Real Estate Investing in Hawaii
Investing in Hawaii requires understanding your goals and choosing the right property to meet those milestones. Investment properties Hawaii islands can provide both income and appreciation over the long-term. Knowing how to make money investing in Hawaii real estate will factor into if you are successful.
If you are considering real estate investing in Hawaii, you will want to ask yourself these questions before you buy any property.
1. What type of investment properties Hawaii do you want to consider?
First, you will need to determine if investing in a residential or commercial property is a better strategy for you.
Commercial property is real estate that is used for business or anything with five or more units. It can include office space, retail, industrial, multifamily (five units or more) or hotel. A benefit to a commercial investment is leases are typically longer than residential leases. This means you won’t have to spent time rewriting leases or finding new tenants. However, commercial space is usually more expensive and requires a higher initial investment. Plus, if the space is vacant the monthly costs are more than residential space sitting empty.
Residential investments are those made on a single home, condo, or residence. They often require less money upfront than commercial space. However, leases typically run for a year so you may find you need to find new tenants more frequently.
Short-term rentals – Hawaii’s current market has made short-term rental investments incredibly lucrative, especially if you are patient and willing to do the work of attracting renters and creating positive experiences. A solidly-booked Airbnb rental is often more profitable than renting the same property to a long-term single tenant.
Through research, you may decide you don’t want to lease the property but rather use it and hold for a period until it appreciates. You could use the property as a secondary home instead of renting it out.
2. Are you investing by yourself or with a partner?
Some people want to be in full control, others don’t, and this will likely impact your answer to this question.
Investing by yourself provides you sole authority on all decisions about the property. It gives autonomy many people seek in an investment. For those who have time, going alone may make a lot of sense. You can make all the decisions and don’t have to rely on anyone else’s feedback.
With the high prices involved with real estate investing in Hawaii, 0thers find partnering up a more feasible route. Partnering with a friend, family, or other investor can help provide a larger amount of money to invest and provide more opportunities. If you choose to go with a partner you need to be comfortable with the implications of the agreement.
There are advantages and disadvantages to either decision. With a partner you can share the funding, risk, work, and learn from each other. However, it will also require increased need for coordination, responsibility, and advanced planning and structuring. For many, they just don’t want to deal with any potential friction that could result from decision making.
3. What is your budget?
Before buying any investment property, you need to determine your budget. You’ll want to do some number crunching so that you are realistic in the type of investment. A budget will help you decide what type of property you can afford and narrow your prospect list.
When you’re calculating the budget be sure to include agency fees, renovations or updates, furnishing, or expenses needed to get the space ready to be leased.
Your budget should outline your initial investment and anticipated monthly income. You will also want to understand the property’s monthly expenses including maintenance, taxes, and insurance. Some properties may include HOA or condo fees that should be considered in your final budget.
You should also account for vacancies and establish an emergency fund for any unexpected expenses such as a new roof, furnace, or hot water heater.
4. Where do you start looking?
Real-estate 101 is location, location, location. For any investment property you will want to pick a space that will attract renters so that you make a profit.
You’ll want to check your emotions at the door before you enter any investment property and keep circling back to your goals. What you look for in an investment property should be different than what you look for in your full-time home.
Any investment decision is about the numbers. You will want to compare properties in the area to understand how investments compare in size, amenities, and condition. You’ll want to look for properties that provide the highest rent for the lowest price and maintenance fees.
Before you purchase investment properties in Hawaii it will be important to get to know the area. Search for area rentals to get an idea of rates and amenities tenants expect.
5. Who will manage the property?
You’ll need to make a decision about property management. This will be especially important if you don’t live in the area. You will want someone close by to check on the property, manage any maintenance needs, and quickly address problems or emergencies.
If you decide to hire a management company, you will want to interview them and have a thorough understanding of their role. Management companies provide a wide range of services from rent collecting, repairs, landscaping services, and other maintenance. You will want to understand their experience they have in managing rentals and check references.
How to Make Money Investing in Hawaii Real Estate
Investment properties make money through cash flow and appreciation. Cash flow is generated from the rental income after your expenses have been paid. A good investment will have your tenants paying your mortgage and providing extra money in your pocket after expenses. Long-term your investment can provide appreciation value, paying off when you decide to sell the property.
Rent revenue isn’t the only benefit to investing in Hawaii, there are also tax benefits. You will be able to deduct certain expenses which may include property tax, property insurance, mortgage interest, management fees, repairs, and advertising. Don’t forget to keep good records and all of your receipts.