With foreclosure rates the 15th highest in the nation, many investors are considering looking for bargains in Hawaiian real estate. Yes, the climate and scenery are gorgeous, and there are a wide variety of lifestyle amenities to choose from. However, there are some significant factors that inexperienced mainland investors may need to consider.
Some investors believe that it would be feasible to purchase a home in Hawaii, use it for their family vacation a few weeks per year, and rent it to other vacationers during the other months.
However, vacation rentals in Hawaii are strictly regulated. Both Oahu and Maui require permits, and are not issuing new permits. In other areas, the property must be in a designated Vacation Destination Area (VDA).
You can obtain more information by joining a group of vacation rental owners to learn about legal requirements and marketing methods. You will also want to speak with a qualified tax professional about tax issues with vacation homes.
Building Code Issues
Many available properties which appear to be bargains are "not permitted". When sold, they must be brought up to code before the purchaser can reside in the home. These repairs can add significantly to the cost of the home.
Buying to Rent
there are several factors in Hawaiian rental properties that may be unfamiliar to mainland investors. First , Hawaiian law requires that out-of-state landlords employ a local property manager. Property managers generally charge 15-20% of the rent as a management fee.
While the trend in the rest of the country is to rent homes and apartments "unfurnished", most Hawaiian rentals are furnished, even including dishes and cooking utensils. This can add significantly to maintenance expenses for various appliances, as well as replacements for wear and tear.
Finally, because the combination of high rents and low incomes create an economic challenge, extended families or roommates occupy many residences. This can create critical issues in terms of damages, conflicts, and even communication.
Many renters are employed by the tourism industry. However, the current economic crisis has had a negative impact on tourism. Therefore, job security is an issue for both tenants and the landlords who depend upon their ability to pay rent.
Like the rest of the country, Hawaii has seen real estate prices drop considerably in the last few years. Many experts believe that values have reached the bottom of the curve, and will soon head upward, making Hawaiian real estate an excellent investment for the long-term.
Know the facts before you invest. You can save money, time, and trouble by performing your due diligence. You may even make a profit!