Should I buy a condo in Hawaii at my new Duty Station?

Question

I am moving to Hawaii with the military soon and want to know if buying a condo is a good investment. Condos are the only affordable thing and I want to get started and own a place. However, with hefty HOA fees and high interest rates, my housing allowance will be exhausted and maybe even exceeded. Is it still worth while to buy and try to gain some appreciation and even some cash flow if I rent it out down the line? Or is now not a good time or are condos a no-go? I just want to learn and make the most financially sound decision. Unfamiliar with the area and how real estate operates there

Doug Nordman · Answer

Elijah, I'm a retired submariner in Mililani, and we've lived on the island for nearly 34 years. We own three properties here and we've been landlords for over 25 years. BiggerPockets gives you the tools to invest all over the country in places where the cap rates make sense. When you compare Oahu to the rest of the U.S., I think you'll be a little concerned about leveraging a personal residence into an investment for a short military tour... and very concerned about doing it here. If you aren't able to live on base or can't find a rental here (for the best of reasons) then I'd recommend house-hacking a 3-4 BR SFH with roommates. (That's the best way to put BAH in your pocket.) Another possibility would be a live-in flip (not for the faint of heart, and maybe not for families) that you could rebuild during your tour. That's going to involve a lot of nights & weekends... in between deployments, right? If you feel obligated to buy a condo or a SFH during your tour here, do the math. It's better to buy an investment rental property that you can live in for a few years rather than buy a nice home and then try to turn it into an investment rental property. The appreciation is unlikely to pay the closing costs on both the buy and the sell during a typical three-year tour. Appreciation is going to have even more pressure on it as Koa Ridge and Ho'opili build out their new phases and start selling. Cash flow is challenging due to the homeowner's association fees.

Bryan Vukelich · Answer

Hi @Elijah WichersWhich island are you coming to? And how long you plan to be on the island? And have you been pre-approved and if so, do you mind sharing what price range you can afford? Here in Hawaii, condo monthly fees are called AOAO (Association of Apartment Owners) and the monthly fees can vary greatly in cost as well what they cover. There are some 1 BR condos that have AOAO monthly fees around $500/mo that cover electricity, cable, water, sewer and common area maintenance. While other buildings might have a $1k+ fee and only cover water, sewer and common area maintenance. What monthly fees have you been seeing? I'd be happy to talk with you and give you more info on the topicAnd impossible to predict future values, but on O'ahu, over the past 38 years, average price for a condo has increased 4.72% annually. And overall, inventory is quite low right now and this is helping to support valuations for most parts of the island even with the higher interest rates. And perhaps you can afforded a townhome or single family home? I recently had a VA buyer acquire a 3 bd/2 ba single family home in Pearl City. It was listed at $695k but he offered $725k and asked for a $29k credit toward closing costs and to pay down some personal debt. Seller accepted and now my client is housing hacking it. If I can be of service to you, you are welcome to contact me any time.

Lake Lutes · Answer

Uncle Sam is giving you TAX FREE BAH to put towards a mortgage - in my opinion, there are very few scenarios when it would be better to put it in a landlords pocket instead of towards your own equity.With that being said, Hawaii is its own beast. The entry price is steep, and the risk is higher. I would advise looking out of town if you want to keep your HOAs down and purchasing power up. Mililani, Ewa Beach, Aiea, or even Pearl City could give you some lower HOAs and purchasing power in your BAH range. Shoot me a message if you need some help, would love to connect! Spent 3 years investing and as an agent in Hawaii, and am still active on Oahu. Love where your head is at already!

Joe Funari · Answer

@Elijah Wichers Jealous I never PCS'd to HI. So congrats there. Regarding the condo's you need to read their HOA covenants very closely to make sure the one your purchasing will allow rentals down the road. I had a client here in the Dallas/Ft. Worth area buy a condo with the same intent of keeping as a rental within a couple of years. The HOA covenants, at time of purchase, allowed rentals. But while living in the condo the HOA got together and voted to amend the covenants to not allow rentals. Now again this was here in Texas. But would suggest if you can find a single family that will still pass a VA inspection use your COE to get into a single family. But also suggest you find an investor friendly realtor in HI that will know if condo HOA's there in HI are not allowing rentals. Let them know your goals. Hope this helps.

Paul K. · Answer

Elijah, any updates? I'm in the same boat (not actually cause go Air Force, Beat Navy) and would love to hear what you ended up doing.Thanks!

Paul K. · Answer

Appreciate the insight! I ended up doing an assumption. Just starting the process so should close in 2-3 months. The condo is ok not great but in a nice area, still expensive, and will def cash flow negative but I plan on being here a while and renovate while living in it.

Mike Cavaggioni · Answer

I agree with Doug here. If you can get a few military buddies to be roomates, you can househack a single family home and the payoff would be much better when you PCS and sell in 3 years. The market on Oahu is tough, however there isn't much competition right now to get under contract. When the interest rates go back down, it will be much more competitive. Oahu is not like the mainland. Once we are back in the 4's, you will start to see multiple offers coming out again. @Elijah Wichers, thank you for your service. What branch btw? I just retired from the Navy a few months ago.

Richard F. · Answer

Aloha,You certainly need to review your condo docs, most importantly the operating budget and reserve funding plan. There are a lot of Condo and HOA properties that seem to have "low" maintenance fees, when in fact they have a huge deficit in funding for the maintenance and repairs that are required by their Governing docs. Many Association Boards keep maintenance fees "low" by simply deferring needed maintenance for years.

Kyle Baker · Answer

Hey Elijah! I 100% agree with @Joe Funari. I would do your due diligence before hand and find out if the HOA allows rentals. I dont think its a bad idea to purchase if you can do so without over extending yourself. The property *should* appreciate while you are there and make you some money, but you should never buy a property on the hopes that it will. If you can buy at least a 2 bedroom condo maybe you can house hack by renting out the other room. Brings down your expenses by a good bit I'd guess. Enjoy that weather out there though. Im sure its going to be beautiful 🤙

Eduardo Guerra · Answer

Everyone on here is giving you some great advice! I don't know the Hawaii market like I do here in California but I'm sure it's not too far off from San Diego since the entry points to both markets are a bit steeper. I would also advise buying an SFR or condo/Townhome and house hacking the property go keep more money in your pocket. I help many service members do that here in San Diego as well as in other parts of California. Find a good agent who will take the time to guide you in the right direction and who is well versed on the VA Loan. Not too many agents really know the full extent of the benefit we have and how to utilize it effectively. But good luck and congratulations, changing one future at a time with the power of the VA loan!