Honolulu, HI Cap Rate: 2.73% — Rental Property Analysis
Honolulu is a premium-priced metro in the West with a mid-sized city of 345,510. At a 2.73% estimated cap rate, this is a appreciation-focused market where rents of $2,800/mo lag behind home prices. With a median home price of $845,000 and population is roughly stable, Honolulu is primarily an appreciation play that requires creative strategies to generate positive cash flow.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
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Challenging for pure cash flow
Based on $845,000 median price and $2,800/mo median rent
Est. Cap Rate
2.73%
1% Rule
0.33%
Fails
GRM
25.1x
Price / Income
10.0x
Market Data
Median Home Price$845,000
Median Monthly Rent$2,800
Property Tax Rate0.28%
Population345,510
Population Growth0.2% / yr
Median Household Income$84,200
Vacancy Rate4.2%
Annual Appreciation2%
2026 Market Update: Honolulu
Honolulu's 0.3% rent-to-price ratio is well below the 1% rule. At median prices of $845,000, the $2,800/mo rent produces only $1,922/mo in NOI. Investors here need to target below-median properties or pursue value-add strategies to make the numbers work.
At current rates, a 20% down conventional loan ($169K at 7%) would result in approximately $-2,573/mo cash flow — negative at median prices. Larger down payments, seller financing, or buying 15–25% below median are strategies to turn the numbers positive.
The 25.1x gross rent multiplier and 4.2% vacancy rate position Honolulu as a growth-dependent market. With annual appreciation at 2%, total returns (cash flow + equity growth) run approximately 4.7% before financing leverage.
Cap Rate Calculator — Honolulu
Pre-filled with Honolulu medians. Adjust to match a specific property.
Property Details
$
$
3–8% typical
%
Monthly Expenses
0.28% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
2.41%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$20,393
net operating income
Gross Rent Multiplier
25.1x
High (>15)
1% Rule
0.33%
✗ Fails
Monthly Cash Flow
$1,699
before debt service
Annual Breakdown
Gross Rental Income$33,600
Less Vacancy−$1,411
Effective Income$32,189
Less Operating Expenses−$11,796
Net Operating Income$20,393
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Factor in financing to see your actual return on invested capital in Honolulu.
$
$211,250
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-12.72%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$236,600
$211,250 down + $25,350 closing
Monthly Mortgage
$4,132
on $634K loan
Monthly Cash Flow
$-2,508
after all expenses
Annual Cash Flow
$-30,091
before taxes
Cash Flow Breakdown
Monthly Rent$2,800
Less Expenses−$1,176
Less Mortgage−$4,132
Monthly Cash Flow$-2,508
Is Honolulu a Good Place to Invest in Rental Property?
Honolulu, HI has a population of 345,510 and has been growing at 0.2% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $845,000 paired with median rents of $2,800/mo produces an estimated cap rate of 2.73%.
Property taxes at 0.28% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 4.2% is impressively low, indicating tight rental supply and strong tenant demand — favorable for landlords.
At a price-to-income ratio of 10.0x, homes cost about 10.0 times the local median income of $84,200. This elevated ratio means homeownership is stretched, supporting rental demand but limiting buyer pools. Home values have appreciated at roughly 2% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: At current median prices, Honolulu is challenging for pure cash flow investing. Consider BRRRR strategies with below-market purchases, or look at neighboring metros with stronger price-to-rent ratios.
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