So you are thinking about buying an investment property on Oahu and maybe you are wondering if there is a better place to put your money.

Let’s take a look at and compare what history says about 3 different investments: 1. Oahu SFH bought in 1985.  2. Two SFHs bought in 1985 somewhere else in the U.S. based on the median SFH price in 1985.  3. An investment made into the S & P 500 Index in 1985.

We have housing data for Oahu homes back to 1985, so we can look at that.

In 1985, the median SFH price was a whopping $158,600.  For our example to keep it simple, lets say you put 30% down and rented it out for break-even every year until the end of 2007. This clearly wouldn’t happen, but so we don’t complicate things and we compare apples to apples, we will be looking at appreciation only, and also not take into consideration any depreciation you would have on your tax returns as well.

30% down on $158,600 is $47,580.  So you invest $47,580 into the property.

In 2007 the value of that property on Oahu would be roughly $643,500. That would give you an appreciation of ($643,500-$158,600) $484,900 or a 1,019.13% ROI.

Lets look at the U.S. median price in 1985and compare this one.  In 1985, the median SFH was $75,500.  If we invest $47,580 that would be more than 50% down, so to keep it similar, lets say you bought two properties on the mainland based on the national median sales price of $75,500.  You would have paid $151,000 for the two homes.  Once again, we assume that you broke even on the rent up to 2007 and we didn’t factor in depreciation.

At the end of 2007 the two homes would be worth $219,000 each, or $438,000.  That would have given you appreciation of ($438,000-$151,000) $287,000 or a 603.19% ROI.

Lets look at a totally different investment now, the S & P 500.  Say you took that same $47,580 and bought into the S & P 500 index in 1985.  The Index was at 179.63 at that time. 

The index at the end of 2007 was at 1,463.36.  That would have put the value of your investment at $387,647.04 and given you appreciation of $340,067.04 or a $714.73% ROI.

So, just looking at these, the best investment would have been real estate on Oahu.  There are several reasons this occurred.

1. Leveraging.  Real estate is one of the only investments were you can use someone elses money to purchase your investment. 

2. Location- Oahu and Hawaii in general is land-locked, so the supply is limited and the demand is usually much higher.  We aren’t creating new land here on Oahu, so your neighborhoods tend to be consistent over time.  Diamond Head will always be Diamond Head.  Here, when you buy, you mostly are buying resale homes.  Much of the land is developed already, so you don’t have to worry about your neighborhood be the best neighborhood this year, and 3 years from now, the new place to live is 5 miles further down the road.

 3. Did I mention Location? We are located in the middle of the Pacific in between Asia and the mainland U.S. giving us multiple market segments and the Internet added a global buyer to our marketplace.

Want the best way to pay your child’s college education? or a plan to get you to retirement quicker?  Oahu real estate has been a great way.  The hardest part is getting into the market due to the higher initial cost, but historically the return is quite worth it. 

***Past results are not a guarantee of future performance****