Hawaii - Oahu Investing

Hawaii - Oahu Investing

New to Real Estate · Tokyo, Japan · Member since 2020 · 13 posts · 11 votes

I'm looking to get started doing real estate investing in Oahu. I've never done real estate investing previously but I've spent a considerable amount of time reading books (6 and counting), listening to the bigger pockets podcast (100+ episodes watched), and consuming other content on the topic of real estate investing. I mention it just so people respond knowing that I'm a beginner but that I've spent a considerable amount of time trying to learn prior to coming to the forum for information.

My post is a bit long so let me state from the outset I'm trying to check my investigation against the experience of people doing this on Oahu. I'm also looking for any insights people are willing to share into Condo and SFH investing on Oahu.

From the investigation I've done thus far it seems that across the island the median days on market is quite high by comparison to where I'm from in Sacramento or the national average.

Oahu - 60 Days
Honolulu - 78.5 Days
National - 34 Days
Sacramento - 9 Days

Escrow/Closing times are 40-60 days which is much higher on the island than the mainland - my friend closed 21 days conventional on a house here in Sacramento last week. Property taxes are some of the lowests of all 50 states but HOAs are almost unavoidable island wide, except for homes in certain areas. Generally speaking you're much more likely to pay an HOA fee than not. HOA fees can range from $200 to over $1000 per month. While it's not as common as it used to be it you still need to look out for Leaseholds.

Cash-flowing properties can be found but when it comes to renting these properties out its not as simply as buy and list. You really need to pick the right place, have good marketing of your property, and it has to be what people are looking for otherwise your property is going to sit. Tenant turning has a higher cost than would normally exist on the mainland because things move more slowly on Oahu. As it relates to STRs you can only do that in very specific zoning otherwise it's been outlawed and the fines are quite high for people who try to skirt the law and get caught.

I've been unable to find reliable information about how much more an Oahu rehab on a BRRRR or flip is going to cost vs. Sacramento for equivalent square footage (say a 800sqft condo). I'd imagine it's higher just because of the cost to get materials to Hawaii. I've also been unable to find a reliable way to estimate how much longer a rehab would take in Hawaii, if at all. It seems everything is slower in Hawaii.

Flips seem to be a good opportunity on the island. At 70% LTV it seems like you'll see significantly fewer opps than if you were at 80% LTV but connections are everything for this. If you don't have significant capital or good lending connections you're not likely to do any SFH flips. Holding costs are likely to be much higher than most places because of the speed of sale and escrow on Oahu. Condo flips can be done but are more tricky because HOAs often have improvement regulations that might make your renovation ideas impossible or there could be a long and painstaking process to get any improvements approved (assuming they are improved at all). There's quite a bit more leg work to do to ensure your plans and ideas will work.

Lending can get tricky if you are buying in a condo and a certain percentage of the units are not owner occupied. This can also present possible issues after purchase when you want to list your condo for rent but the building only allows a certain percentage to be rented. You might not be able to rent a unit out if the max threshold has been hit. It can also be an issue when you want to sell.

That's about what I've gathered from the limited research I've done on Oahu investing. I didn't mention anything about MFH because I lack the funding and connections to attempt that currently. Any and all corrections are welcome and any additional insight is appreciated.

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Real Estate Agent · Honolulu, HI · Member since 2019 · 60 posts · 40 votes
5y

Hey @Nathaniel Garcia, I also used to live in Japan and now live on Oahu. But I do my cashflow investing out of state for many of the reasons you already mentioned. I have been involved in a few flips here which can work if you can purchase properties low enough. Let me know if I can help in journey!

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  • New to Real Estate · Tokyo, Japan · Member since 2020 · 13 posts · 11 votes
    5y
    Originally posted by @Duc Ong:

    @Nathaniel Garcia I agree that the live in flip / house hack is a good place to start, since you would leverage the better terms of a primary occupant loan. I'm actually doing a live in flip right now with my condo in Makiki. Days on market are crazy low currently, due to lack of inventory, low rates, and increased demand. If rates go up, we might see some softening, but that's not happening currently. SFH's that are move-in ready are seeing many offers, well above asking price. Let me know if you want to chat more.

    I sent you a message. Thanks for reaching out to connect. The market really is moving really fast and the prices are eye-watering on SFH. Right now my focus is going to be condos unless I can find a SFH that's in terrible shape, barely qualifies for conventional financing, and fits the math for a flip.

  • Rental Property Investor · NJ · Member since 2019 · 43 posts · 14 votes
    5y

    @Nathaniel Garcia

    Aren't you the lucky one :)  Enjoy your trip!  Say hello to Kiley for me.

    Selina

  • Joel BongcoBusiness Member
    Investor · Honolulu HI & Los Angeles, CA · Member since 2018 · 371 posts · 179 votes
    5y

    @Nathaniel Garcia - Oahu is a tricky market for the novice real estate investor and even the sophisticated ones. First rule of thumb is to avoid buying property off MLS whether its a fixer or not. By the time you rehab the property, you will have consumed most of your margin or may be negative from the get go. The condo market here is even harder with crazy maintenance fees, lease rent on some properties and special assessments for elevator renovations, plumbing and fire systems. However, it is doable if you build relationships with other investors who live and invest here on Oahu. We have several active flips including Kalihi, Mililani, Halawa, Wahiawa, and Ewa Beach. Please DM me if want to check them out and I'll give you a quick tour as well as the grit and patience it takes to acquire them. Aloha! Joel

    Inspired Life Investments LLC.
  • Lender · Oregon, Hawaii and Texas · Member since 2020 · 43 posts · 18 votes
    5y

    Hi! I am from Kauai and I so I hear ya about some of the peeves of investing there. My recommendation would be to start with a house hack. Many homes are geared for that there to offset the high cost of living. And from a lender perspective- claim the rental income in your taxes so you can use that towards qualifying your DTI towards your next purchase. Oh and live in it for at least 2 years so you can get a capital gains exemption when you sell it- because the good thing with Hawaii is it should appreciate pretty well over a couple of years!

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