There are currently 26 apartment buildings for sale in Hawaii. These multi-family buildings range from two story walk ups to 6 story mid-rises. They range in price from $2- $40 million. Initial rates of return range from 4.0- 6.45%. The majority of available properties have an asking price with an initial cap rate of 5.5%. Three of them caught my eyes this month.
Investors will ask themselves a few questions before making an offer and spending their time and money on due diligence. The first question for investors is, “will there be enough of a premium over borrowing costs?” We all want to grow our money over time and most investors are happy to accumulate their profits slowly but surely each year. When the market takes a big leap, we can cash-in on those profits and move up to a new property or improve our lifestyle. The next question investors ask themselves is, “will the net income go up or go down over the next five years?” Investors always hope for rents to increase but over the last few years, the pressure has multiplied. The third question is, “what kind of repairs will be required?” Accurately estimating the cash flow and expense is key here. If we only had a crystal ball, it would be so much easier….. but if there was no risk there would be no reward.