Investing in Hawaii

Investing in Hawaii

We live in such a desirable tropical location, and land is a limited resource.  History has shown that property values tend to be more stable and the values increase steadily over time.  As a result, investing in Hawaii Real Estate has been a successful move for many.  There are many options when it comes to investing, and we can explain what they are in depth so you can make a well-informed decision and minimize your risk.  To start, there are a few ways you can invest.  From buying a seasonal vacation home, condo, timeshare, to a fixer, bare land and building, or a commercial property with monthly income, the options are open.

Vacation Homes or Condominiums:
Many people buy their vacation home or condos near the resorts on the South-West side of the Island.  This is partly due to the fact that it is sunny more often, and it can be easy to have a property management company rent the house out to visitors when you are not there.  This can help cover expenses and your monthly mortgage, but is a more costly investment than some other options.

A timeshare can be a good option if you have a smaller amount of money to spend and are okay with applying it towards an annual vacation of just 2-3 weeks.  One good thing about condominiums is that you can often trade the use of it with another condo owner, so one year you could have a vacation in Florida or the Caymans or other locations.  Be cautious of people approaching you while you are perusing stores or open-market areas as they may be soliciting timeshares and they can often be pushy and tricky in their methods.  Make sure you know what you are getting into and read the fine print!

History has shown that it can be possible to buy a home in need of cosmetic repairs, make those repairs quickly, and then re-list the property just months later for a decent-sized return on your investment.  While this has happened often in the past, it is no sign that it will still be a good idea in the current market.  We suggest  you do your research, see what comparable houses are going for in the area, seeing the supply and demand, and getting precise estimates of the cost to make the repairs or renovations.  Don’t forget to factor in the cost of selling the home, which includes closing costs, inspections, surveys, and realtor commissions.  If this is something you are considering, please let us know and we can provide advice on the specific costs that may apply.

Rental Properties:
This would be a case where you wanted to purchase a house and then just rent it out to tenants, a family, students, or whoever you choose.  It tends to be easier to find a reliable tenant in a bigger residential area like Kailua-Kona or Hilo town.  People like to live close to their work, and rental properties can be listed at a higher price per month.  Regular homes typically require a down-payment of at least 20% to even come close to having the rent cover the mortgage, but this may not always be the case.  We have seen times and locations where the rent check covered the mortgage, yes a great investment!!!  It is a good idea to look at what is available in the current market, what areas or subdivisions have a LOT of listings, and which areas are priced well (to buy) and are still in demand.  This may take some time to research, so be prepared to invest that time.  We can offer some ideas based on history, so please feel free to ask us. 

Buying Bare Land and Building:
Buying bare land usually requires a decent-sized cash down-payment to secure the loan, and then the loan is usually a short one of 2-3 years. During this time you must have the home built, so this is a constraint to be aware of.  Things can take longer here in Hawaii as compared to the Mainland, so be cautious when estimating time-lines and always ask what the penalties will be if these time-lines are not able to be met. 

So now you have secured a great piece of bare land and plan to build a home that you will sell once it is complete.  We strongly suggest that you refrain from ‘clear-cutting’ your lot as it may make your property less appealing, and more difficult to maintain than native vegetation.  There are many more options when it comes to building these days, so make sure you do your research.  Energy-efficient or “green” homes are in higher demand these days so you may want to decide to go in that direction.  If so, make sure you let your building contractor know your request.  Do you plan to build more of a “cookie-cutter” home or a “kit” home?  They may be easier in the long-run, but make sure yours isn’t going to be the 50th kit home in your area as that will make it less desirable.  These days it is very possible to take a house kit and customize it to suit your needs thus saving time and money! So weigh all of your options and choose wisely.


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