If you really want to break it down, being a real estate investor, in Hawaii or anywhere, is just about buying and selling. Sure, the strategies change as do the timescales on which these happen, but it’s about buying a piece of property at one time and (hopefully) selling it at a higher price at some point down the road. It could be three to six months for a standard flip or maybe several years if you’re holding it for cash flow as passive income.
While there are many attractive deals out there to be had, remember to think about who your end home buyers are going to be when you have Hawaii real estate for sale. Many investors when starting out focus so much on finding the property that they ignore the other end of the transaction. Of course when analyzing a real estate deal you’re going to look at the after repair value (ARV), required renovations, financing fees, title/escrow costs, etc. to determine your maximum offer and profit spread.
But it’s also critical to think of who the person is that’s going to buy this piece of island real estate from you. Is it a homeowner? A landlord? Another investor? Local or mainland? Who’s looking for investment property in Hawaii? Different buyers look for different prices or discounts. A homeowner will generally pay more for your property than a landlord. Understanding your buyers is critical to getting the price you want at the day of closing.
Having a list of interested buyers ready to go solves many potential problems. One, they have already indicated they’re looking for property to purchase. So while you can still list your property on the Hawaii MLS (house listings for sale) to attract a greater pool of potential buyers, and therefore a possible higher price, you may also be able to ‘pre-sell’ the property to one of your buyers. Just have them place a deposit in escrow with a contract ready to go. This saves you time, marketing and other holding costs. Two, by selling to your repeat buyers you establish a business relationship that you can go to over and over again. If the previous closing with a buyer went smoothly, you can likely eliminate some of the worries that come about as you approach the next closing with the same buyer. Three, repeat buyers will often come to the table with cash, facilitating your closings even more.
So if you have a pool of qualified cash buyers who can go to contract on your Hawaii properties for sale before you’ve even completed a rehab, saving you significant time and holding costs, wouldn’t that be worth a discount to them? This, in turn, helps ensure a happy buyer who is more likely to purchase from you again. It’s much better to sell your properties this way than to go to the open market every time not knowing if your new buyer is going to close or not. Having a qualified buyers list helps eliminate these worries for smoother closings and greater profit for your Hawaii real estate investment business.
Click here for Part 2 of How to Build Your Hawaii Real Estate Buyers List!