Real Estate Investing in Hawaii: The Real Costs of Condo Ownership

Being a real estate investor was always something I wanted to delve into. But I knew there were many things I had to do to make that happen. Before I start, here is a little backdrop of my story. I retired as a high school mathematics teacher and now run my real estate agent business. I was born and raised on Kauai, but worked on Oahu for 24 plus years as a teacher in the Department of Education before I returned home to finish my teaching career on Kauai.

I always knew real estate was a good investment. I purchased my condo unit in the heart of Honolulu, a block away from the Ala Moana shopping center. I was within walking distance from the shopping center, Wal-Mart, and all the eateries in the area. The real estate mantra, location, location, location, fit perfectly with my condominium unit.

Some would call it luck, but I remember buying my condo for $128,000, fee simple. The one-bedroom, one-bath unit was considered a good deal in the early 2000s. I lived in my condo before moving back to Kauai to finish my teaching career. I also knew I built equity in my unit for over 20 years.

The two years I owned my condo when I returned home to Kauai to finish my teaching career were the start of my real estate investing. That was what I thought. I was still teaching, so I hired a real estate agent and their management company to manage my condo unit. The first step was to rent my parking stall, so that is what I did. I rented my parking stall with the help of my real estate agent on Oahu. I wasn’t a real estate agent yet because I was still teaching full-time.

The next decision was to rent my condo to a tenant. That is where the numbers didn’t start to add up. There are many things to consider when renting to a tenant. That was something new to me. Here are some of the costs that I never thought would occur with more frequency.

Cost to the Real Estate Investor (Condo)

• Increased maintenance fee to the AOAO maintenance company
• Repair request from the building maintenance for your unit
• Repair cost to make the condo unit rentable
• Trying to get a renter to rent your unit

There were many more added costs that I knew I had to deal with. I knew I didn’t want to spend too much out of my out of pocket money on all the repairs, so I knew having a Home Equity Line of Credit would help with the cost.

When the numbers didn’t work out in my favor, I decided to sell my condo unit, take the equity, invest it into the stock market, and start over again when I retired from teaching and started my real estate agent business.

Maintenance Fees to The AOAO Company for the Condo Building

Here is the one cost in Hawaii that many will overlook. The maintenance fee to the AOAO management company increased because many of the building insurance policies for condo buildings in Hawaii increased. My maintenance fee increased slightly more during my ownership of the unit. I was still able to afford it, but I saw what might happen if I kept it longer than I did. My condo building was built in the 1970s, so it was an older building. I also found out later that the master insurance policy of my condo building was underinsured.

A year after I sold my condo, I talked to my real estate agent and the property manager of my unit in the building, and she told me that the building’s maintenance fee in my condo increased by over 100%.

Repairs and Maintenance to the Unit to Get the Unit Tenant Ready is Always Ongoing

The part of the cost of running a rental business that you will always deal with is the cost of repairing and maintaining your unit. Getting started is the most difficult because you will need cash to pay for repairs and maintenance.

Having a water heater in the condo unit for over 10 years is a good thing because some of them don’t last 10 years. Making sure the water heater in your unit is not leaking is a must because if the unit below you gets flooded because of your negligence, you, as the owner, will have to take on the cost if the insurance company decides you, the owner, are at fault.

Licensed Contractor vs. Handyperson (unlicensed)

Having a licensed contractor do work in your condo unit is a must because the work done can affect other tenants in the building. I know it’s cheaper to hire a handyperson to do the work, but if something goes wrong, such as the installed water heater flooding the lower floor after the installation, the cost to you, the owner, could be more costly in the end.

Finding a Tenant at Your Price Point for Rent

During the two years when I moved back home to Kauai and prepared my condo unit for rent, I decided to leave it empty because I did the numbers again. It was cheaper for me to sell my condo unit with over 20 years of equity and start over again.

Property Management

Finding a person to manage my property was a must because I wasn’t going to fly between Kauai and Oahu if something needed to be done on my unit. Thankfully, I knew someone who knew a friend who does property management for 10%. I know the rate for property management is much higher for other companies. Property management is an added cost.

Summary

Moving back home to Kauai to start my real estate agent business and start building my real estate portfolio again was the best thing I did. The overhead cost of running a rental unit is always changing because the cost of everything keeps increasing.

Another cost, such as paying someone else to manage your property, is a must because if you choose to do it yourself, you will be tending to your unit at all hours of the day. Everything has a cost, including the property manager who manages your unit.

Whether you’re doing short or long term rentals, the cost of upkeep to the home is still something to consider. There is one real estate investment I didn’t mention here, and that is flipping homes. That is something that has its own concerns, so I will leave that for another time. I’ll say this: the permitting office is different on every island, but I’m certain everyone involved in the permit process wishes the process would be faster.