Analyzing Deals in Expensive Markets

[Ben Duq]

I currently reside in Honolulu, and compared to some of the prices quoted in other posts I think this market is very expensive. On average I have calculated price per sq foot to be in the $360+ range, resulting in a studio/1Br condo costing about $180-200k. I think that most properties here would result in a net cash outflow.

What are your thoughts on investing in more expensive markets such as this one? How would you go about analyzing and deciding on investing here, i.e. would you pass on investing if the investment resulted in a small cash outflow, or take the small cash outflow in the short term, refinance to a better position and take advantage of appreciation in market value in the long-term future? What about investing abroad?