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