Should I sell or hold a studio in Waikiki Hawaii

3 Replies

I have a studio unit in Waikiki, which is a block and a half away from the famous Waikiki beach, Hawaii. I rent the studio for $900, which is below market. Other units in the building in higher floor rents for about $1000-1300, but because I am on the 2nd floor, I think I could only get $975. I never have any problems renting the place. I bought the unit in 2004 for $73K and the last sale in the building was $135-150K. This is the cheapest you can find in Waikiki as most studio units cost more and the most expensive is the Trump Tower slated to be completed in 2009 (a studio cost $500K).

The unit is paid off because I used the cash I got when I refinanced my personal residence at a 5.3% interest rate. The $900 rent covers the 5.3% interest rate I pay for my mortgage, the $360 monthly maintenance fee, plus RP tax and insurance. Hawaii market has reached its maturity, so I may just expect a small appreciation going forward. If I sell, I plan to use the money to invest in equities. However, I am not sure if selling the property is a good move. The location is very good and the unit is easy to rent although the building construction is average (built in 1975). On the other hand I think I could get 10-15% yield if I invest in equities. Should I continue to hold the unit long term as a rental or sell? Any feedback is appreciated. :lol:

In my opinion, unless you come across another great deal, I would keep it as a rental and continue to raise the rent each year. Your property value will continue to rise, especially w/ the Trump Tower coming in.. Just my 2 cents. SHEP

Originally posted by "whiteorchid":
I have a studio unit in Waikiki, which is a block and a half away from the famous Waikiki beach, Hawaii. I rent the studio for $900, which is below market. Other units in the building in higher floor rents for about $1000-1300, but because I am on the 2nd floor, I think I could only get $975. I never have any problems renting the place. I bought the unit in 2004 for $73K and the last sale in the building was $135-150K. This is the cheapest you can find in Waikiki as most studio units cost more and the most expensive is the Trump Tower slated to be completed in 2009 (a studio cost $500K).

The unit is paid off because I used the cash I got when I refinanced my personal residence at a 5.3% interest rate. The $900 rent covers the 5.3% interest rate I pay for my mortgage, the $360 monthly maintenance fee, plus RP tax and insurance. Hawaii market has reached its maturity, so I may just expect a small appreciation going forward. If I sell, I plan to use the money to invest in equities. However, I am not sure if selling the property is a good move. The location is very good and the unit is easy to rent although the building construction is average (built in 1975). On the other hand I think I could get 10-15% yield if I invest in equities. Should I continue to hold the unit long term as a rental or sell? Any feedback is appreciated. :lol:

I would compare your long term return on the two strategies. Will the 10-15% return on your equities beat your return on renting the property out. I would also factor in rent increases, appreciation (even if it is small), and equity built on the studio. In 10 years your equities investment still is only making 10-15%, but even if you can currently only match that on cash flow from renting your property out, then future rent increases, appreciation, and equity would make it a very strong investment in 10 years. I would say that the Trump Towers coming in only helps the outlook. Your appreciation may jump from that also.

If your return on keeping it looks better than 10-15%, I'd say keep it.