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I could use some suggestions on the rental housing market on Oahu. I'm advising my recently widowed niece relative to a number of financial issues, including the 6 residential properties that she rents out. Based on a quick glance at the some market rents (newspaper ads), her rents are substantially under market. So, at a minimum, she needs to raise the rents. However, before I make my recommendations, I'd like to get some better info on market rents.

The specific properties include 2 4-bedroom & 1 3-bedroom houses in Kaneohe, a four-plex in Kaneohe, a single family house subdivided into a duplex in Kailua, and a 3-bedroom townhouse in Hawaii Kai.

As there is very little debt on the properties, I may recommend additional leveraging to generate additional investable cash. Thus I need to get a feel on valuation methods by local lenders. In our part of the world (the NE), lenders would value the properties based on an income approach, using a cap rate against the NOI's. Do Hawaiian lenders do the same? If so, what level CAP rate would they use?

Btw, selling is not a viable alternative as the properties have been almost completely depreciated for tax purposes. A sale would reward the Feds with a significant capital gain. Rather than a outright sale, I may explore a 1031 swap with her tax attorney.

Any suggestions on these matters would be greatly appreciated.

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