Area for investment properties in Oahu (Honolulu, Nanakuli: fit in, sales, real estate market)

[jgouston]

I am trying to have an investment property in Oahu. While browsing over the lists, I found an area called Ewa plain has some properties following into my category - relatively new, less HOA, townhome like with one garage or car port, and most importantly the price for a 2/1 can be at low 200k, and 3/ can be low 300k which would give me relatively good return. Also some of them are close to beaches too. Do you know why price in this area is lower compare to other areas?

I am also looking into a bit north, such as Nanakuli, Maili or Waianae. Any comment in this area?

I am trying to take advantage of current depress real estate market now to rent it out 1st. I will live in this house after 10 year when I retired.

By the way, I have been in Oahu, Maui, Kauai and BI in past a couple of years as a tourist. Since I have only stayed in these islands for a few days - really don't have much sense for a particular area. But I do narrow down my investment will be in Oahu and Maui. Choosing Oahu over Maui was mainly for rental consideration.

[Joliefille]

The areas you are looking at are considered "down market". You probably will be able to rent it out, but may not get as high a rent as better areas. If you ever plan to live in the house, you need to spend some time in these areas first.

[WaikikiBoy]

HI jgouston,

The key to any investment is education. And the old saying in real estate is that it's all about location. Those properties are less expensive for a reason.

If you have not personally visited any of the specific area's you're looking at, then I would encourage you to visit them first. Especially if you may want to live in the property yourself in the future.

As a rental property, you will need to be able to consistently find renters able to pay an amount of rent that will cover your mortgage, HOA, tax, management fee's, insurance, etc.

Typically, properties in lower priced area's tend to command lower rents. You may even have a smaller pool of qualified renters as well. Which could mean more months of vacancy while you screen potential tenants.

I have found success in the past purchasing in high demand locations. I've found you have a much larger pool of renters looking in those area's and rents tend to be proportionate to the cost of a unit. But I also believe you can find success in any location ... if you really spend the time to educate yourself on the specific location, understand the rents common in that location and capitalize yourself well enough to get yourself through vacancies. You also need to know the market (meaning exactly what other units in the area have sold for) so you can negotiate the best possible purchase price to get your costs as low as possible.

Anyway, you probably know all of this already. So I apologize for rambling on. Real estate is simply a topic that interests me and I spend way to much time analyzing it.

Anyway, prices in those area are low compared to other area's because there is less demand for housing in those area's. There are also fewer jobs in some of those areas. And traffic can be bad for those who choose to live there and commute to other parts of the island for work.

Anyway, know your market before you buy. And really study your potential rental pool before you buy as well. That's the best advice I can offer.

[KauaiHiker]

Waikikiboy wrote: "an amount of rent that will cover your mortgage, HOA, tax, management fee's, insurance, etc."

Pray tell, why should that be? While it is an ideal (of the landlord's) to cover all monthly costs with the rent, there is no realistic way to expect that. The price of the property, and thus the monthly mortgage is a function of many factors in the real-estate market, only one of which is the rental potential. And inversely, the rental value of the property is a function of many factors in the rental market, only one of which is the landlord's mortgage.

In fact, in the Hawaiian market where there are so many rent-to-retire properties, the rental potential of the property drives up its sales price. Usually people who can pay cash (and thus have no mortgage) have the lowest overheads and can thus get a 3-7% return on a rental property. Somebody paying interest on mortgage on the same property isn't going to cover it with the rent.

[WaikikiBoy]

Originally Posted by KauaiHiker

Waikikiboy wrote: "an amount of rent that will cover your mortgage, HOA, tax, management fee's, insurance, etc."

Pray tell, why should that be? While it is an ideal (of the landlord's) to cover all monthly costs with the rent, there is no realistic way to expect that. The price of the property, and thus the monthly mortgage is a function of many factors in the real-estate market, only one of which is the rental potential. And inversely, the rental value of the property is a function of many factors in the rental market, only one of which is the landlord's mortgage..

Hi KauaiHiker,

You know, you really are just making my point.

You say the cost of the property and the monthly mortgage is not necessarily a function of the rental potential. I agree. That's exactly why you need to know your market and educate yourself before you make a purchase. Know your costs and know your location know your rental pool before you make a decision whether a property is an appropriate investment.

Your converse point simply makes exactly the same point: Know your market. If the rents in your location/market can't support the prices and what your costs will be, then it's probably not a good investment.

Many people make purchases based on emotion and don't do their research. And that's the quickest way to make your dreams not come true.

A rent-to-retire property and an investment property can be evaluated differently because of different goals for the purchase.

With respect to why a person purchasing on a mortgage should expect to cover their monthly costs, I'd ask why should someone invest $100,000 in down payment on a property just for the opportunity to lose $300 per month ? If that's the situation you're entering into, you should understand it and be able to support that loss. find a different property or look for a different use of your money. Whether it's rent-to-retire or investment. I've purchased several rental properties (with mortgages) and rent then to cover my expenses. I also have a rent-to-retire property that I take a small monthly cash-flow loss. If you educate yourself and don't buy with emotion you can be patient and find the right opportunity.

I was posturing my original post for a more general audience and assuming a mortgage purchase. Obviously a cash buyer really can do whatever he/she wants.

Anyway, just my opinion and it's worked for me.

[jgouston]

Thank you all for response. I am really looking for the comments/input of the areas of Ewa, Nanakuli, Maili or Waianae. I am not looking for real estate rental finance 123 class here. I understood I should be there to experience the areas myself. I have never been to these areaea. This was the whole purpose I posted this question.

[Tiger Beer]

It always seemed to me that most condos in Honolulu/Oahu have such high monthly maintenance fees. I just cant imagine absentee landlord would make much of any profit in Oahu.

Maybe I'm wrong, but that was the conclusion I came up with when I looked into it. No direct experience though.

[Joliefille]

Originally Posted by jgouston

Thank you all for response. I am really looking for the comments/input of the areas of Ewa, Nanakuli, Maili or Waianae. I am not looking for real estate rental finance 123 class here. I understood I should be there to experience the areas myself. I have never been to these areaea. This was the whole purpose I posted this question.

Ewa has beaches, but they are not user friendly and do not have facilities nor parking. They, as well as Nanakuli & Makaha/Waianae have reputations for being less friendly to newcomers or outsiders, thereby making them less desirable areas to rent in from the stand point of beach access or desirability. None of these areas have any shopping or dining optionsr. The local schools are also at the bottom of the heap.

On the westside, Kapolei, Makakilo, Ko'Olina are better investments, IMHO.

[timbo31958]

REPUTATIONS are hard to change, we have been welcomed here in Waianae since we first set foot in town 4 years ago. 30 years ago maybe not so much.....Things do change over a period of time for better or worse, but seems like a REPUTATION never changes!! If people would get over the REPUTATION thing and give something or someplace a try no matter where or what it is, they just might find that its not as bad as the REPUTATION has described

[Joliefille]

Originally Posted by timbo31958

REPUTATIONS are hard to change, we have been welcomed here in Waianae since we first set foot in town 4 years ago. 30 years ago maybe not so much.....Things do change over a period of time for better or worse, but seems like a REPUTATION never changes!! If people would get over the REPUTATION thing and give something or someplace a try no matter where or what it is, they just might find that its not as bad as the REPUTATION has described

The OP specifically asked why prices were lower in the areas he posted.