Aunty used to go to a lot of marketing events at the Ala Moana Hotel, parking at Ala Moana Center by Macy’s, which was a no-no but everyone did it without any hassle. From there, a short walk up a ramp took us into the ballroom section of the hotel.
Rumours Night Club just off the lobby is a hoot! Aunty is not into the nightclub scene but decided to join some friends years ago during the happy hour. We had pupus and cheap drinks and the place was packed with gyrating, happy dancing hipsters. Old hipsters. Even some really old hipsters dancing and enjoying themselves in the dance cages until the clock struck 9:30, when it changes over to a swinging place for young people.
Besides Rumours, the pool bar, some good restaurants and hotel amenities, the Ala Moana Hotel is such a convenient place, right smack next to the Ala Moana Shopping Center and the Ala Moana Pacific Center where Salon 808 and Aunty’s former hairdresser Quyan are housed. The hotel always seems busy and vibrant. The lobby is open, bright and clean. Various airline crews are there for their layovers because prices are reasonable and access is easy. This hotel is out of the hustle and bustle of Waikiki and neighbor island locals like it. The entire hotel is smoke free and the property is fee simple (as opposed to leasehold).
About 10 years ago, this hotel was condo converted and employees were given the first option to buy. Units began selling for $85,000 and up. Current prices range from $145,000 up to $498,000, depending on size (246 sq ft – 559 sq ft) and desirability of individual units. AOAO (building association) fees run from $794 – $1130/month and property taxes range from $174 – $259/month.
One could choose to live here part (or all) of the time and rent out the rooms the rest of the time. This could be done by managing your own rental – finding tenants, collecting rents and fees, cleaning on a regular basis, maintaining the unit up to hotel standards and conformity. Or, you could find a property management company and arrange for them to do all the work for fees ranging from 15-40%. Joining the hotel management pool would be the easiest option – though at a cost of 50% of rental income and 10% management fee. The term of rental agreement is for 5 years with initiation fees of $400. Even with these high hotel management costs, Aunty heard that the cash flow is good.
Testing waters
Aunty contacted Noreen Ho, her mortgage broker who also is a real estate agent about buying a unit. Noreen is hard working, very knowledgeable, and easy to work with. Within minutes, Aunty had a list of 48 units currently for sale. That is a lot of units for sale, but it is a big hotel with 1100 rooms/suites. She also gathered rent rolls for the units that were potential purchases. They all cash flowed!
Why would people sell their units if it is so convenient, well maintained, well run, and cash flows? Seller disclosures do not reveal any negatives, so it is a curiosity as to their reasons, and Aunty wades in cautiously.
The visit
Noreen met Aunty at the hotel’s front desk and received a pre-arranged one hour pass to see 2 units of interest. The lobby was busy with a line of people waiting to be registered. We were informed that the hotel was sold out for the day, and that it has been a very good and busy year for bookings.
A very nice bellhop stopped to chat with us and we discovered that overnight parking at the adjoining Ala Moana Center was not allowed because the parking was closed after hours and re-opened at 5:00 in the morning. Hotel guests needing parking are charged $20 per day for basement parking or $25 per day for valet parking. Metered parking around the streets were also available, though on a first come first served basis and subject to feeding the meters during the day. Residents of the hotel can purchase parking passes at a discount.
Just around the corner from the front desk is the real estate office of Jack Tyrell & Company. We picked up a handy info sheet that he provides with all active listings in the hotel as well as recently sold units. As of 10/11/2015, 44 units were available for sale and 35 units had sold in the last 6 months. Jack Tyrell is the listing agent for approximately 25% of the current units for sale. On a subsequent visit, Aunty dropped in and had the great pleasure of meeting Julie – super nice lady and so helpful.
Days on market of current listings range from a few days to 300 days. Units are not flying out the door, but they are selling at an average rate of 6 per month with new listings at the same rate.
Touch and feel to decide
It was good to see the hotel and walk the halls. It is not luxurious but it is very pretty. The hotel card key is required in the elevators to access the different floors for security. The elevators are clean and bright. The hallways are clean. An ice machine and drink vending machine are located close to the elevators.
Waikiki Tower, Unit #1
The first unit we looked at was in the Waikiki Tower on the 17th floor close to the elevator, with a lanai overlooking the Ala Moana Center parking lot. This was rather nice – being high up meant a wider view with a sense of privacy. The view from the tiny lanai was of downtown Honolulu and Ewa side, with a number of construction cranes in Kakaako – evidence of the condo building boom that is overtaking the area.
The room was a mess because it was recently vacated and not yet cleaned for the next guest checking in. Still, it felt pleasant. The entire hotel was going through renovations, floor by floor, and this room had brand new carpets and clean neutral walls. The furnishings and built ins were of good hotel caliber, the bathroom was decent and average. It was 297 sq ft and priced at $177,000. We were in contract (in escrow to buy) at the asking price.
Rent rolls were pretty good, to Aunty. (note: Aunty has been advised in the past by several real estate “gurus” in Hawaii that there are far better deals than the ones we were considering and then bought. However, time and cash flow has been kind to us, even though we did not follow the “gurus” advice.) In 2014, revenues for the room totaled $46,690.25 with deductions and expenses of $37,854, resulting in net annual income of $8,836.25. The majority of the expenses was the 60% (yikes!) to the hotel pool management. It was vacant for 75 days last year.
To most seasoned investors, these are not great numbers. In fact, they might even say that they are poor numbers resulting with a ROI (return on investment) of 5.13%. (Revenue of $8836.25 divided by cash investment of $172,000 = ROI of 5.13%)
Real estate pros and gurus usually will not settle for less than 8% ROI.
Waikiki Tower, Unit #2
The second unit was on the 21st floor, a 1 bedroom suite on the Atkinson side of the building. It was very very nice and looked brand new. The “parlor” had an almost full wall kitchen with even a small undercounter dishwasher. A new comfy sofa could be pulled out to be a bed. The parlor could be closed off for privacy from the rest of the unit which consisted of a good sized bathroom and a bedroom with a building corner lanai.
The view was less than nice – unless seeing the messiness of Kapiolani Boulevard, ugly buildings, and street traffic is your cup of tea. The view of the Convention Center did look nice, along with a peek between the Yacht Harbor Towers and the YMCA, revealing the charming boat harbor fronting the Hawaii Prince Hotel. This charming peek will soon disappear once the new owner of the YMCA property commences construction and builds their planned high rise. The lanai was also very breezy – too breezy for Aunty’s dry eyeballs and fly away hair.
This unit was priced at $345,000 and felt spacious with its 503 square feet of living area. This unit is not in high demand in the rental pool because it costs more for guests to book ($259 per night for this suite vs $149 per night for the studio rooms). In 2014, it was vacant 110 days. Still, it did manage to cash flow (actually almost anything will cash flow if the unit is bought with cash) at $8346.60, slightly less than the same net annual income as Unit #1. The ROI was rather sad in comparison, a piddly 2.4% (revenue of $8246.60 divided by cash investment of $345,000 = ROI of 2.4%).
Kona Tower side
Noreen and I were curious about the Kona Tower units. These were the smallest units – studios with 246 square feet of living space, no lanais. Units in this Tower have the lowest sales price and lack of scenic view. They also have the lowest booking prices for guests. This should make it cash flow better than units in the Waikiki Tower since they would be the first to be booked by travelers looking for hotel deals.
We accessed from the left side of the lobby area, through a corrider and past the Business Center by following some tourists into the elevator and exiting on the 7th floor. There are only 13 stories on the Kona side. Rooms are numbered from 33 to 63, with #48 corner unit rooms facing downtown/Ewa and #49 unit rooms facing Ala Moana Center and the ocean. These corner units may seem appealing (we did not go in to see them) but they are at the farthest point from the hotel elevators, 14 rooms down from the ice machine/elevator junction. The hallways in the Kona Towers seem narrow and the ambience of the lighting and walls make it feel motel-like.
Based on rent rolls that Noreen secured for one of the units on the 13th floor, the 2014 ROI for this $170,000 246 sq ft studio was 4.35% (revenue of $7404.95 ÷ $170,000 = ROI of 4.35%). It was vacant for 65 days in 2014. The lowest list price of $145,000 was for a studio unit in the Kona Tower.
Analysis
Experts and investors will probably judge these as not great investments. Even the employees of the Ala Moana Hotel that bought in years ago when it was first offered for sale in the condo conversion have not been thrilled with their purchase as an investment.
There are factors that are out of our control which could negatively affect the cash flow – low occupancy, repairs that cause vacancies due to being out of order, renovations, rising management costs, downturn in the economy, disasters.
If a unit can be purchased for a lower price and occupancy rises, the ROI increases. If the hotel becomes more desirable to investors, the sales price could appreciate and a tidy profit could be made in the future.
Financing as an option
If an investor does not have the cash for the entire purchase, Finance Factors will provide up to 60% of value as an investor loan. The current rate is 4-4.5%. Securing financing for these will add a monthly expense in the mix, dropping the amount of cash flow.
Running the numbers for Waikiki Tower unit #1: the purchase price of $172,000 and annual net cash flow of $8836.20:
a 4.5% loan on $103,200 (60% of purchase price) will result in mortgage of $523. $523 x 12 months = $6276
Cash flow is reduced by the monthly payments to the bank, resulting in annual net cash flow of $2560.25
ROI is now 3.72% because the annual cash flow of $2560.25 is divided by the cash investment portion of $68,800 (the rest is from the bank loan). It seems like the numbers got worse BUT the amount of cash that is invested is much less, and it is still providing cash flow.
Running numbers for Waikiki Tower unit #2: the purchase price of $345,000 and annual net cash flow of $8246.60:
a 4.5% loan on $207,000 (60% of purchase price) will result in monthly mortgage of $1048.84. $1048.84 x 12 months = $12,586.06
Cash flow is reduced by the mortgage payment, resulting in a negative annual net cash flow of -$4339.46.
ROI is now negative – not a good idea, BUT it may become one if it can be sold for a higher price in the near future, occupancy increases, you want a second home to live in, or you want a piece of the sky in paradise.
Jumping in
Aunty has a talent for losing money. Stocks are bought and watched as they slide down in price with little bumps up and bigger dips lower. Poker hands are won and then lost in going “all-in”, but it is amongst friends and only $5 for the buy-in. Get rich quick seminars cost a lot and leave Aunty with an empty purse, apprehension and not quickly rich. Fads and network marketing opportunities create a whirlwind of frenzy and high hopes, leaving Aunty with a stash of products, a lot of potluck parties and then later, tired and unmotivated.
Regardless of Aunty’s other losing ventures, real estate that can cash flow is like a hen that always has value because of the constant flow of hen eggs to feed the family. Some hens drop a lot of eggs, some drop a few eggs. Some turn out to be turkeys that need to be prettied up and sold.
Aunty thinks that the Ala Moana Hotel has been a pretty sleeping turkey that is turning into a egg laying chicken so she is jumping in to complete the deal of unit #1.
Why?
It is one of only a few condo/hotels that operate like hotels in Hawaii and it happens to be in a super location.
It has just gone through renovations so it looks and smells great.
It is busy, beautiful, well run and well maintained.
It is affordable, especially compared to the new condos that are coming up that cost several times more, or houses in Hawaii. Prices have been increasing, but at a snail’s pace.
It is fee simple. Leasehold properties (only Hawaii seems to have these) have lease expirations and potential increases in fees and are not as desirable as fee simple properties especially when you are ready to sell.
It cash flows. Even at 2%, it beats Aunty’s stock market gambles or money in a savings account. It will cash flow even better if vacancy rates keep improving.
It has all the advantages of real estate rentals (depreciation, expenses to offset income, income producing asset) as well as the potential for value appreciation.
Owners have the option to live in it part or all of the year and have rent revenue for the times that you are not there.
If it doesn’t work out, it can be sold.
Why are they being sold?
Perhaps the sellers want better results or have found something better to buy or invest in. Perhaps they went to Rumours Club on a bad day and at the wrong time.
Whatever the reasons, Aunty is glad to have the opportunity to try her hand at the Ala Moana Hotel by owning a piece of its sky.
Steps to take
1. Ask your realtor to pull up a list of all units for sale at the hotel. Or drop by the brochure rack fronting Jack Tyrell’s office and get a handy printed list of all units available for sale in order of prices, lowest to highest.
2. Ask your realtor to get rent rolls for the units that you are interested in so that you can run the ROI numbers. Have them arrange a showing with the hotel and view prospective units.
3. Submit your bids with an earnest money deposit check and cross your fingers. Most of the time you will be countered with a higher price by the seller and it is up to you to accept, counter back, or decline.
4. If your bid is accepted, do a happy dance, start the escrow process with the designated title company, then go on the eHawaii.gov website to register a business in Hawaii (or visit the DCCA office). It can be a sole proprietorship, LLC, partnership, etc. (note to Aunty: do a post about starting a business in Hawaii.) When registering for a business license for rental income from a hotel, you will need to apply for your GET and TA (temporary acommodations) license. The NAICS # is 721199.
5. Meet with the ALM hotel rental pool people that are located just behind the front desk area to learn about their pool rental program. Most units are already in the hotel pool rental program. Aunty met with Willie (Wilhelmina) and signed up to be part of the hotel pool because the program is so convenient for people like Aunty.
6. Pay (with a cashiers check) the balance due and sign final escrow papers at the designated title company office. The deed will then be recorded with you as the new owner.
7. Congratulations, let the cash flow begin! As an owner you can reserve your room for friends or family at special discount rates ($105 for the studio), as well as blocking off your room for yourself or your guests for free, though subject to a $40 checkout fee.
Time passed and lessons learned
Aunty will be updating about the wonderful world of hotel ownership in a future post. The learning curve has been rather steep. The searching and buying part have been fun and exciting.
Cash flow appears, as well as expenses.
Please stay tuned as Aunty, the hotel mogul wannabee’s saga unfolds.
Meanwhile, here is a list of Aunty’s “team” that have proved themselves to be awesome:
Realtor and/or financing agent: Noreen Ho of Savvy Realty (808) 398-8528 nho398@gmail.com
Attorney for LLC formation: Aaron Mun of Kobayashi Sugita and Goda at (808) 535-5738 or arm@ksglaw.com
Jan 2017 update: Aunty tried to win an auction last month, but the bank representative shot her down.
Also, cash flow from the “cheaper” units in the Kona tower is dropping. Perhaps the new owners of the hotel operations (Mantra Group) are offering cheaper booking rates to contract guests. It is affecting the monthly cash flow for these units, in a junk way.
Towards the end of 2016, fewer and fewer units in the hotel were available to buy because the offerings were being snapped up like hotcakes. However, this trend of lower rental income might have current owners dumping their units on the market. The Ala Moana Hotel Board meeting is scheduled in February. It will be interesting to see and hear from the new owners, and Aunty will definitely be there.
September 2017 update: Mahalo for the comments that previous owners have made. Sadly, they have had very poor experiences and results and have had negative cash flow and/or lost profits. There ARE better deals out there – and perhaps Aunty’s bias toward the hotel is too positive, but for now, Aunty still likes investing there.
A caution to prospective new owners, though. When you let friends and family stay for “free” as owner guests – they are required to pay $40 upon checkout for a cleaning fee, or more if they utilize the daily parking ($20 or $25 if valet) and each extra cleaning day is $18. That is a really great deal for them, but you, the owner, will have your net rental check from the hotel pool cut by about $100/day. Be aware of this and limit those owner guest passes unless they really are great friends and family.
Hi, Aunty, yours is the only kind of blog that tells us about how the investment in Ala Moana hotel is going/can go…. I bought a studio in Dec 2022 when HOA fees were 1100. Month later, Jan 2023 jumped to 1200. And lo and behold, I get a letter in Nov 2023 that HOA fees are going up to $1300/month as of Jan 2024. So, HOA went from $1100/month to 1,300/month for me in one year and couple mos. Brutal. That is eating into the positive cash flow a lot. I’m not sure how they justify such a big increase (almost 20% in 2 years), when they on TOP of that charge the guests $50 registration fee and $25/day to use facilities. It’s like double-dipping. I have an OK outside property mgmt company taking 20%, occupancy rates vary in low season (April-May) from 14 days to 27-28 days occupancy in busy periods like July/August. So a modest return of about $6-7k per year. What do you think about the ever rising HOA fees? Ouch. And you mentioned some monthly newsletter going to all owners – how can I get ON THE DISTRIBUTION LIST of that, I’d love to connect with other owners. Thanks Aunty!
Hi Yvette,
Just before you bought, owners brought up our Covid devastated occupancy and thus with less employees, less usage of electricity, etc, the fees should be lower – and it was lowered to $933 from $1006. It then went to $1100, and you know the rest.
I have my one and only unit (at one time I had 3) in the hotel pool because it is easier for me and through those horrible Covid years, I ran negative. The advantage is that guests don’t pay the registration fee or the $25/day because it is included in their daily fees (I think). I like to use my unit for friends and family to stay there so they pay $40 upon checkout which is a deal for them, and a hit to my pocket for me but I like the convenience of that arrangement since they clean, book, etc. for me quite wonderfully.
I admire that you are self managing. I thought of joining up with other property management companies but wasn’t impressed with reviews of rooms being dirty, etc. And you do pay more fees. Only 10% of owners self manage so you are in a major minority.
Regarding the owner distribution list – unfortunately Babs (who was on the owners’ committee) sold her unit and is no longer active. She also self managed and many of her issues were about that. I did go to the election meeting that took place last week and Elliot Onuma (sp?) was elected to the owners’ committee. I need to get his contact info and see what his intentions are and hopefully we get represented and heard. But the owners’ committee doesn’t have a vote.
There are regular meetings that are not published but open to anyone. I attended a couple of those with Babs. I am also concerned that our HOA fees keep rising as well as our property taxes. For now, I am still slightly positive and not counting on the rental income so I just lay low. In my older years I really need to pick my battles and this one is a tough one.
Still, I plan on attending more meetings. Richard Cooke and Joann Allin are owners on the Board, with votes. They mostly go with the flow and paid Max Sword $30,000 ($5,000 for 6 months) to be a lobbyist at City Hall when Brookfield Properties wanted to build skyscrapers on the shopping center (Macy’s parking lot and others). It was totally unnecessary since the 9 City Council members could be reached and appealed to rather than a “lobbyist”. I was super disappointed in the Board and wanted to go back to them and say “We told you so” when he came under investigation a few years ago.
Ah well, you have stirred by cauldron, Yvette. Not sure if that is good. In any case, I’ll get in touch with Elliot.
Aloha Aunty! I am actually looking to buy a place to reside at, not for investment. Are these units only for investment/rental pool or can we live in them? Thank you for your time, J
Aloha J!
These units are investments and there are a few rules about long term stays. However, I do know of several couples from New York that use their units as winter residences. When I sold a unit last year, my realtor (Martin Fajardo in Vegas) received a lot of interest from people who wanted to live in their units. He was told that owners can stay for a few months at a time. The hotel also requires that the room be cleaned at least once a week and that cleaning charge ($18) is added to the bill upon checking out.
Hope this helps,
Aunty
Thank you for the quick response and information! Aloha, J
Aloha Aunty!
Many mahalos for writing about your experience and sharing it online for everybody to learn from. I am trying to figure out if an Ala Moana unit is right for me and I want to make sure I understand the costs involved with keeping your room in the Hotel’s rental program (or not).
$400 one time Initiation Fee
$1100ish monthly maintenance fee
58-60% of monthly Gross room revenue
$12.50 for UMIF
$? a monthly share of liability insurance costs
$? a dollar value equal to 50% of three nights (I’m not sure I understand the purpose of this?)
If NOT in the hotel management program:
$50 per check in for key card
$18 per day housekeeping
$25 per day Resort Fee
$? for outside Property Management
Did I miss anything? It sounds like a LOT of fees but I suppose the trade off is that you literally don’t have to do anything unless you want to?
What kind of ROI are you expecting for 2022 now that tourism has picked up again?
Mahalo for your insights, Aunty!
Hi Mumfry,
You are pretty right on with your fees assessments. If you are in the hotel pool, they will collect the GET, TAT, and OTAT taxes from the guest and IF you opt into them filing these taxes for you, it will cost $10/mo. I do this because I am terrible at keeping up. However, they will not file if it is a partial month (say you get the place from the 18th and not the 1st) and they will not file your annual returns if you do not have it from January 1st. Insurance is $15/mo, preventive maintenance is now charged monthly $30. It IS a lot of fees but the reason I like being in the hotel pool is that I don’t have to do much.
I am not so sure about the fees if the unit is NOT in the hotel pool but if I only had a crystal ball during covid, I would have had an aggressive property management company manage my unit for those 2 years instead of biting my nails and watching terrible income results every month. That $1101 monthly AOAO (which nicely was reduced to $933 for several months) really bites into profit, but it is there no matter if you are in the hotel pool or not.
A fear I have if the hotel doesn’t manage it for you is the quality of service the outside property management will provide. Some complaints have been about the room being dirty when checking in. I do not know if the hotel will provide housekeeping if the unit is not in the pool. However, since you might be making more because of lower fees, that might be a good choice.
I ended up selling one of my units because of a reverse 1031 exchange at a loss – but I had to. I still have one left and it is finally making money because of occupancy rates – which I believe will continue on. ROI will probably be about 5%, which isn’t much but I love being able to put family and friends in the room when needed. We still don’t have any major conventions being booked but there are more local events either booking the Convention Center or the Ala Moana Hotel itself – such as the Miss Hawaii pageant recently. Things are looking up.
Prices on units are still rather low but I notice the higher floors are getting bought up quicker than the lower priced lower floors. Most of the bookings are from third party companies such as Cheap Tickets, etc. so the owners’ daily room rate is lower than the published rate.
I like the Mantra Group that manages the hotel. They have made improvements that had been overlooked for years by Outrigger. The only improvement I don’t like is the garish floral backdrop behind the front desk. I cringe – but then, that is just me.
Good hunting and good luck!
Aunty
Hi aunty
Thinking of investing in a unit. Father in law had one from initial conversion. Had to sell when he passed cause of other siblings.
If you are in hotel pool and use unit yourself is there a cost?
What about immediate family
Like daughters?is there a cost for them?
Thanks love the info.
Aloha Dibby,
An investment in the Ala Moana Hotel has been a series of ups and downs so your father-in-law’s unit being sold might have been a good thing.
I am in the hotel pool and there is no daily cost to use for myself, family, or friends if you fill out an owner’s reservation form which will ask for the name of the occupant, how many people, check in/check out dates, their (or your) contact information. The only mandatory fee would be at check out – $40. I love that and use the room for friends and family to stay and they are responsible for the $40 check out fee. Cleaning the room is an extra – at $18 per day, but is not mandatory unless they stay longer than a week because they want it cleaned at least that often.
There are a few “black out” periods when the hotel knows it will be super busy such as the Honolulu Marathon, New Years, etc.
Units are coming up for sale and are selling faster nowadays – compared to the terrible Covid period. Let me know if you need a good realtor and also the room number that you are thinking of. Good luck investing!
Aunty
Yes please what realtor do you recommend
Also thinking about the smaller rooms. Actually the corner rooms in the small building I think they are 302 sq ft
Do you know how the overall occupancy has been at hotel this year?
Thanks for all the help
Mahalo
Carlin Yamashita is one of the experts regarding the hotel market. His contact info is (808) 392-3244 or email at carliny@islandlifehm.com. I have used him in the past to both buy and sell and he did well for me.
I think you are referring to the Kona Tower – most of those have a terrible view but because of that, they are the least expensive to book and airline employees are put there in a discounted group rate. And, people looking for the cheapest option tend to book those since nobody really stays in their room while in Hawaii. For myself, I don’t like them because I like to put my friends and family in the hotel as my guest and I want a decent view for them. But, it might cash flow better…
The overall occupancy has been great this year – especially compared to the Covid years. More events are being booked at the Ala Moana Hotel ballrooms and if conventions start happening in Hawaii, the rooms will be filled, hurray!
One more question for aunty….I know she probably didn’t vote for him, but what does she think of trump hotel in Honolulu? Hoa lower than ala Moana….
Mahalo
I never looked into the Trump Towers – I assumed they were much more expensive and tried and true Democrats would never book there. Interesting to know that the HOA is lower. The Ala Moana Hotel will be increasing the HOA starting next month. Not happy about that but the improvements have been super nice, IMO.
Aunty,
How has the ROI been in 2022 at the Ala Moana hotel? How are the cost to purchase now as compared to 5 years ago? Rooms now sell for $165,000-$220,000, is it still worth it? What about whether to buy all in cash vs. a mortgage and the affect on ROI with higher interest rates? Thoughts and recommendations?
Aloha Doug,
FINALLY the ROI of the Ala Moana Hotel is returning to being good. Throughout Covid, I was losing money with really poor cash flow. Last month was excellent with almost 100% occupancy for my room (I only have one room now). Prices are still very low – though a few are now coming on the market with slightly higher prices – and sales haven’t been strong, yet.
This investment will only make sense if it is a cash deal because a mortgage would be a burden along with the HOA of $1100/month.
I believe the hotel will continue to have strong bookings. I do hope conventions come back to Hawaii – that will really seal the deal when our Convention Center starts buzzing with activity.
Can you live in an Ala Moana Condo Hotel unit year round?
Hi Kyle,
Not really. The hotel will say cannot BUT there are some people that do stay for long periods of time. I think you have to get the key changed every few days and it is mandatory to pay for the cleaning service if you are in the hotel pool. Outside of the hotel pool – I am not sure.
Aloha Aunty,
I enjoyed your take on the Ala Moana and have been looking to invest into this property for over 5 years, but have chicken feet. Anyway, how does the hotel pool select your room to rent? Is it random. How many days in the month does it have to rent to break out even? I want to purchase all cash and use this as a place to stay for myself when I visit the islands.
Mahalo.
Aloha Doug,
It was good you had chicken feet because the prices at the hotel have come down to prices that are bargains now. As I understand it, the hotel pool selects rooms randomly based on what the client chooses, i.e. lower floor, higher floor, ocean view, partial ocean view, mountain view, etc. It takes about 15 -20 days of rent to break even. The only way purchasing a unit is with cash because the HOA is going to be over $1000 in 2022 and to add a mortgage on top of that would be negative cashflow. Your reason to buy is a very good one. It is a wonderful place to stay, right next to the Ala Moana Shopping Center and away from the craziness of Waikiki. You can also let friends and family stay there at a discount.
Good luck in your purchase! I highly recommend Carlin Yamashita because he is very knowledgeable about the hotel. carliny@islandlifehm.com. or (808) 392-3244.
Hi Aunty, this is so incredibly informative! Really appreciate you taking the time to piece this information together for outsiders who want to invest in Honolulu one day. Seriously, this is a gem 🙂
From your experience, how would you say that your unit has kept up in recent months now that tourism is thriving again? My wife and I are interested in one of the CondoTels in the area but we can’t pick which one… Have you heard anything about the rent rolls at Island Colony? That one seems to have a much more manageable HOA fee (half of Ala Moana’s) but we’re not really sure how occupancy looks over there. If you also have any other recommendations about anything, that would be amazing 🙂
Aloha Dave, and mahalo for the kind words!
During the restrictions of Covid, occupancy was SO low that I was losing money because I still had to pay property taxes and the monthly $933 HOA fee. It picked up a bit when tourism picked up in July, August, and September, but dropped again quite dramatically in October, and I expect the same for November.
I have not heard about the Island Colony and I looked up some of the units currently for sale. The price point seems good and the HOA is very low! It also looks like it has a full mini kitchen, which is nice. The location is smack dab in Waikiki which might be a plus for tourists, but as a local who doesn’t like driving or parking in Waikiki, I prefer Ala Moana. To find out about rent rolls, I would suggest that you contact the seller and ask for them.
Before I bought my unit(s), I was also looking at the Luana hotel/condo. It is located at the beginning of Waikiki, right on Kalakaua Avenue (the main drag), next to a gas station and overlooking a large park owned by the military. These are bigger units with full kitchens. Rent rolls seemed decent. One complaint that I heard was that it did not have a coffee shop so one had to walk to find something to eat.
Sky Ala Moana is a new up and coming condo project that is starting to sell condotel units. They are located on the mauka (mountain) side of the Ala Moana Shopping Center. Much higher in price and bigger floor plan than Ala Moana Hotel and the projected rents will be higher than Ala Moana. The Mandarin was also going to be built right across the Convention Center. Land was cleared and for over 2 years, nothing has been going on. I heard they didn’t have any buyers – these would have been very high end and command rents that only the rich could afford.
Real estate prices in Hawaii are going up, up, up – except for units at the Ala Moana Hotel. Those are going down, down, down. On the plus side, the recent renovations and additions are beautiful.
One thing to also consider is the HARPTA designation that out of state or foreign investors get when acquiring real estate in Hawaii. I don’t think you get a penalty when buying, but there is one when selling.
Good luck in your search! I recently used a very enthusiastic agent for a 1031 exchange that might be a good resource for you. His name is Carlin Yamashita of Island Life Home. His email address is carliny@islandlifehm.com.
Aloha Aunty,
Thank you for starting this blog. Recently I have been looking at low maintenance investment with positive cash flow in Honolulu. The condos in Waikiki have very high monthly maintenance fees which makes it hard to be cash flow positive. Then I came across the Ala Moana hotel and your blog. It looks like an interesting investment idea and easy to maintain from afar. I understand during Covid, the income hasn’t been very good. Has tourism started to pick up in Hawaii? What is your view on property value in Hawaii in the next 5-10 years? I understand a lot of youngsters are moving way. Looking back, do you still believe this is a good investment? Since you owned Ala Moana hotel, are you cash flow positive or has the downturn eaten up all the gains?
Mahalo Nui Loa,
Rosalind
Hi Rosalind,
The Ala Moana hotel also has high monthly maintenance fees – it is currently at $933 per month, down from $1037 because owners were quite pushy and demanded a break since maintenance costs (labor, cleaning, etc.) went down during Covid. Perhaps that will rise again because the staffing has returned with the recent influx of tourists. TOO many tourists, imo. My friends came from Vegas and stayed in my room but cut their vacation short because all the activities they wanted to do was sold out. Long lines to eat, not enough cars to rent, and Waikiki was packed.
During Covid, income was dismal and I ran negative for months and months. It is starting to pick up now, though the hotel is not yet at 100%. However, I still like the hotel as an investment. I can let friends and family stay there – and all they pay for is the $40 checkout fee at the end. Of course, that means I really don’t make money then, but it is nice to have that option to share my room. That being said, the downturn has taken all gains over the years – but on the positive side, it will make for a great deduction on my tax return.
My view on Hawaii property is that it is frightful. Prices are too crazy. Really crazy. And yet, the Ala Moana hotel has units for sale at very historically low prices because owners are dumping after running negative for so long. For that reason, I do think it is a good investment now – though choosing the right room on the better side is more money up front, but will get more bookings, imo.
Property value in Hawaii in the next 5-10 years? It seems to be going up beyond reach. Interest rates are so low that people can afford the million dollars but… if interest rates rise, mortgages will be higher and less affordable and then property values might drop.
For me, I want to get into Vegas again. Homes there cost 1/3rd the cost of Honolulu homes and the rent has increased from a few years ago. It cash flows better than Hawaii and the houses are very well built.
I am very glad you found me, and mahalo for leaving a comment!
Aunty
Aloha Aunty,
I was interested in buying at Alamoana. What are some hidden costs that they do not disclose? One of your posts mention a faucet replacement although you didnt need it did you still have to pay for that? Also in the event some major like the elevator break who is responsible for pay for that?
Aloha Howard,
I think it is a great time to buy a unit because prices are so low because of the Covid effect on tourism. Everyone who owns a unit has been running negative because of the month AOAO fees ($933) and hardly any bookings. However, tourists have come back with a roar and airline crews as well as hotel guests are bringing the hotel back this month. The tide is turning fast.
Hidden costs? I am not sure if they are that bad. You will find that you will have to pay more upon closing escrow because they will assess you prorated property taxes, the next month of AOAO, and recording fees, etc. If you put your unit in the hotel pool, that won’t start until the first of the month and there needs to be some time for the engineering department to check and make sure the room is up to standard. Changing the faucet even if it doesn’t need it used to be required but hopefully that is not the case anymore. They seem to be more flexible. If there is anything wrong with the room it is usually covered in the AOAO monthly fees. If there is a major break in the hotel such as an elevator or air conditioning, they hotel covers it. It is very hands off and smooth sailing once you are in.
Congratulations on your interest. It really is a great time to buy, imo.
Aunty
Hi Aunty,
Thank you for hosting this page. The information was very informative. I am curious about how are your units doing recently on the rental pool. Unit #1 and #2. Thank you in advance for any information.
The recent travel restrictions because of Covid-19 are devastating to our numbers. The occupancy rates have plunged and we are all losing money. However, that is to be expected, but it still hurts. More units are up for sale than ever before.
On the bright side, renovations of the porte cochere and the lobby areas are complete and beautiful. The tide will turn to profitability in a few months because of the vaccine, so I will hold on. I am still a believer in this investment property.
Aloha Aunty,
By chance, a pleasant surprise that I ended up at your site (still don’t know how.) I enjoy reading all and every pages and subjects, brilliant and sincerely sharing your knowledge.
In your page of the Ala Moana Condotel: You mentioned that one could choose to live part (or all) of the time. From a friend who lives in Las Vegas, I was told that owner could stay for a maximum of 6 months only. Do you know of a voice of authority to confirm one way or the other?
I am currently living on the mainland and would love to return to Honolulu. I am faithfully watchiing “Grand Sumo Highlight” this week, only one day left for this Spring (another subject you have covered.)
Take good care, do well and stay wonderful.
Aloha Olivia!
I haven’t heard of the 6 month rule – maybe it applies if you are enrolled in the hotel rental pool. If you book your own guests (which also means cleaning before they arrive), you can stay as long as you want because the room is yours.
You could call the Owner Relations office – Cheryl Ann Rivera or Wilhelmina Langan at (808) 944-4318 – and ask them about the 6 month rule. They would know if the room is in the hotel rental program.
Thank you for your kind words! I hope you can return to Hawaii and bask in the sun again.
Mahalo, Aunty. I think you are right. I will pass on your words and contact info to my friend in Las Vegas as well.
Hope to meet you someday in Honolulu. For now, I will visit you via your site. The daily best to you and yours.
Aloha Aunty,
I’m thinking about getting a unit at Ala Moana. I was wondering how the occupancy rates have been since March and if there are any small signs of improvements in new bookings?
Mahalo!
Aloha Chaz,
The occupancy rates have been dismal to nil. At most I have had 3 days of occupancy so have been running negative because of the AOAO fees of $1000 per month. However, I must say that Accor (current management company with Australian Board for the hotel) has waived some of the monthly fees on the rental side, but still, I am very negative in cash flow. They said we would see more occupancy in August because of government bookings but it wasn’t much of a difference.
Our tourist quarantine restrictions are being lifted with proof of negative Covid tests but I am not sure of the quantity of incoming tourists – which Hawaii is too dependent upon. Time will tell but for now, negative cash flow is not exciting or wise. Some owners are selling their units for prices that I haven’t seen in years. It is tempting to buy at the low prices in anticipation of better bookings in a few months.
Mahalo for checking in!
Aunty
Mahalo.
How do you calculate the depreciation for a unit. do you use a 27.5 useful life like a condo ( ex purchase price / 27.5 )
Thanks
I am not sure what formula is used. My CPA does my taxes and I trust her numbers and do not pay attention to depreciation rates. I do know that she separates the land value from the unit value, and I assume that land does not depreciate.
Many changes are happening at the Ala Moana Hotel. They will all be good, but in the meantime, there will be disruptions in the process.
Aloha Aunty,
Have you found any other condo-tels recently that can compare to the Ala Moana that have an ocean view? My friend would love to invest and possibly retire here one day, so he would like to have a place to come and visit each year.
Mahalo,
Jim
Aloha Jim,
There are other condo-tels. The Ilikai has better ocean views, but they are a bit higher priced and the building is rather old and not to my liking. The Luana Waikiki is another one – just at the beginning of Waikiki on the Ewa end, overlooking a large park if you get a unit on the “ocean” side. I would avoid the side next to the gas station because of the smell.
There is also Aqua Bamboo, a boutique style condo-tel, but the parking is by valet only and not sure about the ocean view since it is surrounded by buildings and a stone’s throw away from the Luana.
Diamond Head Beach Hotel is another one that I looked at. This one is leasehold, which is unique to Hawaii. You pay lease rent to a landlord with an expiration or re-nogotiation date. It is an older building in a great location but none of the units’ windows or doors face the ocean, which is right there.
So far, Aunty’s favorite is the Ala Moana Hotel. Mantra (now owned by Accor Hotels) manages it and is bringing improvements to an already great place.
Construction has just begun on the Mandarin Hotel, which will be a condo-tel, directly across from the Hawaii Convention Center and a block mauka (mountainside) from the Ala Moana Hotel. These will be very pricey and swank, like the Trump Tower Waikiki Condos – another condo-tel that I have not looked at and do not plan to own.
Good luck to your friend! I think having a condo-tel with a hotel managing it is convenient, potentially cash flowing, and a good way to invest.
Mahalo for visiting,
Aunty
This was a great post. Thanks!
Following up on your blog and this response, you say there are BETTER OPTIONS. What would those options be?
Also, has your aunt thought of hiring a management company? At 10-20%, your rate of return would be higher.
Mahalo.
Hi Rebekah,
Better options would be be single family homes, duplexes, four plexes, etc. However, that would mean more money and/or financing. If I was just starting out in real estate investing, I would look to buy in Las Vegas. Prices have come up but it is still so much cheaper than homes in Hawaii.
Some owners do use a management company. I prefer to stay in the hotel pool just because it is easier and the rooms get cleaned on a daily basis so the room can be rented continuously when a guest checks out in the morning and a new guest checks in afternoon. I am curious on which would be better. The low management fee is tempting.
Hi Aunty! Nice website! I got some graphs of the Ala Moana Hotel available at:
Graphs: http://www.YamashitaTeam.com/resources/AlaMoanaHotelMarketReport/
Sold Data: http://www.AlaMoanaHotelResales.com
I specialize in real estate transactions in the Ala Moana Hotel. Congratulations on your purchase!
sincerely Carlin Yamashita
Mahalo, Carlin! I think I met you once at some seminar or meeting.
Hey Aunty, how is the investment property working out for you at this time?
Thank you for the valuable info. We are looking for investment properties ourselves and wondered how it would work in Waikiki.
It will work in Waikiki – I have been eyeballing the Luana Waikiki because it is not quite in the midst of the hustle and bustle of Waikiki, but not sure how well it cash flows.
Another one that might do well is Aqua Bamboo, but the parking is pretty bad there.
The Ala Moana Hotel is still my preferred hotel/condo because of its location. It is not cash flowing as well as it used to – perhaps because Mantra, the new hotel owner, is charging less per room. There are a LOT of them on the market right now – in the past month, several have been listed, including one of mine.
One caveat about buying for short term hotel rentals – it will do well if tourism is strong.
Good luck in your investing!!!
I own some units at Ala Moana Hotel and looking to sell.
808-834-0500
Interesting. I will email you. Recently the rental income has been very low, and we still have 60% of gross rents going to management if we are in the hotel pool. Part of it has to do with lower tourist counts and it should pick up now that winter is coming.
Aloha Auntie, thank you for this great information. I have been wanting a unit there for over 5 years. I have been trying to do research but no luck. Thanks to you, I have changed my strategy. I wanted the one bedroom becuase it’s beautiful. But will look at a studio because it rents out better. I was going to look for property management company but hotel pool looks like the best bet. The junkie part is that parking per day. I come home 6 weeks x 2 per year and want to stay at the hotel. That would be $880 for parking $20/day), $108 for weekly cleaning. Then no possible income if I am occuping the room. I think it also would be best for me to buy the unit and not mortgage. Thank you so much for all time and info!! Good luck with all your investments! Please keep us updated!
Aloha Noelani,
I also wanted a 1 bedroom unit – very livable with an almost full kitchen. Higher monthly HOA but would be harder to fill because of the higher daily hotel rate. However, more people could stay there – up to 4, though only one bathroom.
The new hotel management had a owner policy of 1/2 the parking rate if an owner stayed in their unit. Not sure if that was during their promo period of if this is standard. Also, weekly cleaning would on be $18 per week, or $18 per day, as you choose how often and when when filling out the owner reservation form.
Prices are going up, up, up right now. The dinky units last year were in the $150k range, and now they are in the $200k+ range.
If you do get a studio unit, may I suggest that you get one with 2 beds. These rent better. You are wise not to get a mortgage if you can come up with the cash, imo, but RichDad education folks would say the opposite.
Best of luck and timing for you, too! Mahalo for checking in!
I owned a unit in the Waikiki Tower for 10 years with an angled ocean and mountain view high up. It was lovely . I purchased it in 2006 and sold it in 2016. In the beginning the maintenance fee was approx. $450, at the end it was $799. In the beginning the rental income paid for all expenses and owner parking was $12. At the end I was short $500 plus each month due to the increase in maintenance fees.
For your information: There is no “owner” parking packet. You are on your own. There is a 2 or 3 dollar discount from the $20 charged for owners.
I lived in my unit for about 6 years. It is NOT affordable to rent it out due to the huge daily “resort” fees charged, and key fees. The hotel wants to keep it in the rental pool.
Over the years the worth of the units plunged and were “underwater” many by half the original worth. The banks no longer lend at all for them.
Finally they were slightly “above water” with huge losses but enough to cover the mortgage. I put my unit back in the rental pool before selling. The Rental pool personnel charged me thousands of dollars for “repairs”. They tried to charge me for items they had insisted I give back when it was taken out of the rental pool. They have been incredibly unethical, uncooperative and downright nasty.
I was lucky to sell my unit quickly by taking a huge loss after 10 years.
I would never recommend this as an investment to anyone. Sincerely, J
Mahalo, Jan, for your insight and experience. Before buying, I asked our friend who used to work at the Ala Moana Hotel and knew several people who bought in the beginning. He said that they were very unhappy with their returns and the management.
However, I had been following the sales of units at the hotel for a couple of years before finally buying. The prices kept going up, the entire hotel was fully renovated with new carpets, wall treatments, furnishings and when I went to see a unit, I decided to jump in, offering a little less than the asking price, and getting one. The cash flow was not great, but it was decent. Real estate investor “experts” told me that I could do better in a different building, such as the Ilikai, Pagoda or Aqua Bamboo, but I liked the location – connected to the Ala Moana Center, and how nice the place looked. The only thing that was subpar to me was some of the staffing. Some (not all) looked and acted unhappy. I wondered how they could be made happier and proud to work there. Some Yelp reviews blasted the staff, some praised them because of room upgrades (because they were local).
I agree somewhat about the hotel rental pool personnel. Sometimes I feel welcomed, sometimes I am treated like an irritant. Because of one of the employees going on vacation, my unit was not inspected, rehabbed and added to the rental pool for over a month, resulting in loss of income with the ongoing expense of $800 monthly AOAO fees. The rehab costed about $2000 – they automatically change the bathroom faucet even if it isn’t broken. Self managing is discouraged – they do charge the daily resort fee if you rent it out, and parking is rather expensive per day ($20 for self parking, $25 for valet). One of the reasons that I got the lower asking price for the unit was because the previous owner had a really terrible property manager who rented out the units for months at a time for a very low price, charged her 25% of the income, and then forced the owner to pay the daily resort fee.
The only way to cash flow in this hotel is to scrape together cash (I was fortunate that I had sold a place in Vegas for a profit and had the cash). So far, for me, so good, because the tourist economy is doing very very well nowadays.
I am sorry to hear about your big loss. I thank you again for your insight. I think it will help readers to also get your perspective, and decide on their own about owning a unit.
Thank you for the above information. I’am a military member, while conducting our missions in Hawaii we’ve stayed at the Ala Moana numerous time, I really like hotel. I did some partial research on information about a possibly purchasing a condominium. Upon reading your review I think i have lost interest.
Thank you kindly,
Aloha Lenny,
I felt sad for Jan and also appreciate his sharing his experience.
However, I still like the Ala Moana Hotel as an investment because it does cash flow, and if one wants out, there is a market for it. Ever since I started watching it as a potential investment, prices have risen. It hasn’t been the best investment, but it is good enough for me.
I too was an owner…in fact an ‘original’ one from 2005 in the first offering to the public after an offering to ‘friends and family’ (real estate people and developer employees). In the 9 1/2 years of ownership, I NEVER (and I mean NEVER) had a positive cash flow year…but admittedly because I had a loan on the property.
My original loan was at 6.375%,,,not bad for investment property in 2005, but once the ’08 crash took place and 10 units per month went into foreclosure, conventional lenders stopped lending altogether which meant that I was shut out of the 4% rates for refi in 2010 and later.
As stated earlier, the original AOAO was under $500 per month and then ballooned to the current $800 after HECO raised rates and the flood insurance increased by almost double. I did a bunch of research before committing to buy, but I missed a lot of things out of ignorance. Property tax for example…I thought because this was a condo, it would be taxed at residential rates. No, it’s a Hotel and is taxed at Hotel rates…10X more than residential rates.
The hotel managers were friendly (Willi was a gem), but the whole team thought of me as a major annoyance for questioning things like allocation of guests (those military and airline crews keep heads in the beds, but at a greatly reduced room rate which lowers the owner’s income) and details of monthly occupancy. It got to the point where Outrigger threatened to throw me out of the program if I didn’t stop the emails to the management crew. (I know it’s no longer managed by Outrigger). Self management wasn’t an option for this haole from the mainland and interviews with those few owner’s who self managed, disclosed tales of toilet brushes, waste baskets full of condoms and other less than mixed company stories.
For the former owner who said they lived in the property, actually, that’s not allowed due to zoning requirements. I’m not saying it didn’t happen, but the property is now non-conforming and must remain completely as a hotel, and owner’s are not legally allowed to stay more than 6 months at a time and no more than a certain amount over the course of 3 years. I think Outrigger just thought it would be more trouble to evict and enforce, than to just let it quietly exist.
During the deep downturn, it took upwards of $800 per month to make up the cash flow difference, and although I had high hopes once the tourist economy turned around, my revenue just languished. I would have been happy with break even cash flow due to the tax benefits, but I couldn’t even attain that.
After 9 1/2 years I got out and sold at $15K less than what I paid…and I thought I did just fine.
When all was over, I just chalked it up to an experience. I would have been mo’ bettah’ off buying a low cost ‘regular’ condo in Mililani or Ewa and hiring a manager. At least that would have allowed me to refi at the low rates and the property would have appreciated rather than going the other way.
I took my residual equity and invested it in preferred stocks and my income/cash flow is far better than my Ala Moana unit.
Lesson learned. Mahalo and Aloha.
Aw, Kawika. I am so sorry about your lose money experience with this condotel. Mahalo for sharing.
All the best to you,
Aunty
Hi! Do you need to pay to stay there? I would use as a get away in the summer.
Aloha Ray,
If you are the owner and have it in the hotel rental pool, you don’t have to pay, except for $40 when you check out. However, you might want to arrange to have it cleaned some of the days in between, and each cleaning is $18.
Or, if you self manage, you don’t pay anything BUT if you rent it out, you will have to pay the $15/day resort fee for them. To me, it is a perfect place for people who want a place to stay when they are in Hawaii long term (a month or more a year) and then rent it out in the hotel pool when they aren’t here. You will need to get approval from the hotel with a form requesting the dates that you want, sometimes a few days in advance, sometimes months in advance (for the peak periods).
Aloha Aunty,
Great to hear from you again!! Glad you had a good time w/everyone at the owners meeting.
Do you talk to many that are renting out their unit thru Airbnb & VRBOB?
My friends have a unit on the west side & manage it themselves & do very well!
Mahalo nui loa Aunty,
Maui Boy
90% of the owners use the hotel rental pool. I did ask my friend about her unit – she uses Airbnb. However, she is younger and has more time and energy than Aunty. I take the easy way out.
Aloha Aunty,
I hear ya Aunty low maintenance works well!
I have some friends who successfully managed their property on the West Side thru Airbnb & VRBO, do you know of anyone doing this w/their Ala Moana Unit?
Mahalo nui loa Aunty,
Maui Boy
Yes, a friend the I met at last year’s owners meeting said she self manages and uses VRBO and Airbnb successfully. I’ll see her at this year’s meeting which will be happening this month. Should be an interesting meeting – with the new hotel management owners that are from Australia.
Aloha Aunty,
Really love your stories, kokua, knowledge & insight!! Akamai Aunty!!!
How is your unit doing at the Ala Moana? Plenty work?
Mahalo for all your aloha,
Maui Boy
Aloha Maui Boy,
The Ala Moana Hotel units are not doing as well as they used to with the new owner management changing hands. The Mantra Group now is in charge and I think they have dropped the hotel rates on the Kona Tower side by quite a lot. So, the cash flow is still there, but substantially less than before. Bummers. However, it is NO work at all if it is in the hotel pool. That’s the kind of business Aunty really likes!
Hi,
very interesting and informative,
Are foreign investors able to participate?
As a retired Canadian I like the idea of using the room myself for two or three months in the winter and then being able to walk away and have it managed and rented out when I’m not there even if the management rate is high, also when it comes time for renovations does the cost come out of maintenance fees or are there special assessments?
Aloha Don,
I do believe that foreign investors can buy – in fact, an Australian hotel group, The Mantra, just took over the management of the hotel so I am guessing that a lot of Chinese investors will be buying (just because China and Australia have good trade relations with each other).
The initial renovations come out of the owner’s pocket unless the room is already in the hotel rental pool. Hotel renovations come out of the monthly AOAO fees. Currently they are $799, but will increase in January to $826. Repairs to the room will depend on the extent of the repair but usually it is minor.
Winter months are peak months, as you would know, people wanting to escape the cold. April is the slowest month. You will need to reserve your room in advance in writing and cleaning will be done if you order it, for a fee.
I think it is a great idea that you have – though the rooms are rather small if you were staying for a long time – unless you purchase one of the larger one bedroom units which are VERY nice, but pricey and with a higher monthly AOAO. Also, they do not rent out as readily as the studio units because of higher hotel booking rates.
Thanks for this post, lots of useful information with “real” numbers, which are hard to find without doing a lot of legwork yourself. For me personally, an ala moana hotel purchase probably wouldn’t happen until the next economic bust. I’d be looking at purchasing in the lower 100k end, and ride out the low occupancy.
Aunty, do you know of any competing management company that handles a bunch of units in this building (that would make it economical for the mgmt. company)? That 60% take is pretty high. Your ROI would go up immensely if you had a company do it for 40% take or less.
It is smart to wait until a price bust, but I figure, with the lousy interest rates that banks are paying savers, even a 5% return on investment is better than .1% that they pay.
Someone mentioned Hawaii 5-0 property management – I think they take 25% of the rental income, which is much less, BUT the reason that I like using the hotel is that they take care of everything, and so far, our portfolio is doing okay. Not great, but okay, and okay is good enough for me right now. Also, if walk ups come in, the hotel rental pool can book them, whereas an outside property management company will only be able to book in advance, clean after, usually have a few days of vacancy between each booking, and do not really have the capabilities to book short stays in-between.
The former owner of a unit was using an outside property manager who was charging a long term tenant about 30% of the normal hotel rate, and on top of that, the owner had to pay the daily WIFI and usage fee of $15 per day, which ate into any profits that the owner was making. I felt very sorry for the previous owner and I believe she was super relieved to get out of such a poor investment. Unfortunately, it wasn’t the investment that was poor. It was her choice in property management.
I am thinking about purchasing a unit in Ala Moana hotel and stumbled onto your post. Good information. Has your investment panned out better, worse, or as expected? What were the biggest surprises? What would you do differently, and would you make the same decision to invest knowing what you know today?
Thanks for visiting, DJX! The investment is still rather new – some months are really good, April has been poor. The biggest surprises were how little the owners mattered. Outrigger was in charge. However, the ownership has just changed. It might get very very interesting. I don’t think I would do anything differently. In today’s market, I still like the hotel. Are you in Hawaii?
Thanks for the quick response. Yes, I am in Hawaii; born and raised here 🙂
I do believe that it is best to invest in your own backyard, i.e. Hawaii for us, rather than the mainland. We are more in touch with what is going on and Hawaii real estate is limited, and so, in my opinion, very valuable.
You are wise in your young age. I am assuming that you are young? I wish you luck in your investments. I will be doing another post on how my investment in the Ala Moana Hotel has panned out. Interestingly, just today, about 4 more units went up for sale. April rents might have been too brutal for owners, maybe even May, but I do not get my rent reports from the hotel until after the 20th of the month.
Thanks for the good information. I have additional questions that I’d like to ask offline. If you could email me at my email address, that would be great 🙂
Done! Look forward to “talking” to you!
I have had a couple of interesting conversations with people about this post about buying in the Ala Moana Hotel. The consensus is that it is not a good idea and that many people have been very unhappy in the past. Also, there are better deals out there.
All true. However, Aunty has been known to go against the flow and leave the herd. Sometimes it doesn’t work out, and sometimes it does.
I think many people think that investing this way is risky, and that is one bone that Aunty has got to pick. Some real estate investing is risky – especially if flipping properties. It is all good and fantastic, until it isn’t, and then it is very ugly. Stock investing is risky, but somehow people think it is a safe investment.
Cash flow rental real estate is the least risky, in Aunty’s opinion. The returns on these hotel rooms if put in the hotel rental pool program aren’t that exciting, but right now, it sure beat money sitting in the bank or a CD. If there is something else that can give a better return that Aunty likes, then the units can be sold.
If the occupancy rates increase, the cash flow increases, and vice versa – decreasing occupancy will decrease cash flow, but for the last couple of years, occupancy has gone up and is staying up according to a few hotel people that I have spoken to. In the past weeks, more units in the hotel have been put up for sale – people wanting out might signal that a slow period is coming (April and May and through the fall are not peak tourist seasons) or that they just are tired of returns that do not meet their expectations. This creates more opportunity for Aunty – more candy in the store. However, Aunty now needs to adjust her methods because her funds are tied up. Partnerships are now on the horizon. Stay tuned!
Wow! You are the smartest, bravest woman I know. I’m so impressed!
Thanks Kay! It took a lot of thinking about and talking to people, and then it then became something that I felt I had to do. If it works out, its great. If it doesn’t, it gets sold. Learning began with playing Robert Kiyosaki’s Cash Flow game. I think it should be taught in our high schools.
Wow, Aunty. You’re amazing!
Thanks Jalna! I have to keep busy or I get into trouble.