Anyone on BP investing in Oahu, Hawaii?

Question

Does anyone here invest in Oahu, Hawaii? If so, what investments do you have? How does it work to be investing in a very popular tourist area? Would love to learn more about investments there!

Lane Kawaoka · Answer

Stacy, it depends if you are looking for cashflow or more of a trophy asset.

The Rent-to-Value Ratio of more than 1% is needed to be able to cashflow after expenses - you definitely will not find it here. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%.

I live here in Hawaii but invest in the South plus Phoenix. Live where you want and invest where the numbers make sense 🤙

Doug Nordman · Answer

Dewayne, it doesn't matter what I believe in, but my family has owned a B+ single-family home in Waipio Gentry for over 30 years.  During those three decades it's appreciated at the rate of inflation.  In terms of the 1% thumbrule, we've finally managed to boost net cash flow to 0.4%. Several thousand new homes are coming to Oahu in the next few years in Ho'opili, Koa Ridge, and the light rail corridor.  "Gamble" is the right word.  Why not invest anywhere else in the U.S. where the numbers work for both cash flow and appreciation?

Doug Nordman · Answer

Jeffrey, that old trope of "buy a home at every duty station" might have been cool in the 1980s, but now the Web lets everyone invest where it makes financial sense.  If you're going to become a long-distance landlord after the military transfers you out of Hawaii, maybe it makes more sense to learn how to do it while you're living in Hawaii and investing in someplace like Oklahoma or Michigan.The military homeowners in Hawaii are making their money by househacking with roommates (like Scott Trench's "Set For Life") or by doing live-in flips... and the more rewarding live-in flips are practically gut-rebuild.  If you're planning to buy a multi-family while you're here during the tail end of a pandemic, well, you'll get real familiar with the landlord-tenant code.Just because the DoD hands out more BAH here than almost anywhere else is no reason to leverage a VA loan on short-term speculation.  The reward is not worth the uncompensated risk.

Stacey Ocampo · Answer

@Doug Nordman Thanks for the insight Doug! I can agree to it as a gamble, gotta invest where the numbers make sense.

Stacey Ocampo · Answer

@Andrew Keeler Awesome goal Andrew, I have a similar one with living in Hawaii. Let’s get to work!🙌🏽😊

Stacey Ocampo · Answer

@Michael Borger Definitely makes sense with Hawaii. Thank you Michael!

Zander Kempf · Answer

@Stacey Ocampo

Hawaii can be a great place to invest, depending upon your investment goals. If you are looking for an incredibly stable market, with strong long term appreciation potentials, Hawaii is the place to go.

If you are looking to buy a property that you can also vacation to, a short term rental in Hawaii is the perfect solution.

Flips are possible, but almost always (recently) are found off market. Condo projects (where you buy a lot and divide it in two, selling each lot separately) are very profitable and low risk, though they are tough to find.

Doug Nordman · Answer

I hear you on the emotions of the buy vs rent decision.  Let me know if you want more help crunching numbers-- we have a number of military investors on the islands who network and help for free.

You also want to make sure you’re not asking a barber if you need a haircut-- hopefully your realtor is experienced at working with real estate investors instead of homeowners.  You’ll get the $3400 BAH whether you spend it on housing or not, so a sure way to put it to work is to go cheap on rent (or house hack) and invest the rest in your asset allocation (equity index funds or REI) where it makes sense.  You don’t have to dump your BAH into real estate in the same ZIP code as your duty station.

I’m a solar nerd, and we’ve had a grid-tied system since 2005.  It paid us back by 2011 and we’ve had free power since then.  It’s worth buying (solar water heating as well as photovoltaic) when your electric bill becomes $26/month instead of $250/month.  However Hawaii’s photovoltaic incentives are not coming back.  Those subsidies did their job and the systems are cheap enough for the markets to compete on their own merits.

Jeffrey L Jerschina · Answer

Doug, thanks for the response and reality check. While I don't subscribe to that specific AD mantra of "buy at every duty station," it is a very emotionally charged decision to look at renting in Hawaii for 3 years and seeing a potential 100k+ in equity never materialize, although that's at the crux of the rent vs. buy conundrum- emotions vs underwriting!

I need to run the numbers on a few properties in Hawaii- I've been talking to a RE agent and browsing SFHs on the windward side around Kailua and Kaneohe. With enough square footage and correct zoning, I would strongly consider building an ADU on the property and lurking to see if solar panel tax incentives return.

Whether forced appreciation through doing a live-in-flip, ADU, and potentially solar along with equity is enough to eclipse a potential collapse/stagnation in the Oahu market- that's the big sticking point, and all of my musings come back to your premise: is the cash flow there and is the potential for appreciation and equity worth the "uncompensated risk?" With a 0% down VA loan and 3400$+/mo in BAH, it's a tough choice!

Stacey Ocampo · Answer

@Jeffrey L Jerschina I too, heard about ADU’s and rentals doing well, but sounds unsure with covid and agree with what Lane said. How exciting for such a big move! You’re definitely gonna love it there. Good luck!

Anyone on BP investing in Oahu, Hawaii?

Most Popular Reply