Honolulu Condos: Waikiki Homebuyer-Investor Guide

Waikiki Homebuyer-Investor Guide

I just love living in Waikiki and selling condos here.  I was thrilled, when reading the Sunday paper, the "Honolulu Advertiser", I ran across this great article about buying and investing in a condo in Waikiki.  I couldn't have written it better!

Buy in Waikiki? For many investors, it's a no brainer. Here are five reasons why it might work for you too:

1. Condo hotels. Financing one of these converted hotel rooms can be difficult. The lending environment has strict guidelines - the unit needs to have a kitchen, with a cooktop, a sink and refrigerator, and even still buyers need to have 35 percent down. Units without a kitchen, called "lodging units," require even more money down.

But if you're able to front the cash, buying the right condo hotel can be a huge money maker, according to Toan Doran, Realtor and partner at Prudential Locations. And you'll have lots of leverage to negotiate a great price.

"I looked up the sales history at the Waikiki Grand for a client recently," says Doran. "Unit 409 sold for $325,000 in 2006 and is now listed for $199,000. My client likes the building because of the ocean view, nothing is in front of it except for the zoo."

2. Smaller is better. Doran does the math for all of his clients so they can see the logic for themselves. Generally, prices jump from $75,000 to $100,000 more for a 2-bedroom as opposed to a studio or 1-bedroom. Crunch the numbers and you'll see the rental income for a 2-bedroom, won't offset that. Use the money to diversify - buy two smaller units instead of one big one, says Doran.

"It doesn't make sense to pay more to buy a 2-bedroom," says Doran. "If you have a 2-bedroom, you only have one set of renters. If you own two 1-bedroom units, you'll have two sets of renters. So if one unit is empty one month, the other one is still producing income."

3. Parking. The market value of a parking stall in Waikiki is between $45,000 and $50,000, says Doran. But it is not a deal breaker if a unit doesn't automatically come with a stall.

"Island Colony, for example, has a garage in the building and tenants can rent a spot there if they want one," he says. "When I advise investors about parking, I tell them it doesn't hurt to not have one. Tenants might work in Waikiki or take the bus. They might not need parking. But for resale, units do sell faster with a parking stall."

4. Investor criteria. Doran's personal philosophy about investing - this is why you need to have a great Realtor working for you - is all about finding the right building. Find one that is well managed, well maintained, has a low maintenance fee and no assessments and you've found a winner.

"Make sure to look at the quality of the building and how well it's maintained," says Doran, who has lived and owned in Waikiki since 1997. "One of the buildings I like to recommend* is well maintained, and the maintenance fee for a typical 533-square-foot unit is $290 a month, and that includes the electricity - all the air conditioning - the cable, hot water, sewer, water, everything except phone."

He keeps some of his best finds for his own investors/clients. Many international owners rent it out most of the time, but also stay there when they're in town.

"The maintenance fee is so low there, because there are two buildings so the expenses are distributed over more homeowners, plus there are commercial spaces below and a public parking lot, which bring in money," Doran adds. "Look for buildings that include utilities in the maintenance fee. You can charge a renter a little more when those are included."

5. Tourism. Waikiki is possibly the most famous beach in the world.

"If you go to the Middle East and say 'Waikiki,' people have heard of it," Doran says. "The name itself is so well known. This is the apple of the state's eye and they spend millions maintaining it and promoting it."

Doran describes a city utility truck he sees on Kalakaua regularly that has a man riding in back holding a rigid hose who reaches up to water the plants in the flower pots up on the green street lights.

"I just chuckle when I see them because I think, 'the state is paying to keep up my neighborhood,' " he says. What other neighborhood would you ever see that happening?"

Waikiki has an array of products ranging from $199,000 condo hotels in the Waikiki Grand to $4 million dollar condos at Trump Tower. With all the money invested in keeping up it's image, Waikiki's real estate market tends to remain stable during the bad times and appreciates in good times.

Doran contends that Waikiki is one of the best neighborhoods on the island to invest in because it attracts money from around the world.

"Waikiki is its own universe," he says. "It has everything. You never have to leave."

*Wondering what that building is?  It's Waikiki Banyan, at 210 Ohua Ave.  Please feel free to visit our website at www.HNLCondos.com for details, floor plans, map and current listings.