Oahu Real Estate Investors Talk Strategy

BY LISA SCONTRAS

If you think building wealth by investing in real estate is easier for Realtors to do than the average person, you might be right.

It’s not, however, because Realtors keep all the good properties for themselves or have a crystal ball. It’s because they have a plan.

For John Hayama, partner and active investor at Prudential Locations, investing in real estate was part of the reason he became a Realtor – it was part of his master plan.

“I was in sales and decided I’d rather sell something that I wanted to invest in myself,”says Hayama, who got his real estate license in 1972 and bought his first investment property around the same time.

He decided on a career selling real estate rather than one selling stocks and bonds because he liked the idea that investing in real estate was done, to a large extent with “other people’s money.”

“Initially, I chose real estate because I liked the fact that you can use leverage to accumulate wealth,”says Hayama.”You can use a portion of your money to make an investment, and borrow the rest.And the same holds true today.”

Hayama, who has never regretted buying a piece of property, does regret selling one.

“I sold the first house I ever bought because at the time, the rent didn’t cover the $425 a month mortgage payment,”he says.”That was the dumbest thing I ever did. If I owned it today, I’d have no mortgage and conservatively be bringing in $1,400 to $1,600 a month.”

Statistics at the National Association of Realtors show that since 1968, the national median home price has increased an average of 6.4 percent per year. PMI Mortgage Insurance, who also tracks national trends, reports that if you owned a home for 10 years, between 1986 and 2005 in any of the 50 largest metropolitan areas, you profited 100 percent of the time.

Michael Koyama, Realtor and partner at Prudential Locations, has owned 18 properties since buying his first in 1986 and says if he’d kept all of them the portfolio would be worth millions today.

“My first purchase was my own home, then I bought a larger home and kept the first one as an investment,” says Koyama, who took advantage of capital gains and tax benefits to continue upgrading his personal residence.”If a person were more conservative, they could stay where they are and buy a smaller property.The key is to have a goal, develop a plan and take action.”

Both Hayama and Koyama agree that today’s low interest rates make it a particularly good time to invest in the home market.

“I think history will show that there really is no bad time to buy real estate,”says Hayama.”If you’re going to use leverage and get a mortgage, it’s going to cost you less today than if you wait.

“Remember, you deal with sales prices only twice – when you buy and when you sell.You deal with cash flow everyday – those are the payments you make based on the interest rates.”

Koyama, who says his own retirement assets are largely real estate holdings supplemented by a tax-deferred pension plan that is invested in the stock market, advises new investors to make a plan.

“I would encourage investors to seek out a mentor and a good real estate advisor who can help them with their investment plan,”says Koyama, who purchased two properties this year and plans to purchase two more within the next six months.

“Wealth building is a long term process,”says Bill Chee, Prudential Locations president and CEO.”In the 36 years of doing business, never have I heard of someone who has held a property for 10 years and say they regret buying it or they lost money on it. It wouldn’t surprise me, though, in 10 years to look back to 2010 and wished they had bought something.”

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