Hawaii - Oahu Investing

[Nathaniel Garcia]

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.

[Nathaniel Garcia]

@Carlos Ptriawan I get it. Sacramento has some really nice appreciation potential and even cashflow in the right areas. For the time being I want to put my money where I am living because I can benefit from leveraging a primary residence at 3% and doing some of the labor myself (paint, flooring, drywall, plumbing, etc). I fully appreciate that Hawaii, specifically Oahu, is going to be a much more challenging venture than Sacramento. I also realize the margins are most likely slimmer. I've lived in Sacramento and it's suburbs 26+ years. At some point I'll put my knowledge of the area to good use. 

I didn't pick Oahu because I think it's the best market in the country to do investing or because it's easier than most places. I picked it because for my own personal reasons it's where I want to live and I'm committed to learning and succeeding in that market. I had considered Sacramento, Dallas, Detroit, and Cincinnati but I knew I wouldn't be happy living in those places right now. I've realized investing in your happiness before you try to invest in something else will go along way towards making those investments a success. Obviously you need to make wise and sound investments but when things get hard, markets fluctuate, and the best laid plans are tested having invested in yourself will go a long way to ensuring you endure, survive and come out the otherside better than when you started.

Oahu here I come.