ROI of Investment properties on HI

Asked by Gres Geeko, NA Tue Oct 14, 2008

I would like to understand what kind of property has highest return on investment in Hawaii:

What variables affect ROI and how:
* Island: Oahu, Maui
* Location: Any particular location like Kailua or Waikiki
* Vicinity: shopping, beach access
* Bedrooms: studio,1,2,3
* Type: Condo,Co-op, House..
* Any other variables that relevant?

Thank you.

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Frank Diaz, Agent, Honolulu, HI
Tue Oct 14, 2008
So, for a typical 2 BR condo in Waikiki (condos from there to Chinatown get the highest rents):
The rent varies between $2600 and $3100 per month

Let''s say you pay $475,000 with 20% down. Your loan is $380,000 with $95,000 down.

Approx monthly costs:
Mortgage - based on your credit = $$ ? = let's say $2500
Maintenance fee - $450
Utilities ~ $200 (phone/DSL, water/sewer)
Taxes = approx $3/$1000 of the assessed value, lets say $125/month
The transient accomodation tax = 7.25% (let's use $3000/rent) = $218. If you can hit the 6-month mark and still get substantial rent, that is a big help. (Nov 15-Mar 15 are peak rates)
General excise tax of 4.5% = $135/month

$2500 + $450 + $200 + $125 + $218 + $135 = $3628

Income = $2800 average (many people charge the 7.25% and 4.5% taxes to their tenants)

Depreciation = + your other write offs for rental property

Now is where you should talk to a CPA based on your Adjusted Gross Income.

Last but not least, there is a tax called HARPTA (if you are not a resident of Hawaii)
It basically allows the escrow company to withhold 5% of the sales price until you fie your tax return and pay tax on any proceeds.

I know of a few well-priced 1 bedrooms inside and outside of Waikiki. Email if you would like details.
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Gres Geeko, Home Buyer, NA
Tue Oct 14, 2008
You introduce one more variable - tax status. I am US resident.

If you say that rentals that less then 6 month are best investments in term of profit despite of 7.25% tax, let's focus on these type of rental activity.

Thank you.
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Frank Diaz, Agent, Honolulu, HI
Tue Oct 14, 2008
Are you a resident of Hawaii?
Are you a resident of the United States?
You may want to avoid the transient accomodation tax of 7.25% (rentals less than 6 months), however these are also some of the best invetsments. I can send further details once I know more about the two questions above.

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