Minimal time to manage your investment, no A/C or heater expense, and don't need to update the finishes as much as pretty much anywhere on the mainland.I travel back to Oahu 1-2x per year.

But i wont bet on that happening. 

Now I am ready to invest and of course, I'm late to the party :(Everywhere I turn, I find cap rates below 5%, and I don't really want to go into risky C or C- properties or Rust Belt markets for my first investment, as I might find myself squeezed if the market crashes, assuming we are closer to the end of the up cycle now than we were 5 years back.So what is your advice, seasoned investors?

The area is growing and I anticipate rents going up as well as house prices, i don't want to bet on this but it does give me some comfort that equity will increase over the next few years.  

I could probably technically count it as business income but I don't file a Schedule C or anything and I'm not sure if all of my deductions like depreciation would count as "expenses" in this case. 

And you usually have to go to 'C-' or below before you get to 20% ROI.

Taking on underfunded investment properties can become very stressful financially and emotionally.Remember - if you decide to wade in now "Cash Flow is king" meaning it needs to cash flow when you buy it don't bet on being able to significantly increase the rent to improve cash flow.Good Luck!   

This sets up a nice situation for those not afraid to invest in c or d class neighborhoods .

I guess I could look into a COR as well.

@Dan Heuschele Just to clarify my less than articulate point, what I mean to say is if your bank account is stout enough to have that *option* (to put more down to break even) then you’re in a position to make the educated bet on appreciation.