Your Guide to Buying An Investment Condo in West Hawaii: Suggestions for Real Buyers

by Julie Ziemelis

Are you considering purchasing investment property in West Hawaii?

Eric and I offer Zoom calls to buyers all over the US and we cover so many things that buyers considering purchasing STVR condos in West Hawaii need to know.

Below is everything we just covered in a recent Zoom call and the buyers were thrilled to have the one on one insights as they begin to navigate their journey to buying an investment condo in Kona.

(We gave them information they had not even considered). They found the information very valuable, so I want to share this with you as a mini gold mine of info!

Here's what you need to know about buying an investment condo in West Hawaii!

CURRENT MARKET CONDITIONS

The Hawaii real estate market has experienced significant changes recently. Sales volumes single-family homes have dropped by approximately 70% in West Hawaii and Oahu, reflecting a broader market correction. However, this doesn't necessarily spell doom for buyers—it might actually present opportunities.

Current market characteristics include:

Sales prices are typically 5% lower than original list prices

The rapid price increases of the past three years have led to a market correction

August through November traditionally offers softer buying conditions

PRICING EXPECTATIONS

Understanding Hawaii's price points is crucial for setting realistic expectations:

Single-family homes: Starting around $1.1 million

Condo-style homes: Starting around $750,000

Desirable condos: Around $550,000 is considered a reasonable price point

Investment-grade condos: Often available in the current soft market

UNDERSTANDING LEASEHOLD PROPERTIES: PROCEED WITH CAUTION

One of the most critical concepts for mainland buyers to understand is the difference between fee simple and leasehold properties in Hawaii.

WHAT ARE LEASEHOLD PROPERTIES?

Leasehold properties mean you own the structure but not the land beneath it. This arrangement is common in Hawaii, particularly for:

Agricultural properties

Some condominium complexes

Certain residential developments

THE RISKS OF LEASEHOLD INVESTMENT

The cautionary tale of the Kona Kai complex illustrates the extreme risks involved. This complex is scheduled for demolition in 2032, leaving owners with potentially worthless investments. Key leasehold risks include:

Inability to own the actual land

Uncertainty around future lease resets

Potential for dramatic changes in lease terms

Risk of losing your investment entirely if leases aren't renewed

WHEN LEASEHOLD MIGHT MAKE SENSE

Despite the risks, leasehold properties can work in specific situations, but they require thorough due diligence and a clear understanding of lease terms and expiration dates.

CONDO INVESTMENT STRATEGIES THAT WORK

THE 50% RULE FOR PROFITABILITY

According to experienced Hawaii real estate professionals, condo investments typically make financial sense when you can put down more than 50% of the purchase price. This approach allows rental income to cover HOA fees while generating positive cash flow.

INSURANCE CONSIDERATIONS

Condo insurance rates increased dramatically after the Maui fires but have since stabilized. Some complexes have even reduced HOA fees by up to $200 as insurance costs normalized. Always factor current insurance costs into your investment calculations.

SHORT-TERM VACATION RENTAL (STVR) CONSIDERATIONS

THE GRANDFATHERING REALITY

If you're considering property for short-term vacation rental income, understand that:

Current STVRs are typically grandfathered in

Maui is dealing with regulatory changes that will significantly impact rental income potential. West Hawaii has designated rental zones and all the condos near the ocean are in this zone.

OCCUPANCY RATE EXPECTATIONS

Maintaining a 60% occupancy rate for vacation rentals is challenging but achievable with:

Proper marketing strategies

On-site management

Quality property maintenance

Competitive pricing

GEOGRAPHIC CONSIDERATIONS: BIG ISLAND VS. OAHU

EROSION AND ENVIRONMENTAL FACTORS

Oahu: Faces significant erosion challenges, particularly for oceanfront properties. Wealthy homeowners often build barriers to protect their investments

Big Island: Lava-based terrain provides more natural stability against erosion

Consider long-term environmental impacts when choosing locations

MARKET VARIATIONS

Different islands offer varying opportunities and challenges. The Big Island attracts many people seeking rural living experiences, while Oahu provides more urban amenities at potentially higher environmental risk.

THE SIGHT-UNSEEN BUYING PROCESS

HOW IT WORKS

Many successful Hawaii property purchases happen sight-unseen, following this process:

Make an offer on a property without physically viewing it

Receive 15 days to visit and inspect the property

Cancel for any reason during this inspection period

Complete the purchase if satisfied with the property condition

WHY THIS WORKS

Many buyers have spent time in Hawaii previously or have done extensive virtual research, making sight-unseen purchases less risky than they might initially appear.

DUE DILIGENCE ESSENTIALS

FINANCIAL RESEARCH REQUIREMENTS

Before making any Hawaii property purchase, thoroughly research:

HOA fees: These can be substantial and significantly impact your monthly costs

Complex conditions: Understand the financial health of condo associations

Maintenance issues: Older properties may have hidden costly problems

Income data: For investment properties, verify actual rental income potential

PROFESSIONAL GUIDANCE

When you work with the 365 Hawaii team, we are fiduciary buyer's agents who have your best interests at heart and understand the unique aspects of Hawaii real estate markets.

TIMING YOUR HAWAII REAL ESTATE INVESTMENT

MARKET TIMING CONSIDERATIONS

While trying to time the market perfectly is nearly impossible, consider these factors:

Current interest rates and their impact on affordability

Insurance costs and their effect on total ownership expenses

Seasonal market patterns (August-November typically softer)

Long-term appreciation potential regardless of short-term fluctuations

THE LONG-TERM PERSPECTIVE

Even if you don't buy at the absolute market bottom, owning Hawaii property long-term has historically proven to be a solid investment strategy. Focus on building equity over time rather than trying to time short-term market movements perfectly.

MOVING FORWARD: YOUR NEXT STEPS

EDUCATION AND RESEARCH

Attend our market update sessions and educational webinars

Join our Hawaii real estate communities and Newbie groups

Subscribe to market updates by joining our 365 Hawaii Ohana

Research specific areas and property types that interest you

FINANCIAL PREPARATION

Consult with your financial advisor about investment strategies

Prepare for larger down payments (50%+ for optimal investment returns)

Budget for higher HOA fees and insurance costs

Consider the costs of furnishing and maintaining a Hawaii property

BUILDING YOUR TEAM

Connect with us directly, your experienced Hawaii real estate professionals

We have established relationships with local property managers and can connect you

We know reliable contractors and maintenance professionals

We can connect you with our local trusted mortgage pro!

FINAL THOUGHTS

Buying property in Hawaii requires careful planning, realistic expectations, and thorough understanding of unique local factors. While the market presents challenges, it also offers opportunities for those who approach it with proper knowledge and professional guidance.

The key to success lies in education, patience, and working with experienced professionals (us!) who understand both the opportunities and pitfalls of Hawaii real estate. Whether you're seeking a vacation retreat, investment property, or permanent island home, taking the time to understand these market dynamics will serve you well in making informed decisions.

Remember: deals that seem too good to be true often are, but legitimate opportunities exist for prepared buyers who understand the market realities and approach their Hawaii property purchase with both enthusiasm and caution.