I just typed out a very long answer to someone who emailed me this useful question, so I thought I would blog it. ocean pointe house for sale

Assume you have $150,000 down for your investment property. (That's about the minimum you should have for a rental purchase)

Your $150k is 30% of a $500,000 purchase.  Say you are conservative and you buy a 3 bedroom house on Oahu for $450,000. Yes you can do this, in Ewa Beach especially, and it will look like this one.

$1500/month is the mortgage on about $300k at 4.5%.  You also have taxes of around $100-120/month and insurance of around $120-150/month.  So you are at about $1750 - $1800/month expenses.

The rent on a house like that is around $2500. Here are some rental listings in that price range.

If someone is managing it, they take about 10%, so you have about a $450 month profit on your $150,000. Also you will have repairs, etc., so I would bring that down to about $350/month maybe?

That is a return of about 3% a year on your down payment, if you don't have a lot of vacancies.  Add on top of that the appreciation of property value, and any tax benefits, and you have your long term investment return. If the house goes up just 10% in 10 years, that is an appreciation of $45,000.  Now you have made another 30% on your down payment, annualized to 3%.

Add it all up and you have about a 6% return, not including the equity you gained by paying down the mortgage.