With regular life here in Colorado having resumed so seamlessly, it is sometimes easy to forget that I spent seven weeks of the winter in Hawaii. I’m back to wearing clothes and living in a house with windows, and having ready access to old friends and breathtakingly cheap groceries. I’ve even been surprisingly happy with the weather here in my home town. While far from tropical, this area still provides a few precious hours of T-shirt weather (10C/50F and above, plus sunshine and very low humidity) almost every February day, which makes for ideal cycling and construction conditions.
To celebrate, I’ve been doing a lot of cycling and construction, even embarking upon my biggest building project in years recently. I am excited to tell you about it, but before we get into that, we must first tell the Epilogue of the Hawaii story so we can all have proper closure before moving on.
As we left Hawaii, the vacation suite was just about done from a carpentry perspective, but in need of a paint job and some furnishings to add a bit of style. Owners Johnny and Jane Aloha have a busy schedule these days, with one full-time job and one very young baby between them, but with the help of visiting parents they were able to take a good pass at the work, just in time for another round of visiting guests who took over our suite. John sent me a few pictures as well as his spreadsheet detailing how much the whole thing cost in the end.
Since this is a financial blog, let’s start with the investment perspective of the project:
The goal of this new suite is to generate income for the owners, to offset the high cost of home ownership in the area. The house is in an incredibly expensive beach town, where very modest houses begin at around $700,000. The project was of special interest to me, because Jane was about to have a baby, and the income from this rental unit would make the difference between her having to return to full-time work, and being able to stay home as long as she sees fit, to raise her new daughter through the first few years of life.
A studio apartment in this area rents for about $1500/month on a long-term basis, or $80/day ($2400/month) if used as a short-term vacation rental. Taking the most conservative estimate of $1500/month, that implies an annual income of $18,000 per year.
As we went from initial planning emails through to project completion, we encountered quite a few bump-ups in the budget:
In my Colorado city, you can file for your own building permit, get full approval, and do all your own work – as long as you can follow the strict building code regulations and your work is good enough to please the well-trained local inspectors. In Hawaii, building permits are slow and expensive to approve, and you need to know which hoops to jump through to get the approval. On top of that, homeowners are forbidden from doing their own plumbing and electrical work. This drives up demand and pricing for those tradesmen, which adds a big chunk to project cost for any would-be do-it-yourselfers.
Plus, many materials need to be imported from across the ocean, and the relatively small local market prevents the large economies of scale that make daily life so inexpensive for us here on the mainland. Luckily, a few Home Depots have sprung up on the island in recent years, with only a 10% price premium over the mainland, which helps force down the otherwise-shocking prices charged by smaller chains like Ace Hardware.
Even with these extra costs, it looks like this project will turn out to be quite lucrative. Check out this summary:
Item Store Cost
Draftsman and Permit wait-in-line sufferer Draftsman $1,200.00
Board of water supply city and county $638.00
Permit Fees city and county $391.00
shower fixture Craigslist $40.00
shower and floor tile Craigslist $370.00
shower mosaic floor Craigslist $35.00
bathroom vanity Home Depot $281.78
window Craigslist $13.00
exterior door Craigslist $75.00
tiling saw, supplies, safety Home Depot $237.51
plumbing rough in Plumber $3,500.00
electrical rough in Electrician $2,134.00
Huge Initial Materials order home depot $2,604.68
queen bed craigslist $200.00
Construction Trash removal George the Rock guy $200.00
refrigerator craigslist $120.00
paint, hardware hardware hawaii $143.90
wood (finish) hardware hawaii $115.55
brackets, finish supplies hardware hawaii $125.03
counter tile, faucet, sink, etc home depot $1,071.49
lights home depot $47.99
siding, thinset hardware hawaii $171.69
mortar, plumbing, finish hardware hawaii $246.17
plumbing hardware hawaii $41.51
granite tile home depot $437.77
hardibacker hardware hawaii $96.26
siding, hardibacker hardware hawaii $635.53
joist hangars hardware hawaii $24.46
lumber hardware hawaii $101.43
trim iterms hardware hawaii $66.08
Food and Beer for Lead Carpenter Mr. Money Mustache $300.00
In case you were curious, Mr. Aloha calculated that the Craigslist purchases saved us about $1800 over the new-equivalent items (and over 10% of the whole project cost). Also, if you don’t live on a tropical island and thus don’t have access to free labor from blogger/carpenters, you might add in the cost of hiring a carpenter for this quantity of work, in the range of $6000-$8000 depending on local labor rates.
So despite all the cost overruns, we still ended up with a project with a Gross Return on Investment of 115% annually. You can tweak the numbers all you like, but you’ll still end up with a very good result, which pleases Mr. Money Mustache.
Here are a few pictures from the mostly-done suite. Alas, this isn’t the most photogenic work for a carpenter to profile, since we’re really looking at a drywalled room with a basic white kitchenette (at least the bathroom and fancy shower are nice). To really make this place sweet, we’d have to add some rich woodwork and built-in shelving along with bolder tropical or earthtone colors. Also, these pictures were taken by the owner at night – to get the proper impression, you need to imagine bright sun and tropical leaves streaming through the large windows which face the back and side yards (not shown in these pics).
But given the short timeframe (Most of it happened in the initial 2.5 weeks), and the great numbers above, I’m still very happy with the project.
So that officially wraps up the Hawaii project.. and I’ve already started on something bigger: a second-story master bedroom addition on the back of a friend’s 100-year-old house here in my neighborhood. This time, we’re insourcing everything, right down to shovel-digging the massive holes for the foundation piers and pouring the concrete a few weeks ago. As of this moment, we are finishing up the floor framing and about to build the walls. It should make for a few more interesting construction and real-estate-related posts, mixed in with the financial things I have planned for you.
So much fun to be had, so little time!
And if you missed it, here’s the Hawaii Series of articles in full: