Real Estate Investing in Hawaii: What You Need to Know

              Aloha! Welcome to the Place of the Gods – Hawai’i 

What do Spam®, poke, pineapple, and Pele, all have in common?  Not soccer. They are all near and dear to hearts, stomachs, or both, of Hawaiians. Food, faith, and fire surround the intricate web of cultures and history making up the land in one of the hottest real estate markets in the U.S.  And we’re not talking scalding lava from Kilauea here, baby.

Or maybe we are.

 

Hawaii’s real estate forecast is good

Some of the highest across the board average increases in valuation in the US right now is Hawaii real estate.  It is also the most expensive by average and overall least available real estate in the U.S.  Recent eruptions in Volcano National Park, i.e. Kilauea, did not slow down the market. In fact, it increased. Perhaps people are fascinated with fire, or perhaps it is the draw of a slower lifestyle, integrated culture, and strong independent spirit woven through taking care of their own on these remote dots of Islands.

Our 50^thstate may be known for tropical drinks and world championship surfing, but living in the middle of the Pacific Ocean has its challenges. Did you know that the most expensive place in the world to buy toilet paper is Hawaii? It is also the most expensive place for electricity and gasoline in the U.S.  The reason is importation. Nearly everything you need in Hawaii has to come in by plane or ship. And the cost of that 2,500 miles from the mainland adds up quick.

Hawaii was a sleepy little group of islands with lots of agriculture and a stop off for shipping and planes when it became the 50^thstate in 1959.  It was, and still is, a key strategic U.S. military location.  A  waypoint to the Far East, Pacific, Asia, and Middle East for carriers, cruisers, and flights, the Joint Base Pearl Harbor – Hickam headquarters the US Pacific Fleet, and Hickam “Field” as it is still called, the Pacific Air Force Command, on Oahu. This large military facility is adjacent to Pearl Harbor and is a strong economic force in Hawaii after the #1 tourism trade.

Hawaii was popular way before we got it, though

People have been grabbing up Hawaiian real estate for centuries. Captain James Cook stopped by in 1778, claim the “Sandwich Islands” for the British crown. He rests there permanently after trying to kidnap King Kalani’opu’u, underestimating the laid back exterior of the fierce fighters Hawaiians had become through 1,500 years of everybody stopping by to mess with them. Mark Twain spent four months there on expedition in 1866, the islands having only recently been invaded by white missionaries. He noted they had not faired too well either, having been dedicated to appeasing Pele, the goddess of fire, and ruler of the volcanoes.

Lengthy history shows tremendous pride and cultural cement of these beautiful islands, full of tropical flowers, birds, sharp mountains, verdant green, and lava. Hawaii was a kingdom, then republic, overrun by sugar barons forcing the queen to abdicate. Hawaii put up with this authoritarian money rule until they asked to cede to the U.S. in 1898.  The U.S. welcomed them into the union in 1959 and we got to learn how ridiculous mainlanders look in grass skirts trying to hula to Don Ho ukulele music having had far too many MaiTais under the brilliant Hawaiian sun.

Lots of lava does not stop real estate in Hawaii

A volcanic wonder, Hawaii has eight main islands and 126 more small islands, atolls, shoals, reefs, banks and seamounts stretching 1,500 miles in its archipelago. This includes the famous Midway Island of WWII, all while sitting atop one of the most active seamounts, or volcanic seafloor tectonic areas, in the world. After the most recent Kilauea eruptions that wiped large parts of towns and significant structures and roads out of Volcano National Park, Hawaii has done what is has always done, whether it is eruption, tsunami, or typhoon. They immediately started to rebuild, and bounce back. Lava was still sending up steam tendrils when moveable B’n’B and tiny homes began to pop up on the 100’ deep new lava fields. And Hawaii gained some valuable real estate in the process.

And, as always after a bad typhoon (hurricane) and volcano season, some people left. Not enough to even budge the real estate needle, though.

Today Hawaii is a world vacation spot, with nearly 10 million visitors annually flocking to this small group of islands (only half again bigger in total area than Connecticut), concentrating on Oahu, Maui, Kauai, and the “Big Island”, Hawaii. That makes for a huge need for places to stay, i.e. rental property. Investing in Hawaii rental property takes some self-education and some mighty deep pockets, though.  Hawaii real estate is, however, experiencing exponential growth.

It is not like you are miles and miles away anywhere on Hawaii

Investing in Hawaii real estate is usually a long-term investment, as there is little  flipper property available. The average time a parcel stays on the market in Hawaii is 14 days, and local ordinances monitor conditions of property, especially rentals. That is why collaborative real estate investment groups are popular in Hawaii as they have access to realtors faster and get inside information before a non-resident can find out something is available.  It increases the odds of actually being able to make an offer before a choice investment is snatched up.  There are more condos and townhomes available in the market by far than single-family homes.

Hawaii is unique in that there are ocean views from a lot of each island, not just beachfront or oceanfront. Often better views with far less traffic can be found further inland, up the mountain, or in smaller neighborhoods. There is also a better probability of finding a home in need of TLC in those areas. Homes in Hawaii do depreciate faster though, than on the mainland, due to weather and temperatures.

This is the land of the world’s 1%, at least buying property

Hawaii boasts the eighth highest personal income in the U.S.  It is not a place for the most part of the poor or even middle class.  Many popular areas in Hawaii are getting $1M for even a modest home.  Hawaii has some of the highest average home prices in the nation – by 4x, or 400%, above the rest of the U.S.  Cost of living is higher, too, by 2/3 more than the mainland. The catch is wages only average about 1/3 more. There is something to be said for a 2.3% unemployment rate, but no one talks about how many people hold down 2 or 3 jobs to pay their rent, let alone utilities.

Hawaii is no longer just Honolulu, Diamond Head, and Waikiki Beach

Kauai is the place to be now in Hawaii.  There is a much higher demand than property available, so it is highly competitive and prices have spiked.  One reason is the reputation for romance and quiet, with good solid tourism marketing campaigns designed to take the pressure off space and resources on both Oahu and Hawaii.   Flights to Kauai increased by 38% last year. That said, property has skyrocketed by over 20% a year the past several, finding something is neigh impossible, and you better plan on writing a check, or mortgage, for well over seven digits.

The only seven digits I want in my life that I am responsible to is my own lead gen business. I will make right at seven digits in profits this year alone, after less than five years in business. Check out how I did it here https://www.bestrealestatedirectory.com/lead-gen/

You gotta have super deep pockets to invest in Hawaii

Single-family homes bring the highest rent, but if considering rental property, it needs to be near busy areas and accessible. Small houses are the most reasonable homes for Hawaiian residential real estate investments, but any SFH is difficult to find for a decent buy.  Townhouses and condos including studios are more readily available, but often in areas specific to rentals having zoning restrictions. Those restrictions include if you may rent at night and rules for long term stays.

Even at $2,000/mo for a 900 square foot apartment, you simply cannot rent a place out for enough to make a profit monthly, so your only hope is long-term sale and hope for profit then.  It is important you are able to carry the mortgage for the difference between those two times, making sure to utilize everything you can for a business expense. It is highly advisable, more so than perhaps any other place in the U.S. to consult your accountant and tax professional before you make any investment in real estate in Hawaii.

Property maintenance is expensive and mandatory for Hawaii rental units

Vacation rental property in Hawaii is more likely to need additional maintenance, and who is going to handle it while you are away? If you are not a local, Hawaii requires you to hire a local company to do maintenance on the property and take care of guest issues. This is not optional.  Property taxes have remained low in Hawaii, and one reason is quality of property care. Hawaii is a nice place and they intend to keep it that way, and keep their worldwide tourist base happy during their stays.

In my lead gen business, I have an average 80-90% profit margin, return on investment. That makes a lot more sense to me than having to pay out every month to keep something, even if the percentage return on the long end may be good. Mine is still way better.

Percentage gains on property remain pretty consistent across all areas of Hawaii. That means by investing the most you can afford to put into a property is the best way for maximum profitability. It may sound a bit illogical, but do the math.  That is why even loosing money on rent monthly may be a good investment strategy if the percentage increase is consistent, as the ROI is much higher, depending on how much you put down and pay in over the long haul.  Some areas of Hawaii have increased by nearly 20% in recent years, but the YTD averages about 4.6% according to Hawaii real estate investment groups.

There are more and higher costs than normal to hold rentals in Hawaii

Vacancies and maintenance can cost way more than mainland, as everything has to be brought in, and vacancies cost you more than a similar mainland property during any down time due to rental values.  You need to carefully investigate not only the maintenance company, but the homeowners association if you are an absentee owner. Adequate insurance, both business and damage, association fees, and long term maintenance are things you need to budget up front for, as they are all sizeable costs in Hawaiian investment property.

Yes you can own property in Hawaii…probably

If you really want to spring for a place in Hawaii so you can use it too, make sure you  figure out your finances and a few more property differences. First, there is a lot of misinformation out that certain groups cannot buy property in Hawaii, especially for investment. Nothing could be further from the truth, for the most part. Hawaii has both fee simple property, meaning you can own the improvements and the land, and leasehold and Department of Hawaiian Homelands property. For either of those categories, you must be a certain percentage of direct Hawaiian heritage. There are a few more regulations for non-residents, too.

While the same low property taxes are paid regardless, there are higher rates in recent years for non-occupant owners for property over $1 million USD.  Since so much of Hawaii is approaching or past that figure in popular areas, it is something to ask about. Also, if you plan to write a mortgage, interest rates on loans can be higher if the unit is in a building more than 49% rentals.  For investment purposes, a non-local may be asked for up to 25% down and a guarantee of six months of resources to pay the mortgage and upkeep in times of vacancy.

While there may be conditions dictating where a single family home would be purchased, especially if you plan to move to Hawaii as many now are, there really are few “bad” places to look for the best place to buy real estate in Hawaii. Know, though, it is all going to be high. There are no bargains to speak of in Hawaii. If you do snag a total repair job, remember – everything pretty much comes from the mainland. You need to be very realistic about the repair and remodeling costs, as they will be far, far more than they would be in the upper 48.

The only pig you want is at the luau, not in the poke

When you do find a place that has been used for a rental, ask to see their books and maintenance logs. Any reputable owner will be happy to share them with you, as they know it will increase their chance at a sale near the price they are asking. If they have been responsible, it will provide you a good idea of earnings potential and expenses, as well as turnover rate, taxes, utilities, and other costs you need a clear handle on  before signing on the dotted line.

I love Hawaii, and could even think about living there. It has just enough beach, mountain, and various other environments, as well as a strong night life, to make me happy. What does not make me happy is thinking about a cool $1 mil or more for a 900 sq foot house off the beach that is going to cost me a fortune to maintain. I would rather be really secure, like I am now, if I was going to drop that kind of change. I can worry less about all that airfare getting back and forth to the States, too.

There is a better way to buy Hawaiian real estate

When I graduated from college everyone tried to convince me that corporate was the future and real estate was the only sane way to make money.  I did the socially and parent happy thing and got a $35K/yr corporate grind job. I learned really quick I was not only unhappy doing it, I was not getting ahead. At all.

I started to look around for a way to make some side money, as I knew inside that working for myself was a way better existence leading to my kind of happiness. I got into some MLMs, spent a lot of money and effort and got very little back. I learned quick the only people who made money in those things were the people way way above me.

Then I got into drop shipping. I made a little, but I had an apartment full of stuff, was working stupid hours on top of the job, and had no, zero, life. I could pay all the bills easier, but I still could not really save. So I kept reading, browsing, asking questions, looking at other business models. That was when late one night I ran into a blog talking about a guy named Dan who was into lead generation websites, and had written a training program based on exactly what he was doing every single day. He was making good money. And he had a life.

By then I was 25, and so ready to get away from the corporate world I could scream. I was ready to do whatever was necessary to get ahead, as long as it was legal, ethical, and honest. I knew it was going to require some work.  I did some checking and yeah, the Dan guy was real. It was not a fairy tale, he was making serious money. I watched some videos and decided to schedule a call to ask questions at this link https://www.bestrealestatedirectory.com/lead-gen/

When I talked to Dan a couple days later, there was no pie in the sky. He was straight up about it was up to you to work and get your business running. He also was generous with technical help (though it was not hard to do) and support. The price was reasonable for the training, too. After what I had already spent (as in way into the five digits and gotten pretty much no where) I decided to give it a try, as I did not have a lot to loose and had not seen another business model that looked anywhere close to this solid. I also knew the massive potential for businesses needing help getting customers.  I paid my tuition and dug in.

Man, I am so glad I clicked that link and made that call. Five months, just 5, later, I handed in my resignation at the J-O-B and I never looked back. I was paying all my bills plus had enough to continue to build my business. I was on my way.

The training was not hard and was thorough. Dan taught us to build a site, first, after some research. This is the first one I built.  It took me about six hours total:

I rented the leads that came in right away to a local business. He paid me $750/mo for them, and was tickled to get them. To this day five years later he pays me $750/mo. I hardly ever have to touch anything on the site, and five years later after some small ongoing expenses I have cleared over $36,400 for this one six hours of work website. That is an awesome return.

Digital real estate can easily pay for physical real estate

The best part is, I own it. Lead gen sites are digital real estate like a condo in Kauai. Except they do not cost me a million bucks to buy, and I do not have to supplement the mortgage every month and pray it goes up. I own the real estate and make 80-90% profit consistently on all my sites.

Yes it takes some work, especially at first when you are getting up and running. Anything worth doing takes some time and sweat equity, though, no matter what it is. It was the best decision I ever made, including going to college.

Five years later and I just turned 30. I will clear nearly $1 million dollars in my business this year. I work part time. I travel when I want, play tourist when I want, party when I want. I am still a responsible business owner, and I still work on increasing my digital real estate holdings. But I do it on my time, and the profit goes in my pocket, not someone else’s.

If you want a cliff hanging view of the Pacific over Diamond Head, do it the old fashioned way. Earn it. It is a whole lot better than sweating a $10,000 or more a month mortgage payment when the house is empty. The lead gen model is efficient and the future of business. There are millions of businesses that have to get customers, all competing. And the internet is the future of marketing, hands down. Some of the money going out to attract customers may as well be in your pocket.

If you want to change your life in a way you could only remotely dream of, click this link https://www.bestrealestatedirectory.com/lead-gen/  There will be no pressure, there is no obligation, you can ask anything you want, and we will tell you right up front if you do not seem like a good fit. We want people to learn and become part of a supportive group that want, to be their own boss, leave a legacy for their family, and have some time to do the important things in life. Yes you will have to put in some work. You will learn some skills. And you will gain so much more than skills and work ethic. You will recover your soul and hope, to really make a difference for yourself.

In Hawaii, they say “Mahalo”.  Most people think it means “goodbye”.

It doesn’t. It means gratitude, and thank you. Click the link. You will be grateful you did, and thank me in the future.

Mahalo.