My friend asked me the same question and running the numbers for him that kind of investment doesnt make sense. The cap rates in HI are so low and especially once you factor in condo fees and HOA it really doesnt make sense and is not a good investment.
If you're looking for cash flow, then head to the mid west.
@Sam Taylor You're probably headed in the wrong direction. If you can't find anything that pencils out in Idaho well enough for you...well...Hawaii won't have your answers. I mean you can try plugging in the HOA fees, management fees, insurance, taxes, 100% of utilities, cost to furnish, replacing linens on a more frequent basis that you'd think, etc. and see how it all works out. Odds are you'll be cash-flow negative.
Usually you have to factor in things like "fun" and "I use it sometimes" to make beach vacation rentals pencil out. Even the "best" ones that I've seen can't achieve the ROI of my apartments.
And that isn't counting what it's going to cost you to fly out there and check up on the property from time to time. Going to Hawaii is a pretty darn expensive flight.
Invest by the profit and loss statement, not emotion.
@Sam Taylor Which areas are you looking in and what criteria are you searching for? You are very close to Rexburg and right now nothing there makes any sense so hopefully you aren't focusing your search there. It can take time to search and run hundreds of analyses to find something worth pursuing. I searched for about 4 months before I found a great cash flowing property, I had made a few other lower offers at a price that makes sense but didn't even get a counter offer for them so I just kept searching. I always look around just to see what comes up but you also need to be ready to pounce when you do find something because when something pops up that the numbers work well, they sell fast. So have your financing in place and use the BP rental calculator and if it all makes sense, send in an offer. If you need a local agent and/or lender send me a message and I can give you some contacts.
Thank you for the input. It was a thought but definitely so many factors involved!
Having owned one of these on Kauai free and clear (inherited), I've yet to figure out how anyone can make money with a mortgage. If they are making money, they certainly aren't using the condo for personal use much, or sharing it with friends(which is an inevitable expectation). We made money, but the return on equity was downright embarrassing. We ultimately decided cash flow was more important than the emotional attachment, since we had moved home and no longer needed a place to stay when we visited. I keep trying to make it work on paper, to take another stab at it, but haven't had any luck yet.
One idea, if you're dead set on Hawaii, and not so worried about where in Hawaii, is to check out the east side of the Big Island. It is the only reasonable priced area left in the state, and the Big Island doesn't limit vacation rentals in non touristy areas. Basically, you could buy a simple home for under 200,000(or less if you don't mind work), and then vacation rental it out. It may not be real high demand...but it may be enough so that you can have a home in Hawaii. The county is trying to limit this, like all the other islands have, to touristy areas only, so this option may be gone soonish(at the speed of government). Granted...there's a reason it's still cheap. But the weather is still Hawaii!
@Sam Taylor, purchasing a condo in Hawaii can be very successful. It's all I do... Few things to keep in mind:
1. It will require 30% down
2. You'll need to self manage or use someone like myself who will do it cheaper. You won't make a dime using a 'full service management company'.
3. If you're going to do it yourself, expect to put in a decent amount of time getting yourself setup and running. You will need to be attached to your phone 24/7 to handle the inquiries.
I don't know why people here repeat how impossible Hawaii is. I average 20% per property COC ROI WITH a mortgage., the AOAO fees, and high electric bills. Anyone who can't net 10% doing it themselves doesn't know what they're doing. I even just finished a cash out refi on one of mine and pulled out 200k to purchase my next one... and i'm still cash flowing 12% (with my pre refi numbers) with the larger mortgage and I only put in 160k 3 years ago. It's literally infinity roi now.
I'm about to put in an offer on one that should net me 25% coc roi. Don't let these guys scare you away. You just need to purchase the correct unit AND set it up / market it correctly on the listing sites.
Sam Taylor I think that is a good idea for me to rent that rental from you ;)
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