I’ve had a few people reach out to me lately wanting to start investing in real estate but complaining about the high prices in Hawaii. The quick response would be: “That’s the cost of living in paradise!”, right? But there’s more to it than that.
Looking historically at the market, Hawaii is buffered by a lot of the swings that categorize the past few decades of many areas on the mainland. Of course, it doesn’t take a rocket scientist to know that our dependence on tourism, much of it foreign, is a big luxury that most mainland markets can’t count upon, especially when those markets take a downturn.
Few areas also have the economic support of local military bases — Hawaii is overflowing with military presence. Think that doesn’t help the economy? Sure it does.
What’s more is that both these factors don’t appear to be going anywhere. Sure, there have been rumblings of the military presence being dialed down a bit, but I don’t see that happening to any extent that would negatively affect the local housing market. To that end, I fully expect tourism to maintain its healthy influx into local coffers and helping to both stabilize and grow the Hawaii real estate market.
So if the above point to a healthy, growing market, then doesn’t Hawaii real estate make sense as an investment? For most people, yes. However, the high prices still prevent many people from otherwise taking advantage. Here are a few ways to get around this:
- Save, save, save. I know, this isn’t sexy, but jumping into a market where the median single family home price (Oahu) hovers around $700,000 means having a very large piggy bank. Skip the lattes and save towards a down payment.
- Leverage. Clean up your credit and aim for the best mortgage rate and terms you can get. Shop around. Bring a bigger down payment if you can.
- Shop for a deal. Don’t be afraid to negotiate or haggle. You never know the story behind a home for sale, even one that may not show any signs of distress from the outside.
- Seller financing — I admit, I LOVE buying homes with seller financing. Not only does it allow me to buy more homes at once, but it also helps the sellers in most cases make MORE MONEY from the sale of their house!
- Borrow from a family member. I know this may not be too popular, but many of us likely know someone who, perhaps at a younger age, got their foot in the door by borrowing from a well-to-do grandparent, aunt or uncle. It never hurts to ask!
- Whatever else you need to do! While some people have expressed concerns about a possible market correction later this year or into early 2016, as of now the prices don’t appear to be dropping anytime in the near future. Don’t buy what you can’t afford — ever — but if you’re prepared and able to buy a house, then it may be prudent to make that happen sooner than later.