Apartment buildings in Hawaii are typically 8 to 16 units. Many of the larger properties, that you would believe look like apartment buildings in Hawaii have been converted into condominiums. The smaller buildings are fairly accessible to investors with the majority of sales prices ranging from $1MM-$3MM. In addition, apartment buildings provide for hands-on management for the buyer and the ability to add sweat equity by upgrading units as they are turned over. Financing for apartments has been outstanding. Loan rate for apartment buildings in Honolulu have been the lowest of any investment class of real estate. Sometimes as low as 4%. During the first six months of 2011, 24 buildings were sold primarily on the island of Oahu.
A smart investment strategy is to buy a small building, clean it up, and plan to do a tax-deferred exchange every two or three years to a larger building. Don’t get emotional about specific properties and continuously upgrade the size of your buildings. In addition, when you get to a large enough size of operations you can provide services more efficiently.
Many families and investors in Hawaii have started in small apartment projects and have never sold a property. They like them so much they just keep buying more.