now, you know, we, we employ oh hundreds of people, you know, in, in, in different states and you know, one project, um, affects so many professions from realtors, the escrow agents to termite inspectors, you know, like a play on,

Speaker 2:8:24I'm so glad you brought that up ma'am. One time it was a, it was a year ago, a year ago and like a couple of weeks cause I just got the Facebook, uh, memory notification, right. And we sold the house, we contracted it, flip, did the Rehab, put it on the market and we're under contract in 15 days. Okay. So it was one of the quickest deals that I've ever done. And when we contracted it, I had this thought where I was like in 15 days, the amount of people's lives that we impacted with this one property. And so I wrote a post where it was like, I helped this realtor moved this house, I helped us seller, uh, this title company closed it this winter, loaned me money. This carpet guy did carpet this painter and I went through every single person that was a part of that one property in those 15 days.

Speaker 2:9:19And by the end of it I was like, holy cow. It was like 37 different companies. And like you're saying, man, I mean it, what we do has such an impact on so many different people's lives. And that is just so exhilarating to me. I'm like, I just want to do it more and more and more because you know it just to see the, the smiles on people's faces and, and how you're changing their lives from this seller who was staring at foreclosure and then she's her credits fixed and she can immediately turn around and go get another house to even the carpet guy. You know, he's just excited that you gave him a job and he didn't even have to work for it. You know? It's just nothing better than that feeling. So I'm glad you brought that up because not many people think about how many lives were actually impacting, you know?

Speaker 3:10:06Oh yeah. And it's very, it's so fulfilling and it's, I'm, I'm proud of what we do, right. And as investors, sometimes we get the reputation that we're just in it for the money and we're sharks. You know what I mean? And that's true. I mean, there's, there's investors out there that's just in it for the money and they'll take advantage of people if they can. Uh, but not the investors and the people in my circle. And I'm sure your circle, you know, I s um, you know, I see how you run your company and inspires me, you know, and I, um, I think like the, what we do is so important because even though we're like, you know, we, we do, you know, one house at a time and stuff are not big time developers, you know, yet. Um, but like we still make such a difference because especially like, let's say in a market here like here in Hawaii where the inventory is sold low, right.

Speaker 3:11:02And the cost of living is so high that, you know, there's, there's houses out pair, there's hundreds of them sitting vacant for like 10 years. And just taking up space, you know, they're sites right now and it takes a guys like us to come in, dump hundreds of thousands of dollars, you know, millions sometime sometimes. And to bring that property back to life, you know, put it back on the market and back in circulation. You know, it's just one more house but it's going to serve another family. Right. And absolutely in that process we employ, like you said, so many people that you know, like that money that we, we put our lives on the line for that money. You know, we signed on the line for that money and we, we take the, we dump it into that project to bring it back to life, put it back on the market to serve somebody. And while we're doing that, we employ hundreds of people. You know, it's, I don't know another profession that's more fulfilling. I mean I'm sure like being like a heart surgeon, it's saving lives. Let me the story, like I got props for those, you know, those guys, you know, but

Speaker 2:12:16you bring up a good point, like in a market like a why? Because I'm here in Texas and we have our branch in Hawaii. Everybody wants to talk to me about it, you know now and we have our branch in Alaska. Everybody's like, aw man, you're the guy that's in Hawaii and Alaska. What's that like? And you know, everybody thinks of Hawaii is like this beautiful place and it is, but I have to tell people, I'm like, look, here's the thing you are Hawaii as a whole is beautiful. The landscape is beautiful, the real estate is not beautiful. Like y'all need to understand something. There is a lot of real estate that is extremely distressed in Hawaii and what we are doing is improving that. Like we actually, the pride that I take in and saying that we are improving the community where in, and I tell people, I'm like, honestly I've, I've talked to people from Hawaiian, it's just not a priority to them.

Speaker 2:13:12They live in paradise. The real estate is not like something that they're, they're going to take the pride in and, and but they are, what we're seeing is that we're improving it. There's, like you said, there's property sitting vacant for 10 years. Like we have one of those on Lily Punto road under contract. We've had an under contract, it's been vacant for 10 years and it's, it's this beautiful property looking over the bay, you know, and it's like, just amazing views. I might, this thing should be like a, uh, a castle, you know, like that someone should take so much pride in this and it's just sitting there, you know? And it's like, you're absolutely right. It takes people like us that go in and because Hawaii is a high price market, we're, we are, we're taking very large risk to take care of this. Um, but I, you know, I, I tell people all the time, I might, you know, I tell them about that part of Hawaii Hawaiian, I might, the other part of Hawaii is everybody truly embraces the Aloha spirit.

Speaker 2:14:10And I'm, I, I, you know, I tell that to people here in Texas and they kind of laugh at me and they're like, oh yeah, the Aloha spirit. Well, what is that? And I'm like, you just have to go there and experience and actually do business with people. And I'm like, you know, you referenced at the beginning of this that you know, I just wholesaled your property very. I, I literally, I was in Utah. Um, when you went in title and you, you signed the documents and you tagged me in a post and I was like, you see this right here, I have wholesaled hundreds of properties. Here's a guy in Hawaii. He saw excited, ease ray to do business with me. He's tagging me in a post. Thank you. Me, even though he knows I made money on this deal. Whereas you don't see that in other markets. That's the, the Aloha spirit. That's, that's kind of what the Hawaiian culture is about, you know. And I mean, is that something that it's like in the forefront of your mind or is that because I'm coming from the outside in or is that just something you've always grown up knowing?

Speaker 3:15:07I, I mean, uh, yeah, I feel that there is, there is truth to that, to the law of spirit here, you know, and cause it on the island, you know, if you meet, if you find out someone else's, I'm from Hawaii in the mainland, you know, you kind of have that connection, you know, cause we all grew up on, on this island that's pretty small. You know what I mean? It's highly populated but it's pretty small and uh, we all share the same, uh, you know, beauty here, you know, so we, and I feel that there is truth to that. You know, there is the Aloha spirit and of course, so you know, there, there's, could impact people everywhere, you know, but when, but yeah, like I, I appreciate, you know, and um, and it's a cool, it's a great deal that you guys wholesale to us and we're going to, it's a, it's an awesome opportunity, you know, for me. And so I'm a, I'm very grateful for it.

Speaker 2:16:04The things that's pretty unique about the, the Hawaiian real estate market is that a lot of properties are paid off and they're passed down generation to generation. So the property that I wholesaled to you, there was a death in the family and it was passed down. Well, those people don't live in Hawaii. They live over. I think the, the person that I taught to lived in North Carolina, you know, and what we're seeing is, is a lot of times there's properties passed down to the kids in North Carolina and then like we own property in Hawaii. That's not a terrible thing to have, but we're in North Carolina, so what are we going to do with it? You know? And that's how those properties end up sitting for so long, you know? And, and, and helping people out in that situation. I mean, literally those people, when I talked to them, Corey, I mean, they were like, you're willing to buy this. They could not believe it. You know? And for us, we're looking at that as like, this is a, this is a great property though. That's an ideal location. That neighborhood, right? They could not believe that somebody was willing to pay for it, you know? And so it's just a, it's such a unique state market. Everything about it is different than anywhere else in the country. I mean, you're also doing seven, Seattle, Washington. What are some of the big differences that you see between Hawaii and Washington?

Speaker 2:17:36See a lot of differences.

Speaker 3:17:37Price point markets. Oh yeah, sorry, I think it got cut off. Can you hear me?

Speaker 2:17:41Yeah, I can hear you. Sorry about that.

Speaker 3:17:43Yeah, no worries. Um, the yeah, they're there. They're very similar markets to be honest. Yeah, they're very similar and they're very, they're high price point markets. I'm very competitive. I mean obviously the differences, the weather right over here in Hawaii we have jealousy windows. That's very common, you know, and you can't have jealousy windows in Seattle, you'll die. Right. So like that, there's a bunch of stuff that we have to kind of learn and my business partner can call is manning the ship up there and running everything. And, you know, we tag team, you know, I help him when he needs help and he helps me down here when, when I need help and all. But the major things is kind of just getting used to the, the numbers in a sense of what it costs to renovate or you know, make a fireplace, you know, fix a fireplace or something like that.

Speaker 3:18:34Cause we don't get any of that down here. Right. And a lot of times we don't even insulate our houses here cause it's not really necessary, you know. And um, a lot of it is single wall construction. You know, we still do a lot of single wall construction, a lot of single wall construction and um, you know, sometimes we, we converted to double wall and sometimes we leave it depending on, you know, you know, what the market is, is, is demanding in that area. Um, but in the grand scheme of things like numbers wise, it's very similar. Um, I think just Seattle is a little bit more subject to the ups and the downs, you know. And Hawaii, I feel we're, we're shielded a bit because we are an island, so the inventory is low. There's limited land, so there's going to be constant demand.

Speaker 3:19:23Right. And you know, it's a international market. I mean, there's buyers from all over that one, a piece of Hawaii, you know, like foreign buyers, you know, I'm from Australia, Korea, Japan and China everywhere. Canada. So there, there'll always be the demand here, you know? And to be honest, I think a big factor too is the city, they're so slow, it's spitting out permits that, that builders don't, developers don't want to come here, you know, and it only guys like, you know, crazy guys like us, you know, don't roll the dice, you know? And, and luckily we know what we're doing, you know. But, uh, you know, that's why like, we do play an important role, I feel, you know, even though we do like, you know, maybe a dozen meal, you know, maybe seven projects at a time or whatever it is, like we're making a dent, you know, I think we're, we're helping a lot.

Speaker 3:20:16Oh, we're definitely helping the local economy. Right. Like all the local, the local guys over here get employed and you know, we pay well. So I, um, but I think our market is shielded a little bit, you know, Hawaii rather than Seattle. Seattle is more subject to the booms in the bus cause we just saw a big pullback actually in the last six months, the market pulled back quite a bit, but since then it's, it's, it's bounced back, you know, so that was like, that was nationwide really in the mainland side of things. We didn't really experience

Speaker 2:20:48it too much in Hawaii or Alaska, but we're seeing that across the board, you know, here in DFW. Um, for those that don't know what that is, Dallas Fort Worth, Texas. Um, you know, I was, I was a little bit freaked out cause we've been one of the hottest cities in the country. And, uh, our, our inventory was just kinda sitting and, and I was kind of joking. Uh, I was talking to my partner Cassie here and, and, and Dallas and she's also the realtor. We listed a property and it had been in the market for like 10 days. And we didn't have an offer and I was like freaking out, like what's going on? Did we overprice it was, and she's like, it is only 10 days. Like in other markets. That's pretty normal. But that was like a freak out moment cause we're just used to like, you know, hey, we're going to list this on Thursday, we're going to have an open house on Saturday and by Sunday we're contracted like that.

Speaker 2:21:39That was the flow of what was going on here. And, and we did feel a pull back. We had some property sit for 60, 90 days. Uh, but we're definitely starting to see in the past 30, 45 days where things are getting back to where they're moving pretty quick. So I think there was, I don't know if there was like concern or a little small correction across the country or whatever, but you know, I definitely saw that across the board and you know, not just here in DFW but also Phoenix. Uh, we saw it in a couple of other, of our markets. So, uh, it's interesting to see how the different markets kind of impact each other. And kind of take on personalities a little bit. Um, so you, you talk about Seattle, um, how did you guys end up there? Is that because your partner lives there or how did you choose Seattle and, and Hawaii?

Speaker 3:22:28Um, yeah, part of the main reason is because my partner has been living there for the last couple of years. He moved, uh, him and his family. And so, um, that was the main reason cause he would be on the ground there. Uh, but it, it, it was, Seattle is an equity market too, right? But there's, there's surrounding neighborhoods, um, that we can buy portfolio of homes to hold, you know, for, for a nice cash flow. So that's, that's a big reason. It's like, it Kinda, you can kind of get the best of both worlds, you know, out there. Whereas Hawaii is strictly equity market. It's not a cash flows, you know, it's not a cash flow market at all. So, um, and so it was on the ground there and um, it is a market that's attractive for equity and cashflow. Cool. So

Speaker 2:23:23you're mainly flipping in Hawaii, you're flipping in Seattle and then you also have some, some buy and holds in the, the Washington market. Are you doing any wholesaling at all?

Speaker 3:23:33Yeah, so, uh, we've wholesaled a few, uh, last year. Um, and uh, when I first started, like I just wanted to wholesale, I kinda just fell into flipping houses too. Oh. And Cause I, you know, wholesaling is awesome. You know, that your key faster, it's less risk, you know, and you can scale it. You know, it's very hard to scale, you know, house flipping company. That's why I have a lot of respect for you dude. Like you're in multiple markets, like, you know, doing this like that's insane.

Speaker 2:24:04A lot of, a lot of room for improvement there. Cause you're right, man. I mean scaling a Rehab businesses, it's, it's almost as hard as scaling like a contracting business. I mean, you are essentially a contracting business. She's just wear yourself and uh, there's a lot of moving parts there, you know, it's difficult. So I appreciate the, the, the respect there. But uh, I don't know, man. I think you're doing a little bit better of a job than we are.

Speaker 3:24:33I mean, I, yeah, we're going to have hurdles in any business, in any industry, right. Like as part of being an entrepreneur. So like, but no, I, I, I, I see, I think a lot of inspiration from you and I, um, like for us to, I mean, we can, we have a lot of room to improve and, uh, we will, you know, and that's, that's the thing is constant progress, right? And we're, we are kind of shifting our business a little bit to maybe focus more on lead generation wholesaling because we are vertically integrating our company. Um, we're, we're, we're going to be kind of focusing more on the process, um, throughout the entire stage of a rehab. So, you know, we'll wholesale a deal, but will we, um, we own the construction company in Seattle. Uh, we own the brokerage. We're going to be, um, starting our fund.

Speaker 3:25:27You know, it would be our, um, that would be the last leg in, in what we're trying to build out in Seattle. And, uh, you know, we'll, we'll be integrating that into Hawaii too, you know, as we're testing it. So we'll focus more on wholesaling the deal, but also offering the construction crew to do it if they need, if the investor needs, and then we'll, we'll offer the primary refinancing and then we'll offer it to this sit on the back if they want, you know, and, and basically, and we know because we were investors, we, that's what we do too. Right? So it will be there kind of every step of the way if they need. Um, right. Yeah, exactly. And the reason why we're doing that, it's just because, um, it's not, it's not like we're burnt out in, in flipping houses because I love flipping houses.

Speaker 3:26:16I'll always, for the policies, I think just for the fun of it, you know? Oh yeah. But we're, we're, we want to build something that's a little bit more, um, of us working on the business instead of inside. Right. And right now, um, you know, we're working inside the business. Um, we're, we're putting the right people in place so that we can step out a little bit and, uh, and build something that is, you know, something that we can one day may possibly sell. You know, maybe the construction company, you know, you can sell that and maybe our fund, you know, we'll look to sell that or the brokerage. Um, but how swift and company as a whole, it's hard to build. You know, I've, I haven't met anyone that's actually built a, um, a house flipping business that is 100% passive for them where they can sell it to somebody and somebody can step in and every and just have it run.

Speaker 2:27:12It's pretty hard to have anything proprietary and house flipping business. I mean, it's, it's kind of up to the operators themselves. You know what I mean? You can have some systems and processes, but at the end of the day, I mean, a lot of it's just going to come down to the management and the people inside it and making sure you're, you're holding people accountable. There's so many moving parts, every house is going to be a little, those other businesses, it's a little bit easier to like set it up where you can say, hey look, this is pretty turnkey. You can come in here and we've got everything lined up. So you guys are also a, y'all are doing a little bit of a new construction development, right?

Speaker 3:27:51Correct. Yep. Yeah. We're about to get into wine aisle in Makaha on the west side of Hawaii. Nice. Yeah. So that's kind of my crown jewel this year. Yeah,

Speaker 2:28:00man. So I, I love Makaha. So, um, let's talk about that a little bit. You know, w what does that look like and, and for the people that are completely ignorant, kind of explained that dynamic of Makaha on a walker. Who and what that looks like compared to the rest of the island.

Speaker 3:28:15Sure. Uh, so Makaha is way out west. We call it the wild west because, uh, you know, it is a market here in Hawaii on Oahu. It is in wine I, which is known to be more of the lower income area, although, you know, it's, it's being developed, you know, and it's, they have one of the most beautiful beaches out there. Yeah. And the only problem is that it's so far out there, right. Nobody wants to go, you know, and, um, at far out there, it means like maybe an hour drive, right? Like you can't, I mean there's nothing to you guys up there, you know, Texas, but, but, uh, you know, in, in, in Makaha it's, um, you know, lower income, blue collar neighborhood. Uh, but they, they need housing as well. You know, they need inventory out there. And I'm actually very proud of the other investors and developers out there building.

Speaker 3:29:14Um, cause they're doing an amazing job. Like Makaha is turning out to be very nice. And, um, and why, and I aside, you know, Miley and, um, it's, it's becoming a very nice area. Um, but it is, you know, higher crime. And you know, when we have our guys out there, like we're going to have security on site, you know, living, um, at the job site and just so that, you know, cause there's a vulnerable period when you're in a project like that where your resources are kind of out in the open, you know? Right. And I hate to be sold like paranoid. Yeah. Or like kind of judgmental is the wrong word, but, well, yeah, I I like if this project was in Kailua, I dunno if I'd hire security 24, seven, you know, I might just let that sit over there, but um, you know, Makaha it is what it is mad like

Speaker 2:30:15our first two projects in Hawaii were, we're in wine. I, and uh, you know, it was, it was projects we bought off of a auction sites and you know, I didn't know anything about a wall who at the time and you know, I'm like, Hey, you know, Alijah I found this deal for 192,000 and it's only 1100 square feet. So I'm like, you know, what are we going to put into it? Like 30, maybe $40,000 so I'm like, we're, we're all in at two 30, two 40 and I'm like, the air be on, it's, you know, three 43 50, you know, those are kind of the normal numbers over there. And why I and m well I just like, yeah, but it's in why I, that's literally like as far away as I could possibly get from my house. The numbers, I'm like, this is actually like a normal like flip, you know, I'm like, and in Hawaii it's like you, you know, uh, an average foot Weigand Kailua or something.

Speaker 2:31:09Your, your purchase and we're like six, 700,000, you know, so I'm looking at this and why not? And I'm mine. No, you're going to drive to why night. Like this is where we need to be. If we're going to do our first one, we're going to go start off with like a $300,000 house, not a million dollar house. And so, you know, I love it over there. You're absolutely right. For those that are listening in and you don't know, there's a highway that basically circles around the entire island and it hits these mountain ranges that go into the, to the ocean. And that's basically on, on the south side of the island. That's where the wind I is. And so the beach, the highway basically dead ends into the beach and it's, you literally feel like you're, you're at like the edge of the earth, you know, it's like there's nothing there at the light mountains and beach and it's just beautiful.

Speaker 2:31:57I mean, Elijah took me out there and I was like, okay, holy cow, you said this is like, we were, we were flipping houses in light, the worst part of the island. And I'm like, this is like the most beautiful part of the island. What are you talking about? So I love why I over there, man. And you're absolutely right. You know, there's a lot of, uh, new construction and development, you know, they're starting to bring in the, the newer commercial is moving in, you know, you're starting to see, you know, new construction across the board, down to the main drag there. And it's, it'll be interesting to see what that looks like in like five or six years.

Speaker 3:32:30Oh yeah. It's, I'm kind of interested to see, interested to see, because it was a lot of beach front property, um, that, you know, are, are very, in my opinion in Hawaii, you know, Standard and um, you know, it's very affordable right now, but it's only a matter of time, especially like they have all the money out there with the Disney hotel. Right. And, um, you know, they're, they're building a lot of big, big things out there, so it's only going to bring in more people, um, to that side and, um, it, it will raise the prices. Right. And, uh, there will be more demand for that area, I'm assuming soon. Um, but it, it, it's basic economics, you know? Yeah.

Speaker 2:33:16So on the new construction you're doing out there, how many, how many homes are you going to be building?

Speaker 3:33:21All Rimbey building six. So six brand new single family homes for a single story, uh, post and pier a foundations. Um, they're both going to be about 1800 square feet that over 1800 square feet and a two, two story houses out there. And, uh, we, I, I really feel, you know, we can get in and out in under a year, which is, um, uh, usually hard for a development project here in Hawaii because of the permitting and all that. But these lots are already subdivided, so we don't have to go through the, the CPR process, which I'm sure you're familiar with, right. Um, which shaves off a lot of time, right? And we don't have to go through the park dedication process because they're all individual lots. Um, so basically we get permits and we go vertical and we'll presale, you know, I'm out there, so I think we can, you know, if we do it right, you know, this will be a seven figure payday at the end. Um, if we, you know, if we hit our marks and you know, I have the right team, you know, I even got my boy killing me who is a, he's from Makaha side. You know, it's not a family out there, you know, said nobody's got mess around.

Speaker 2:34:37That's how it works out there, man. You, you get, you know, everybody on the island and make sure they look out for you to know. So, uh, two things I want you to kind of briefly to touch base on because it's unique, um, to the Hawaiian market. It's more prevalent than anywhere else. And that's the CPR process. And then also talk about 80 years.

Speaker 3:34:58Perfect. Yeah. So the CPR process, a CPR stands for condominium property regime and it's common here in Hawaii, um, where you can take a piece of land and basically divide the land. It's like a subdivision. You can divide the land if it's properly zoned. Uh, so let's say if there's a, uh, a lot, right? That's 10,000 square feet. It has one dwelling on it. One House and it's own are five. So our five stands for residential, you know, five and basically means you can have one dwelling or one structure, one house per per five square feet of land. And so if you have 10,000 square feet on your land, you can have two houses, you know, on paper, you know, on paper you can have two houses, you can CPR that property and sell two homes instead of just one. And, but you have to be careful because the CPR process is long.

Speaker 3:36:00Um, and uh, you know, it can take long. Um, there's different hurdles. Like if you have an easement, like I see you have 10,000 square feet of r five land and you have an easement that takes up one square foot on your property, then you actually have 9,000, 999 square feet. You are five land and you will not get past, you know what I'm saying? So you gotta be careful with that. And whenever you, you add another structure, you have to check with the planning department to make sure that there's wastewater capacity to add another structure. So, just because on paper it looks like you can build two homes, that CPR and sell doesn't mean you're, they're going to allow you to do that, you know, and the city does not wreck, uh, recognize a cprs. Um, so with that said, um, it can be an issue sometimes in a CPR, you know, but, um, you know, that's good. A little bit more advanced in what it is. But basically CPR is kinda like a subdivision, but it's a, um, it's more common here in Hawaii. And basically, um, if you're eight houses or less, you can, you know, you can go the CPR route. If you, if you're going to do more than eight houses, then you'll, they'll probably make you a sub, go into the subdivision process, which from what I've never done a subdivision. Um, but from what I hear, it's, it can be a lot longer and costly.

Speaker 2:37:29I always just thought it was so funny when we first started getting deals and leads over there. And, and even other wholesalers we're sending in his properties and it's like they're sending it as deals at like market value. And they're like, yeah, but you can CPR it and you can build two more houses. And I'm like looking at the pictures and I'm like, what her two more houses going to go? Like I don't understand this. And then that's a very common, like every, everybody does it but does it over here in Hawaii. And I'm like, okay, I just don't understand how this process works. So once I was there, you know, you can see it in person. It's like, okay, I can kind of see how this would work. But it is very interesting. I saw one where, and it was over in wine I, that a buddy of ours had done.

Speaker 2:38:12And it's literally like, there was a house right in the middle and they went and did the CBR and somehow they put three more houses like surrounding it and they put a little driveway right down the middle, you know, and it's like, boom, boom, boom. There you go. That's how we made it. And it's like it, uh, it's a very interesting way that, you know, you guys have found a way to, to utilize the lack of land. You know what I mean? It's an island. I mean it's like you only have so much land in a lot. There's a lot of mountain range there too. So it's like you really have to get creative on how you're going to do new development sometimes.

Speaker 3:38:49Right? Yeah. And actually we're very fortunate to have cprs be common here, you know, because we do need to maximize the lands here and, and obviously develop, you know, responsively. But the, the CPR process has helped a lot of investors and I know investors who only focus on cprs because they know that they can, they can make a lot off those projects, you know, and you can get very wealthy if you can master that. If you master cprs here in Hawaii and ground up construction, Oh man, you can do, you can, you can make a lot of money

Speaker 2:39:24said those are the seven figure paydays. You know what I mean? If you can figure it out. I mean, and especially if you buy correctly, like if you find the original homeowner that is motivated and the property's distressed and you rehab that one and you buy that one at correct numbers and you add on to three other properties on top of it. Ooh, yeah. That's where you made the big Betty. So, uh, what is an Adu? That's another big thing that they kind of is always thrown out. The people, you know, they always throw it out to me where it's like, oh, you can an adu and may make it cashflow.

Speaker 3:39:57Right? Yeah. Yeah. Well, first of all, like I, I know exactly what you mean. Like I kind of, it's a pet peeve of mine when people come to me and say like, well, you can CPR and do this, you know, and then they're offering you full price, you know,

Speaker 2:40:11even above market value like other, because you can CPR this, you should pay $100,000 more than what it's worth. And it's like, no, that's not how this

Speaker 3:40:19works. That's not how this works do. Yeah. It's like, yeah. So basically you're telling me that I got to take all the risk, right? And so like, oh no, that's not how it works. You know? And like, like we always buy with instant appreciation or instant equity, right? And then there's forced appreciation, right? Which is second in line where we take the risk, we dumped the money into force, the appreciation, and then there's, if, you know, if we get market appreciation at the end, that's cherry on the, on top

Speaker 2:40:49bone. We don't care. We don't count on that. They will count online. It's only if it happens.

Speaker 3:40:54Yeah, we, we the, we want instant appreciation is an equity. And then we rolled the dice for forced appreciation. But if you, if they, if they want us to buy with just forced appreciation, then that's the local, you know what I mean? So, yeah, but I'm 80 you, um, they're common out here too, right? And I think, uh, it's very necessary. Um, and it's basically that you can build another structure right on the property. And they, the Adu process, I think they're cleaning it up here and the, the is getting a lot faster. Um, so, uh, the difference between a seat a CPR at Adu is you can't sell the ATU separately. Right. For the most part. Um, and I believe there's a, I believe there's a size limit to that. You can't, it can't be over like 600 square.

Speaker 2:41:54Yeah. A lot of times it's like very, very small. You know, we're talking about like one, one bedroom light, little rental units.

Speaker 3:42:02Yeah. Right. Yeah. So I, um, but 80 years can, can be a very cost efficient way to add value to the property or the project that you're selling. Um, because, uh, everybody here, like if you, if you're going to market with a home here in Hawaii and you can advertise that there's, um, rental income, there's, you know, there's space or there's another unit that you can rent. Um, automatically your, your property goes hi. It'll skyrocket, seen value because the buyers know that they can support the weight of the mortgage, um, through renting out, you know, a section of, of the property, right. So Adu can, can, uh, help with that.

Speaker 2:42:56An Adu is one way to do it. Another way to do it is even to [inaudible] say you have a four or five bedroom house, you can take the fourth or fifth bedroom and turn that into like a little studio where you have a bedroom and a little kitchenette and a little, you know, the studio space that could be additional rental income where a lot of people there, they rent out rooms, not a whole unit itself. So there's a lot of different ways that people kind of get around the high price points to like you said, to basically just afford the mortgage. You know, it's what they have to do.

Speaker 3:43:35Right? Yeah. So like, um, accessory dwelling units. Oh, that's an adu stands for accessory dwelling unit. Um, they, they definitely serve a purpose and I know the mayor was pushing really hard, uh, to, to get, you know, to get it passed so that, you know, they, it can be accepted more. And um, once he did, I think like the city got bombarded with requests. Right, right. And they're spitting out so slow that it kind of put them under pressure. Like so, but now I think like he really got, you know, a crackdown on it cause he are, cause he, he was like, it was big news when he made that announcement and he put all his, you know, words behind it and now he's got to execute. Right. And it wasn't executed. So I think it has been, we're moving faster though now.

Speaker 2:44:24Yeah. Then you know, the other thing that's pretty unique to the Hawaiian market is also the section eight rentals. Um, you section eight is, is pretty high. I mean, I'm not gonna lie, you know, most times when you think about, you know, section eight what they pay, you know, we have a bunch of section eight rentals in St Louis, Missouri, we're getting like seven to $800. You know, you go look at section eight and Hawaiian, it's like 2,500 to $3,500 and it's like, oh my goodness, that's crazy. But that's because of the cost of real estate. I mean, it's just that much higher priced. And so even with that high section eight payment, it's very hard to still make something cashflow there. And, but it's necessary. And, and, and correct me if I'm wrong, I have, I've heard this, but I, I, this is not verified so, but I've heard any house can be section eight approved. It's just based off the bedrooms is, is that correct?

Speaker 3:45:20Um, that I'm not too sure. Um, I haven't actually taken in, we bought properties with section eight renters in them and uh, but we are, our sole intent was to stop it. And so, you know, but I haven't really dove into that process. I'm out here since I don't even look at cashflow properties out here. Um, but I know that it's actually an eight is actually, people want section eight tenants out here. Yeah, exactly. Yeah. Yeah.

Speaker 2:45:58Have you bought a property on [inaudible] Street? And it's three stories. So it's like stair stepping down the side of a hill and that's like, that's like three units and they're all section eight. So we're getting section eight on floor one, section eight on floor two, section eight, seven four, three. It's almost like buying a triplex, but it's all one unit. I mean it's just, yeah, I mean, it's just so weird. It's like, you know, anywhere else you would call that a triplex, but in why it's like I bought a house and I have three tenants and they're all getting different section eight and it's just, it's so unique, man. So anyways, man, I, I appreciate it. I mean you could probably sit down and talk about Hawaii and, and, and real estate all day long, but, uh, for everybody that's listening, if they want to connect, what's the best way that they can kind of reach out or follow you on social media or anything like that?

Speaker 3:46:47Oh, sure. Best way is Facebook and Instagram for me. Um, uh, my Instagram and Facebook handles is basically my name. So Cory, c o r y. Dot. Named modal. That's an e. M. O. T. O. Awesome

Speaker 2:47:02man. Well, I know you're a busy guy. You got to go rehab that house there. I sold you, but I appreciate you taking the time to sit down with us, man. And, and just kind of share your knowledge about Hawaii real estate and what you've got going on. Um, you know, I look forward to doing more business with you and just a thank you for taking the time to sit down with us today.

Speaker 3:47:24Yeah, absolutely. Thanks for the opportunity Rj. You know, you really do inspire man and seeing all that stuff you guys are doing. And you know, I, uh, for any, for your listeners, like, you know, all I can say is like I, I started from the very bottom, you know, and I'm in very high price point markets and sometimes I even have to stop myself and think like, how did I get here? You know? And like, so anyone that's just starting out and you know, it's a, it is a long journey. It was a long journey for me, even though I'm still young in my career, I feel, but a, anyone starting out, um, you know, I, I think that things can happen faster than you think, you know? And if you just got, got the, I guess the, the gumption or you know, whatever it is to, to make it through, you know, like it is, there is a bright side to this business which is very fulfilling like we talked about. And you know, there, you can make very good money in this man.

Speaker 2:48:23I just want to congratulate you. You're the second person that's ever used the word gumption on the titanium and the only other person she used that word. So I love it. That's probably the second time I've ever used it. You use the word. That's good stuff, man. All right buddy. Well thanks for taking the time to sit down with us and uh, and we'll, we'll talk to you soon. Okay, thanks Rj.

Speaker 1:48:47Thanks so much for listening to the titanium vault with your host, Rj Bates, the third for more MPO and to stay up to date, visit titanium vaults with you enjoyed the episode. Please rate and review and we'll catch you next time on a time.

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