Should I sell this unit at a loss or keep it? My gut tells me to sell but...

Question

Hello everyone,

I bought a condotel in Honululu formerly knowns as Trump Waikiki in 2020 for 400k and it hasn't been a good investment at all. This will definitely be my last...

The hotel is currently getting rebranded and unit owners have the option to upgrade our rooms using the hotels "discounted and preferred" contractors for the "low price" of ~160k (again, the unit cost me 400k and is currently valued at ~340k). In addition, we're forced to pay ~1k/ month to help pay for the CAM upgrade fees.

NOTE: the rebrand is this: https://www.hilton.com/en/hotels/hnlwiol-ka-lai-waikiki-beac... and everything in the hotel is getting upgraded.

NOTE 2: if we choose NOT to upgrade the rooms, the units can't be in the hotel's pool of units to be rented out to guests.

NOTE 3: right now, I'm losing about $1,500/mo

My gut tells me to just get rid of this unit at a loss but I have a few questions I'm hoping someone can help me with (so far, I've asked some RE professionals I know but they don't have any idea).

1) If I was to pay the ~160k for room renovations, does this mean the room increases value by at least that same amount?

2) Is there any way to know beforehand if this rebrand has the likelihood of increasing the value of the rooms, in particular mine?

3) Are there any other things I should look at before making my final decision on this unit I have?

Thank you so much for reading this post. I definitely learned a lot from this experience and I don't plan on making this mistake again.

Sayed Jaffar · Answer

Aloha Irwin,

As a realtor in Honolulu area, I think if I have to rate one of the worst three projects for investments, I think "Trump Tower" would be in top 3. I just can't imagine that a condotel operator is asking owner to pay $160K for upgrading room. I think this is criminal.

If I was you, I would not paid anything towards these upgrades, instead I would offload this property. You would rather pay a bit towards new buyer as a Seller Credit and get rid of this unit. Whatever money that you will put towards upgrading, I dont think it will result in any increase towards your equity. UNLESS, the hotel operator is changing how they do business and allow individual owners to run their own STR (although I am doubtful that would be the case).

Alecia Loveless · Answer

@Irwin Dominguez I can’t imagine any type of renovation to a hotel room that would cost $160K.

As many investors learn early on you can over invest in a property on the renovation and NEVER get your money out.

I’d cut my losses and sell before throwing more money at a property like this.

Even if you could rent it out much more frequently as a STR in the pool how long will it take you to get back your $160K? At least 5-6 years. And that doesn’t take into consideration the $400K.

Talk to your tax advisor/preparer to see what type of a loss if any you can take regarding a negative impact from the sale.

Katie Taladay · Answer

others are pulling from the hotel pool and renting out to longterm renters for $2,300-$2,500/month. I currently live here and would not recommend anyone live here. The renovation is not going to increase your value that much and the inventory list is growing by the day. I'd cut my losses and run or just rent out long term.

Kristine Ann · Answer

Everything in Hawaii is at least 3-4 times the cost of continental US.  Hilton knows what they are doing and they run a really nice property. I’d say the estimate is probably more accurate than you’d get if you weren’t associated with the brand. If it were a no name brand, I might be more wary, but it’s a brand with a good reputation.

Was this a lifestyle decision? I could see spending the additional money and enjoying a tax deductible business trip every other year. If it’s just based on numbers, you’ll probably want to cut your losses now and sell it.

Bradley Buxton · Answer

@Irwin Dominguez

Can you upgrade the room with your own contractor for less than $160k and still be in the pool?

What are other rooms renting out for in the area?  Can you sell it for over 400 with a 10k remodel?

Expenses seem to be rising and the value is not after 4 years.  Unless you're getting family memories and like using the place then it might be time to cut losses and move to a new investment.

Theresa Harris · Answer

I'd definitely sell the place.  Talk to a local realtor to ask about after reno estimate on the place, but just because you put in $160K in renos, doesn't mean the place is worth an extra $160K.

I looked at the photos and the rooms look nice, but it is still a hotel room-a sitting area, sleeping area, small counter with a sink and coffee area and a separate bathroom.  Where is all of that money going??  Is some of it for common areas?  It doesn't sound like it.