I’ll continue to research the area.

I can only speak to myself personally but I've continued to invest, knowing properties may not cash flow much but I've invested in value-add so focusing on appreciation.

I wish you great luck on continuing to build up your farm.

At this point, instead of continuing to pay the interest loan payments on properties that we will never be able to financially finish since the rehab loans will not cover the actual cost of the rehab, I wanted to know the ramifications of returning the properties to the loan servicer, deed in lieu.

To me STR and hotel caters to different groups of travelers and so despite competition as long as the travel demand of Hawaii remains (as you pointed out is a robust assumption) I think both will continue to do well.  

I'm unclear why you would continue paying for something that was not what you were told. 

When you do that, you can get better pricing and leaves less room for error.The best advice is to push forward as quick as possible, fail forward, and always continue to introspect on what you would do differently and then ACTUALLY go back and implement that change (easier to say than do).

I'd recommend the following:1) Continue to stay at home to save up more2) Buy the crappiest home in a good neighborhood, with financial help (parents?)

I'd expect prices to continue to appreciate, so the longer you delay, the more expensive things may be. 

Continue to expand my bareland funding for land flippers .