Condos For Sale In Honolulu - 6 Things You Need To Know Before Buying A Condo In Waikiki
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Is Buying A Condo In Waikiki A Good Investment?
1. Where Is Waikiki?
Whether you're looking for a short term rental investment condo or a place to call home in Waikiki, we'll go ahead and identify the local area of Waikiki.
The zip code of Waikiki is 96815 and with the map below you can see the highlighted strip of land separated by two bodies of water. On the more inland side you have the ala wai canal. On the southern shores you will notice Waikiki beach.
This strip of land is the area of Waikiki where most locals refer to it as "town". Yup! Just "town".
Waikiki is Hawaii's concrete jungle in paradise. Walk through a city of beautiful highrise buildings, tons of great places to eat and shop, and with a sudden turn south to be at Waikiki beach.
2. Is Buying A Condo In Waikiki A Good Investment?
Throughout 2020, continued through 2021, anyone interested in buying real estate has been familiar with the term "seller's market". Meaning the seller's of real estate (property) have the advantage of the market. Mainly due to supply and demand. Low inventory of homes, high demand for number of buyer's in the market.
In terms of inventory, it is still a seller's market. But this does vary depending on the area. Suburban communities of Honolulu are experiencing the "seller's market".
Condos in Waikiki are not necessarily experiencing the same impact. Of course there are variables. This is not a blanket statement for ALL condos in Waikiki. You must conduct your own due diligence or feel free to reach out to our team if you have any questions.
For up to date information on the real estate market in Honolulu please check out https://hicentral.com/.
In the map above you can see that the area with the most listings active for sale as of December 2021 is in the area of Honolulu and/or Waikiki. *Note this data is subject to change. Please contact our team for more up to date data and information.
What does this mean? It indicates that homes in the Honolulu area (or Waikiki condos) are sitting on the market longer versus the townhome or single family homes in the suburb areas.
With longer days on the market and lower price points (depending), this gives the advantage to the buyer. Opposite of the "seller's market" definition.
3. Fee Simple vs Leasehold in Hawaii?
Uncommon terminology for those who have not bought or sold a home in Hawaii.
When looking at home online, especially if you're interested in buying a condo in Waikiki, you'll want to look at the "land tenure". Hawaii has two terms of land tenure. Those are "fee simple" and "leasehold". So what does fee simple and leasehold mean?
Fee Simple in terms of ownership means the owner of the "fee" owns the land all the way to the earth's center core, the improvements on the land (the home structure, fence, trees, ect.), as well as air rights with respect to government restrictions.
In simplest terms, what seems like normal home ownership, fee equals land rights.
Leasehold is typically interpreted from the first portion of the word "lease".
Common scenarios of leasehold properties are where a corporation or individual owns the "fee" (as we learned about above) and leases out property for ownership. Any "owner" who buys a property with leasehold land tenure does NOT own rights to the fee. Think of it in terms of being a landlord and renting out your property. You now have tenants who call your fee ownership home. Owners can attain a lease for anywhere from 15 years or more.
In simplest terms with leasehold, owners of leasehold property only on their portion of structure. They do not own the land.
If a lease term expires and the lease is not renegotiated nor is the fee available for sale by the fee owner, leasehold owners can potentially lose all rights to the property. This does not necessarily mean leasehold ownership is a bad investment. If the numbers work and the reward outweighs the risk for your situation, it could be a great investment.
4. Condos For Sale In Waikiki (Impact Of Leasehold Tenure On Price)
What impact does leasehold land tenure have on price when buying a condo in Waikiki?
There are a few factors that come into play when looking at condos in Waikiki. The first item I look at as a real estate agent when asked about buying a condo in Waikiki is the land tenure. Oftentimes a prospective buyer is looking for condos in Waikiki and will notice some price points that seem too good to be true. If this is the case, more often than not, that condo turns out to be a leasehold condo.
Items that can impact the price of condos in Waikiki are land tenure, days on market, size, condition, and location.
If a condo in Waikiki is showing land tenure as leasehold the very next thing you should be checking is the lease expiration date. This will tell you the time left on the current lease before expiration.
The next time to check is if a lease renegotiation date is set. If so, then there is a good chance (but no guarantee) the lease will be renegotiated for a longer term.
The next item you should be looking for is the days the property has been on the market. If the property has been on the market for longer than 30 days this plays to your advantage as a buyer. At this point the seller's agent and landlord are hoping for a showing to be scheduled and an offer to be submitted. This means the prospective buyer now has the advantage!
Last item to note is obtaining a mortgage for a leasehold property. Generally speaking it is more difficult to obtain but it may ultimately depend on the length left on the lease.
If a leasehold has less than 15 years before expiration, with banks more commonly loaning for either a 15 year or 30 year mortgage, they see that as a high risk situation. How is one going to pay a 15 year mortgage off when the lease expires in 13 years? Make sense?
5. Short Term Rental Approved Condos In Waikiki For Sale
If you are an investor then most likely you are looking to use your potential condo in Waikiki as a cash flow investment vehicle. This can be a tricky business in Waikiki( Honolulu county) due to the zoning laws and permitting by the city for short term rental use.
Hawaii's economy is heavily based on tourism. The government also has a hotel tax that pays the government when tourists visit. The government does not make any money from short term rentals. You can maybe guess what happens next…the government starts implementing rules to limit the amount of short term rentals and the length by definition of a short term rental.
When buying a condo in Waikiki for short term rental use it may be beneficial to buy a condo that is already permitted for short term vacation rental use. Depending on if the condo is fee simple or leasehold may have an impact on purchase price.
Here is a link to Hawaii's official government website of approved short term rental buildings in Waikiki (Honolulu County). https://www.honolulu.gov/dppstr/approved-strs.html
6. Condo Fees For HOA's In Waikiki
This could play a huge factor into your monthly cost. Especially if you're looking for a place to either live in and plant roots or your investment.
The association and maintenance fees of a lot of these buildings can be very hefty. We're talking upwards of $600 per month and often higher but depending on what's included.
Some HOA and maintenance fees may include utilities such as water, sewer, electricity, etc. As an agent helping people just like you buy a condo in Waikiki I have come across some condos that have had monthly fees over $900 per month. Sounds crazy right?
Well this particular condo and it's fees were almost all inclusive. All utilities were included except for the internet in this case. Flat fee. No changes or fluctuations. All inclusive. Some prefer it. Some don't.
Main takeaway with condo fees for hoa's in Waikiki is to look out for the amount, how that will impact your monthly mortgage payment (if you have one), and what's included in those fees.
Many people from all over the world move to Hawaii or buy condos in Waikiki for many different reasons. We talk to people every day and we absolutely love it! If you're thinking about moving to Hawaii you can reach out by shooting our team a text, giving us a call, or sending an email. However you want to get ahold of us. We got your back when moving to Hawaii!