Hawaii Housing News

News, Tips and Opinions About Hawaii Real Estate and Housing

So Much for Facebook…

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Mark Zuckerberg

Sad Mark Zuckerberg...

For those looking for an investing shot in the arm, the Facebook IPO wasn’t quite the financial rocketship it was billed to be. Many people lost money within minutes of the opening bell. In fact, it’s already considered one of the biggest duds in the history of the stock market. Not quite the press it wanted – sorry, Mark Zuckerberg!

That being said, what’s an honest investor to do when the market itself has become no better than a weekend trip to Las Vegas and betting it all on 28 black? Well, I’m no fan of the stock market for many reasons (no equity, no collateral, no insurance, to name a few). It should be no surprise, that real estate offers many investment opportunities that the market simply can’t compete with, but there’s one in particular that I feel needs specific mentioning: the ability to say YES or NO at a ‘unit level’.

What do I mean ‘unit level’? I mean being able to say YES or NO as to whether to invest in or buy a particular house, i.e the ‘unit’ is a house (or townhouse, condo, etc.). With the market, you’re buying shares of stocks or mutual funds but are you actually directing the board of a company to make certain decision? Of course, not. You’re investing in a ticker symbol that represents a company (or mix of companies) that has its board of people you’ll likely never meet that make critical decisions every single day — without any input from you. How dare they! But it’s the truth.

However, in real estate, unless you’re investing in a hui or REIT, then you are the ‘board’ of your own personal investing firm and YOU’re the one calling the shots. Not everyone’s comfortable in that scenario, but I LOVE IT.

Now we’re in June, here in Hawaii. Summer is traditionally a good time for real estate — the grass is greener, kids are out of school, love is in the air, yada yada. And while no Hawaiian city made a recent Top Ten list by my friends at FortuneBuilders, there are bound to be some fantastic deals around the corner.

Why? Well, the banks are primed to start releasing more distressed properties, of which there are plenty in Hawaii. Some might say it’s actually started. That means if you have cash to invest or are pre-approved for a mortgage and can thrown down a sizable down payment, then start looking NOW for properties where you can get yourself 15% or more upfront equity. Maybe you can rent it out to cover the mortgage while you watch it appreciate over the next decade (btw, never buy a house at retail — just don’t do it). This goes for here in Hawaii as well as on the mainland. My colleague Scot Stafford of Landmark Properties is finding amazing real estate deals in NW Washington!

Combined with the upcoming glut of more distressed mortgages on the market is the expiry of the non-judicial foreclosure moratorium, which I’ve mentioned many times before and won’t go into again here. In summary, get prepared for more DEALS here in the Hawaii market. If you’re aggressive or get on an investor’s buyers list, you should be able to get a nice deal that suits your criteria and budget.

Bottom Line: The Facebooks of the world can promise the moon and have all the razzle dazzle, but in the end even the biggest firework can be a dud. Real estate, if done properly, can offer all kinds of rewards that a ticker symbol can never compete with.

Batten Down the Hatches…

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Storms’ a Blowin’!

Or are they? The news the other day is that this will be a calmer hurricane season for Hawaii in 2012 than average. While that may not be much fun for the daredevils and storm chasers out there, I think most people will welcome riding out the remainder of the year with fewer causes for concern. Of course, predicting hurricanes — like any natural disasters — is subject to margins of error, but Hawaii is no stranger to tsunamis, earthquakes and the like.

That being said, let’s hope the nice folks at the Central Pacific Hurricane Center didn’t get their storm charts crossed (ok, ok, I know they really use GIS, remote sensing and other high-tech tools). But whenever I see news like this, it makes me think of the precarious nature of Hawaii’s ‘settled presence’ on our islands — namely, where we’ve decided to build homes and infrastructure. The ‘human layer’ on top of the existing physical island.

Hawaii Flood GIS

Hawaii Flood Hazard Assessment Tool - Kailua and Lanikai Flood Zones

Last weekend, my girlfriend and I took a drive up the windward side to Kaaawa Beach Park. We were looking at all the places where the water comes right up to Kam Highway, at all the homes that are sitting right on the edge. And whether you believe in global warming or not, there’s too much evidence of global sea level rise to not be concerned if one of those homes is yours! (someday we’ll have to make a hard decision on just what we’re going to do when Kam Highway gets flooded over just one too many times for our comfort)

Of course, this example is just from Oahu because that’s where I live. But I’ve been to Kauai, Big Island, Molokai and Maui enough to know that the same situation exists throughout the state. We now have shoreline setbacks to help prevent future construction in these dangerous areas (some islands adhering to stricter setbacks than others), but the annual hurricane season prediction is a good time to reflect, from a Hawaii housing perspective, on some basic ideas for living safer in the coastal zone:

1. Learn about the shoreline setbacks that exist in your island/county. Is it 40ft? Or 50ft plus an erosion multiplier?

2. Check up on your hazard and flood insurance — don’t skimp if you don’t have to

3. If you’re building any additions to your home, pay special attention to new building ideas that allow high winds to pass by with minimal damage

4. Don’t build any erosion control structures without TONS of due diligence. This means seawalls, revetments, groynes, piers and more. It’s the State policy to discourage such efforts of shoreline hardening (armoring).

5. If you’re in the market for a new home, think very hard about whether you want beachfront or not. Understand how the beach ‘behaves’ by the home you’re considering. Is it accreting or eroding? Is it subject to massive sand depletion and replenishment throughout the year? Know your beach before buying your home. In the long run, you may be safer and more at ease looking at the ocean from a bit further back.

Leave your comments below!

Hawaii Real Estate Investment Opportunities

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Hawaii Real Estate Investment Opportunities

The recent ups and downs of the housing market, both nationally and locally here in Hawaii, have put both current and would-be homeowners in a pickle. If you’ve been hit by the economic downturn, maybe even put in an underwater mortgage situation, then you’ve either had to seek help, such as a short sale or loan modification, or be forced to ride out the wave until the market picks up.

However, for real estate investors, there’s no denying that the doldrums of the market the past five years have presented unique investment buying opportunities. The old adage of “Buy low, sell high” certainly rings true when a bottom falls out, whether it be in stocks, baseball cards, cars or, yes, real estate.

The drop in prices combined with very low interest rates present unique buying opportunities for savvy real estate investors in Hawaii, especially with inventory starting to shrink to normal levels. Of course, not all investors are the same and the type of investor one is determines what, where and how one views these opportunities and ultimately invests. Let’s look at a few examples:

The House Flipper – Today’s investors who flip houses (such as my company, Big Rock Investments) can find opportunities in Hawaii today in niches such as short sales and preforeclosures. It wasn’t too long ago that Hawaii’s foreclosure rate was in or near the top ten nationwide. While the moratorium on non-judicial foreclosures for most of the past year brought that “deal source” to a crawl, there were still judicial foreclosures being processed. These are homeowners who need options, and the investor who can have a short sale processed can pick up great properties at discount prices. Most of these are centered in the Ewa and Kapolei areas on Oahu, but neighborhoods across Oahu and all Hawaii (ex. Kihei in Maui) have all had distressed properties hit the auction block. Now, with the expiration of the moratorium set for this summer, these homeowners won’t have that protection anymore and will need a helping hand.

The Landlord – For the savvy real estate investors who love the idea of cash flow (who doesn’t?), picking up properties in Hawaii now to buy and hold for the long haul is a great idea. Buying houses and condos now before prices increase allow you to capture rent checks monthly in addition to market appreciation – passive income now with a long-term upside. While Hawaii has, no doubt, been a difficult place to cash flow compared to other states in the country, there are good deals out there. Look to multi-family properties in neighborhoods of Honolulu such as in Kalihi, Kaimuki and Moiliili and out west in Maili and other parts of Waianae. You can also pick up plenty of cheap studios, 1 and 2-bedroom condos in Waikiki and Kihei that you can use as vacation rentals for international visitors. Guess what? They’ll pay well if it looks good!

The Property Buyer – Some people just love to own property because they know that real estate is almost universally a sound investment – if acquired strategically and wisely. Hawaii is at the top of many lists for these types of real estate buyers and with good reason: it offers year-round wonderful climate, it attracts international visitors and is easily rentable if desired. The sand, sun and surf sure help as well! These types of investors usually have a very long timeframe in which they view their investments, and the aforementioned low interest rates with low housing prices make now a good time to pick up a house or two while the opportunity is there. How about a house in Poipu, a multi-family house in Kailua or a couple condos in Lahaina? All good bets right now.

The “Hands Off” Private Lender – If you’re not familiar with private lending, please check out our full-length explanation video at http://bigrockinvestments.com/smart . Basically, private lending allows a wise investor to park their funds in one of our short-term rehabs with a fully collateralized and recorded lien while they earn 10% or more on a fixed rate promissory note. Since the value of the property is always worth significantly more than the loan, the investor is always in an equity position while they passively earn a very high interest rate. No volatility of the stock market, no susceptibility to unforeseen market events and no miniscule returns of savings accounts. If you like the idea of collateral and high fixed interest but don’t want to do the actual ‘heavy lifting’ of a house flip, you can align with a local investor company like us who can put your funds to use, all held by a third-party escrow company. You can even use a Self-Directed IRA to earn the interest tax-free or tax-deferred – ask us how.

As you can see, the Hawaii real estate market offers opportunities to a diverse array of savvy buyers. With the anticipated summer expiration of the non-judicial moratorium, there will be more distressed properties hitting the open market. While this increase in supply may, in the short term, prevent a large uptick in prices it will also present more properties to be had with upfront equity at closing since these types of properties – primarily short sales and REOs – tend to be sold off quickly at discounts to move them through the pipeline.

If you’re a Hawaii real estate investor, no matter the type, who wants to get into the market while the time is right, don’t spend too much time on the sidelines. There are great deals to be had, but it remains to be seen how long they will be available.

Aloha,
Mike

March 2012 Hawaii Foreclosure Info

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In the wake of news that former “Friends” star Jennifer Aniston just sold two of her New York City condos at a loss of over $500 million, we’re sometimes reminded that the drop in housing affects everyone. Now, I’m sure none of us are crying for Jennifer or other celebrities like Nicholas Cage and Jennifer Lopez who are being foreclosed upon or losing money on their mega-mansions. In fact, I’m sure there are more than enough people overjoyed to see the rich folks take their share of the housing mess!

However, watching the big guys take a fall doesn’t really do more for those of us in Hawaii than provide a nice diversion and maybe an “I told you so”. So with that being said, let’s look at the March foreclosure info for Hawaii.

Looking at the data, it’s no surprise that most of the foreclosures were on Oahu. However, the Big Island had the highest foreclosure rate with 1 out of every 460 housing units in foreclosure, mostly in Kona. Maui was right behind with Lahaina and Kihei contributing to the 1 out of 514 foreclosure rate. Statewide, bank repossessions (REO) more than doubled from 102 to 214!

Yet at the same time, inventory is dropping under the 6-month mark and prices have creeped upwards. It remains what will be done when the statewide moratorium on non-judicial foreclosures comes up for renewal in July , but it seems obvious that this will have a tremendous affect on the future of Hawaii housing and real estate.

With Bank of America, a major provider of home loans to Hawaii residents, revamping their short sale process this past week, now might be the best time to get out from an over-leveraged mortgage if it’s crippling your family’s budget, especially with the 2007 debt forgiveness act still in effect through the end of the calendar year.