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No i think you misunderstood me, first we agree that the term being used for local is often resident in the data, agreed? 2nd often new housing is the most expensive on the market, so if you have a resident(a non local) buying condos for investment purposes/rent then who does it benefit? If the issue is lack of housing and that condo is priced as not for local families to afford? It doesnt add to the solution right?
I agree i don't have a problem with locals investing in property either anything helps. I believe that people don't understand that the population makeup of Hawaii is more different then its ever been. Never in the history have we had less % of the population local. To me thats says that the wealth or rosey economic picture isn't local wealth but those moving to Hawaii and bringing there wealth with them. When 46% of the population is transplants it would be interesting to see the true economic picture of hawaii if you were to take the foreign money away. Truth hawaii is a poor state.
Local does not equal resident and resident does not equal local. There is absolutely no correlation between the two words. "Local resident" also does not mean the resident is local in the traditional sense. Nobody assumes a "local resident" could accurately describe a transplant that moved here 2 months ago. But that is how the news media interprets it through the eyes of the developers/realtors.
You will always have outsiders buying real estate here. If they didn't, we would be in a lot of trouble. But the more locals that buy property here the more money stays in Hawaii and the higher the chance we preserve our local cultural values. You keep all real property appreciation here in the island and any future cash flow stays (mostly) in our economy. I always encourage friends that own here to NEVER sell their property unless they are under serious financial pressure or result of a divorce.
The high cost of new developments is not a result of greedy developers. It's just expensive to build here. Insane govt red tape, extremely high labor rates, high cost of material, high city and state fees (when compared to other states). A $300,000 studio costs $30-35K in just city and county/state fees. No design, no land, no labor, no material. 10-12% of the cost is literally a govt FEE that you need to pay or you can't do anything. Developers have to build luxury condos because affordable ones would bankrupt them. You cannot spend $300,000 to build a studio and then sell it for $300,000. So they spend $600K to build larger, more luxurious units and sell them for $900K-$1M. Without that kind of margin, nobody would build here. Way too risky.
HOA fees are way out of line on Oahu and crush your investment - I suspect those Kakaako condo monthly fees to run at least $700 and up.
Actually, HOA dues (known as maintenance fees by locals) are way too low here when you factor in our high cost of everything (e.g. labor, material, maintenance contracts, etc etc). Older building's maintenance fees should be at least 50% higher, in some cases double what they currently are to properly maintain these rapidly aging/decaying structures. People will start seeing huge special assessments to make up for the artificially low maintenance fees people here are paying.
Average maintenance fees in newer higher end buildings run about 80-85 cents/SF not including electricity. But that's a brand new building. The fees move up very quickly after the first year. The biggest increases in fees usually happen in the first 3-5 years because the developers ALWAYS low-ball fees to prop of resale values. The lower the maintenance fee, the more $$ they get for their condos. It is a direct correlation. In other high priced areas (where labor is particularly high) like Manhattan, condos easily have fees in the $1.30-$1.70/SF range or nearly double what we currently pay. Yet these Manhattan condo owners frequently get hit with special assessments.
Having said that, most condos here make lousy investments. Capitalization rates are in the 2-3% range, at best. So let the foreigners come in and foot the negative cash flow with outside money; local investors should steer clear.
Are you kidding? Some condos may be lousy investments but plenty of people have become millionaires by investing in condos. Also, a cap rate is not a measure of the profitability of a property and they are inappropriate to use for residential properties anyway.
Are you kidding? Some condos may be lousy investments but plenty of people have become millionaires by investing in condos. Also, a cap rate is not a measure of the profitability of a property and they are inappropriate to use for residential properties anyway.
Totally disagree. The reason why America went into a deep recession is from your kind of "thinking". Unless you have massive amounts of cash (you don't need at all) to put as a huge down payment on a property (and reducing the mortgage liability to the point where you are at least at break even), you should NOT be buying. Basing any real estate investment on the promise of future appreciation is ridiculously irresponsible.
Why would a cap rate not be applicable to residential real estate? That makes no sense at all.
If you are banking a comfortable retirement on real property appreciation, you are taking some seriously insane risks. Real estate is all about cash flow. If you can't cover ALL your costs with reasonably pegged rental income, any financial hiccups in life can force you into foreclosure.... or bankruptcy. Happens ALL the time.
Totally disagree. The reason why America went into a deep recession is from your kind of "thinking". Unless you have massive amounts of cash (you don't need at all) to put as a huge down payment on a property (and reducing the mortgage liability to the point where you are at least at break even), you should NOT be buying.
What does that have to do with the investment being a condo?
Why would a cap rate not be applicable to residential real estate? That makes no sense at all.
Because there IS NO SOURCE for reliable cap rate comps! Ask three of your neighbors what cap rate they bought their property at.
Even with commercial properties where there third party reporters of the financials of sales comps the market cap rates are NOT measures of profitability.
Show us how YOU think a cap rate predicts profitability.
If you are banking a comfortable retirement on real property appreciation, you are taking some seriously insane risks. Real estate is all about cash flow. If you can't cover ALL your costs with reasonably pegged rental income, any financial hiccups in life can force you into foreclosure.... or bankruptcy. Happens ALL the time.
You are confusing cash flow with profitability. I'd rather have control of a $500,000 property with no money down and some negative cash flow but $100,000 in my pocket than having the same property with a $400,000 mortgage and maybe a hundred a month cash flow but no $100,000 cash on hand. That's just smart investing.
Because there IS NO SOURCE for reliable cap rate comps! Ask three of your neighbors what cap rate they bought their property at.
Even with commercial properties where there third party reporters of the financials of sales comps the market cap rates are NOT measures of profitability.
Show us how YOU think a cap rate predicts profitability.
I think you are confusing what a cap rate is - I gave an example in a previous post - it is related solely to income.
$700K condo, $700 maintenance/HOA fee, $3,000/monthly rent, and property taxes yields a cap rate of about 3.5% (actually less, you still have to deal with GET taxes) assuming you don't have to put a dime into the property and it is always rented. With that as a comp, you can go to other condos and compare where you can get the most income.
Cap rate is only 1 thing to consider when purchasing real estate - A Waikiki ocean view condo will appreciate more (reducing your cap rate unless you get higher rent) than lets say a Pearl City condo which may or may not be part of the decision process.
You are confusing cash flow with profitability. I'd rather have control of a $500,000 property with no money down and some negative cash flow
We think a bit differently - I'd rather have a $500,000 property with no money down and positive cash flow
Personally I'd never buy a investment property day 1 with negative cash flow unless I was going to renovate and flip it - but I'm not in the house flipping business.
I think you are confusing what a cap rate is - I gave an example in a previous post - it is related solely to income.
No, I think I'm quite sure what a cap rate is. I have valued in excess of $40,000,000,000 in market value and am qualified as an expert witness in California on the subject
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