So what happens to all the foreclosed properties we read about in the news?
Three foreclosed homes located behind the Kaaawa post office were recently bought by a real estate group specializing in buying and “flipping” depressed properties. The same group is already targeting two more homes in the neighborhood.
Get Tubed LLC, owned by investors Travis Wittmeyer and Kanoa Bristol, closed the deal on the three foreclosed homes on November 25, 2011, real estate records show.
Wittmeyer and Bristol are also partners in Blue Wave Investment Solutions LLC, according to state business registration records.
Wittmeyer, in a telephone interview, said Blue Wave is their primary company, which then sets up spin-off companies for each separate deal involving a set of properties.
Two of the Kaaawa houses are on Kekio Road, just behind the Kaaawa Post Office. The other is just around the corner, at the intersection of Lihimauna and Hiiaka.
The homes were built in 2007-2008 by the former owners of the properties, Michael and Daniel Sessions, and were taken back by the lender in 2010.
The original lender was IndyMac Bank, which later which was reopened as OneWest Bank after being taken over by federal regulators. None of the homes has ever been lived in, and reportedly need substantial repairs before being ready for occupancy.
The houses are on portions of two larger lots that were registered as condominiums in order to build multiple structures in an area zoned for single family homes. Wittmeyer said they found a number of problems with the original CPR, including confusion over exact property lines and differences in property records between various agencies.
Wittmeyer and Bristol were able to buy the three homes together for a total of $861,520.
According to real estate records, the three properties are:
1-5-1-11-19-1
Kekio Road Estates II, Apt. 1
2 bd, 2 bath
7,442 land area
1,442 living area
$267,368
1-5-1-11-19-2
Kekio Road Estates II, Apt 2
3 bd, 2 bath
8,083 land area
1,582 living area
$297,076
1-5-1-11-20-1
Kekio Road Estates I
2 bd, 2 bath
12,487 land area
1,442 living area
$297,076
Private 100% financing for the deal came from ITI Enterprises LLC, registered with the state just days before the closing of this deal, business registration records show.
ITI is made up of Turtle Bay Land Company, headed by Michael Mazzella; Intelligent Investments LLC, with members Christopher Jay and Tiffany Jay, who in an online video is introduced as vice-president of Turtle Bay Land; and Ionsolutions LLC, controlled by Raymond WM Kong.
Mazzella’s profile on LinkedIn describes him as “Millionaire Mentor & Best-selling Author of the book “Win!”
Mazzella also markets intensive training courses in real estate through another company, Honolulu Mentor.
Wittmeyer said his company often buys several homes in an area, and he is already looking to buy two additional Kaaawa homes, with one already in escrow. Last year, the company turned over ten homes in Wahiawa, he said.
Wittmeyer said his company specializes in finding under-market values, “something we can improve and put back on the market.”
He said the Kaaawa homes are “pretty typical” of what the company looks for.
The company will do necessary repairs and improvements on the three homes in phases over the next several months, and put each on the market as repairs are completed.
“We don’t want to put all three on the market at one time,” he said.
Wittmeyer said they will be addressing several issues, including drainage problems in the area. Owning the three properties will aid them in making necessary adjustments, Wittmeyer said.
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Someones heart was broken in this deal. I personally see nothing wrong with what these guys are doing since no family was booted from their home when it was foreclosed. Its better than letting the houses sit there and deteriorate. Now, if all goes as planned they will become some families home.
“Three foreclosed homes located behind the Kaaawa post office were recently bought by a real estate group specializing in buying and “flipping” depressed properties.”
The title says “Speculators scoop up Kaaawa foreclosures”. That gives the impression, at least to me, that rich outsiders are swarming in to Kaaawa to buy second homes. But these people seem to be based in Hawaii, and most of them are what we would call “local” (Asian Americans born and raised in Hawaii).
You say that they are “targeting” foreclosed homes. What do you mean by “targeting”? Are they sending thugs with baseball bats over to the houses to scare out the owners who are defaulting? Are they burning crosses on the lawns? Or are they simply going through the newspaper and buying houses that have been foreclosed?
What are they doing once they buy these houses? Are these houses their winter homes, sitting vacant all the year round? Is Hawaii turning into Ireland in the 1840s, with absentee English landlords holding vast estates of the best land, with impoverished families with 20 children sitting naked in mud huts on marginal land living on boiled potatoes? Or are these “speculators” simply buying distressed properties and painting them and putting in new faucets and selling them? How is this really different from the TV show “Flip That House”, with middle-class people buying houses and doing superficial repairs and then selling them? When investors flip foreclosed houses like this, it seems similar to the services of a cleaning company, since the investors need to take care of a lot of paperwork on a foreclosed house and also deal with repairs and improvements. They are simply providing a service that new owners might not have time for.
Scapegoating “speculators” who are flipping houses is a distraction from the really troubling issue. The insidious thing about flipping houses is that the new owners might also go into default. The new owners are not so different from the old owners. In fact, things might be getting worse. The stability of real estate prices is based on real estate reaching a historical norm of 2.5 times annual income; yet incomes in suburban areas are falling, whereas in urban incomes they are rising. That means that suburban home prices will not touch bottom even when they meet their 2000 prices because suburbanites are getting poorer (although this might represent a historical investment opportunity for those buying apartments in the city). And this is what happened in Japan over 20 years. Home prices have fallen over the past 20 years in Japan (even in relation to income), but so have incomes, as the Japanese middle class shrinks.
(For a good graphic of home prices, go to the Economist’s “Global house prices: Clicks and Mortar” interactive overview at
http://www.economist.com/node/21009954
There is still a huge housing bubble in countries like the Netherlands, just as there is in US cities like Washington, DC. Be sure to compare “prices in real terms” with “prices against average income”. Also, sometimes you have to move the start date up from 1975 to about 1990 or later, since information was not available that far back, especially for China.)
I recently heard about a dilapidated house right on the swamp in Kailua that sold for almost one million dollars. The person telling me this said “That shows you how all these rich outsiders are moving into Hawaii and buying houses, and how we have a lack of land in Hawaii.” Then I asked if the new owner was a rich outsider. “No, he is a middle-class local.” Are there any rich people in that part of Kailua? “No, not for miles.” It’s a bubble, and bubbles burst. We can do this the easy way (sell the house now and buy an apartment) or the hard way (default).
As for the idea that we are running out of land, at the height of the housing bubble in the US, the largest home-building corporation, the Toll Brothers, commissioned a study to find out why prices were so high. The study concluded that the US was simply running out of land that could be built upon, since most of the US is desert. Yet some of the most dynamic real estate markets at the time were in the desert, in Nevada, New Mexico, Arizona. The Toll Brothers never imagined it could be a bubble, they never looked at home prices historically.
You sure read a lot into what I wrote. Your “value added” strayed quite a ways from what I actually said.
These are speculators. They did not intend to live in the homes. People who buy second homes are not speculating on the purchases, unless they intend to turn around and resell. As you say, nothing different from “flip that house.”
And I don’t know where the images of “thugs with baseball bats” comes from. You’ve got a fertile imagination. I just said that they target these special situations, such as foreclosures. It’s what they do.
We hope it eventually translates into stable families moving into the neighborhood. That’s the best we can do.
These are speculators. They did not intend to live in the homes.
Technically, yes, the people buying these homes in order to flip them are speculators. But there is nothing wrong with that, ethically or economically. This is akin to what pawn brokers do every day, or “glaneurs” in the fields. The properties are being bought at a depressed price (or so you claim) and held for a short period of time while they are cosmetically renovated.
But there is a different kind of ‘speculator’ that you are implicitly conflating this flipping with. That’s is people building houses and not occupying them on the assumption that they can later sell them at astronomical prices. (This might have been the case with the original owner at the homes in question.) This is a symptom of a bubble that will burst. And this more ominous meaning of ‘speculator’ seems to be the reason why you posted this, otherwise it is a non-event.
BTW, I remember reading about an economist who went to a three-day conference in Florida at the height of the real estate boom. His taxi drove through a seemingly affluent neighborhood, and the tax driver said, “You see this area? Half the houses are owned by poor people who won’t make their payments if the economy goes south, and the other half of the houses are unoccupied, owned by speculators. It’s a bubble.” At the three-day conference, not one economist talked about real estate markets. But the same thing is still true in a lot of places. There’s still a bubble, but we’re getting distracted by things like house flipping.
I know someone who has been looking for real estate in Windward for a year and never saw these homes listed and could have afforded one of them. Instead, real estate developers, it appears, have had an advantage in purchasing these properties.
It sounds like these guys are doing something good for the community. They buy, fix, and then sell. Without guys like them, these perfectly good houses would rot. When profits go to those who do something positive, it shows that the system is working.
I have no problem with housing speculators. But it’s interesting that this fact-based and well-researched posting is spurring such a defensive reaction. The posting makes it clear that it’s only about 3 homes that are located near the writer. Mr Skeptical is overreacting to the words “scoop up” and “targeting”. These words are common in news.
I have to wonder what really bothers the few critics of this posting. Is it the story that is so exacerbating? Or is it the facts that are shared?
all in all, it is a non issue. much ado about nothing. This flipping houses is predominant here in Hawai’i. noting right nor wrong about it. It just happens to be one of many ways and means homes change hands here.
I would say be glad their is interest in the properties in your neighborhood at all! Puna has so many foreclosed houses… it’s a homeless person’s pick at vacation homes to break in and live in a styling house for a few months.
Ian,
A quick check of news in real estate sales confirms what you are seeing in your neighborhood and what a friend mentioned today about the market in San Diego.
Inventory is way down, prices are down, interest rates are way low …under4%, foreclosures are way down(many tied up in the state AG law suites), pent up demand is high, newly formed home loan sources opening up..wholesale and retail. It sounds like the perfect storm for a housing turnaround.
Other factors fueling the SD market is an influx of wealthy mainland Chinese, Mitt bought a fixerp-upper in LaJolla, deflated prices, great weather and new funding sources. Just a few months ago Fanny and Freddie were the ONLY financing game in town. If the monied crowd has figured out how to start up funding again there is pent up demand out there that will borrow. I dislike the flippers because values get too inflated and property taxes go up along with all the other nuisance fees tacked onto home buying contracts including the nutty commissions.
The wealthy DO buy vacation homes for investment. The Canadians have become the chief investors in Hawaii RE out buying the Japanese. That oil money piles up.
If rich people were buying homes in Hawaii, then one would expect the home price index in relation to income to be falling. It isn’t.
http://www.deptofnumbers.com/affordability/hawaii/
A real estate bubble is not high prices, it’s a high price in relation to family income ratio. For example, the price of condos on Maui has fallen at times dramatically, and this is usually interpreted as rich people selling off their second or third homes. But if the condos, now much cheaper, are being bought by middle-class people, then this would send the home price index up. Unfortunately, if this is true, this would represent the formation of yet another bubble. Rich people overextended themselves, sold their property and the bubble popped; poorer people bought the property as its value fell, but this new value is well over 2.5 times family income, so it is just another bubble that will finally pop. Middle-class people are overextending themselves financially in the same locations the rich did a decade ago. Prices will ultimately fall in those areas in the future, and foreclosures will rise.
If rich Canadians were buying up property left and right in Hawaii, then the home price index would fall. The home price index in relation to income really is not falling, so that means that it is middle-class people buying property that is many times their income. The average family income in Hawaii is $65K, and the average house is $650K. That is a bubble.
In fact, Canadians are conservative when it comes to real estate, that’s why there was no real estate bubble in Canada. Canadians are buying homes in Florida, but they tend to be cautious and they tend to be older people looking for a retirement home, not a second home.
I believe that you are incorrect in your assumption.
The home price index is calculated on resident incomes, and home sales prices. It would not capture non-resident purchasers. So if non-resident purchasers drive up overall housing prices, the home price index in relation to income would continue to rise.
Speculator: One who attempts to anticipate price changes and, through buying and selling contracts, aims to make profits. A speculator does not use the market in connection with the production, processing, marketing, or handling of a product.
Investor: One who uses his or her money to purchase property in the expectation of earning periodic cash flows from the property,making a profit on the eventual resale of the property,or both.
Investors purchase homes to repair and improve with intent to sell for a profit?
Doesn’t have the zing of Speculators Scoop Up Kaawa Foreclosure, does it?
Markets don’t wait around for the number crunchers to determine cost equals 2.5 times some other number. They can change very quickly. Our financial gurus didn’t see the housing bubble but if they had taken the time to pound the pavement (Bill Gross the bond guy did) it would have been obvious…in 2005. Except for The Canadian investment info all my other news is antidotal. When an agent sells all her listings she has my attention. When the for sale signs come down in a certain neighborhood it means something. When a builder says most my clients are from Canada I wonder why. When the lady trying to start a mortgage business for the last three years is finally got the funding it’s news. Maybe it is a coincidence, a fluke, a false start. Maybe not. Yes, RE bubbles come and pop almost one per decade. …timing is everything. My point is there is finally some movement.
It is extremely easy to determine if there is a bubble in real estate. Historically, real estate agents have advised clients not to buy over three times their annual income as a rule of thumb. Banks have traditionally advised their prospective borrower not to get a mortgage with payments set at over 30% of their monthly income, otherwise they risk default. That was the way it was in the Good Old Days of local commercial banks that knew their customers (these banks emerged from the downturn relatively unscathed, I believe, unlike the investment banks). In fact, if one peruses real estate agent blogs from around 2003, one finds very frank statements like “It is a bubble, just like the tech bubble that went bust a few years ago….”
As I understand it, Hawaii is different in its real estate market not because rich people are flocking to certain beachfront and mountain areas, but in that middle-class people do not intend to move. Ever. If one plans on living in an area for longer than five years, sometimes it is considered okay to buy a home despite a slightly above-average home price-to-rent ratio (although Hawaii has the second highest rent ratio in the US, so still buying in Hawaii is still problematic). The average American moves once every six years, and 20% of Americans move every 18 months, so the whole idea widespread home ownership in the continental US does not make sense (despite George Bush’s Thatcherite dreams of a conservative “ownership society”). Even in 2009, there was a severe shortage of plumbers and auto mechanics in some parts of the US because working-class people who are usually nomadic as a matter of course in their professions were stuck in houses that they bought. But this is not true in Hawaii, where people plan on keeping the home indefinitely and probably passing it down to their family.
There is a difference between a bubble and a boom. When people pay too much in relation to their income, that is a bubble, and that pops. When rich people “discover” an area — like, say, Dumbo, Brooklyn, as they are now — and move in, that permanently drives up home prices. That is not a bubble, and it is not unstable. But booms have their own problems, as it drives out lower-income people (and artists, in the case of New York City, where there seems to be this dynamic of artists colonizing poorer, more affordable areas and then rich people following them).
Now, Ian stated that the price-to-income ratio does not take into account the incomes of out-of-state buyers. I was sure that this was not true. My assumption was that if certain home prices were falling in Hawaii on average (I was thinking of condos on Maui), yet the price-to-income ratio is still nonetheless hovering at a certain level, it suggests that rich people are selling off real estate and less wealthy people are snatching it up at lower rates — keeping the price-to-income ratio nearly flat, even as the price-to-rent ratio falls. In that case, it would be the formation of a second bubble which will burst yet.
But if Ian is right, then it is not a bubble but perhaps a boom, perhaps caused by new out-of-state money (buying condos typically, if it is Canadian snow geese or retirees). However, it might reflect falling incomes in Hawaii.
http://www.deptofnumbers.com/income/hawaii/
After all, the overall asking price of homes in Hawaii has been rather stable, so falling family incomes would drive up the price-to-income ratio.
http://www.deptofnumbers.com/asking-prices/hawaii/honolulu/
But I don’t know. Ian trumped me and has stumped me.