5 Top Tips For Buying In Hawaii
Buying a property in Hawaii has unique challenges, so it's important to work with someone who truly understands the local market dynamics. From Leaseholds to Hawaiian Homelands, unaware buyers could waste a lot of time and energy looking at properties they can't even live in. With that, let’s dive into the top 5 tips for buying in Hawaii.
Tip #1: Leasehold v. Fee Simple
Properties in Hawaii are either Fee Simple or Leasehold. While most property is Fee Simple, buyers are attracted to the low prices of Leasehold, without actually knowing what it is.
Fee Simple is the most common form of ownership, and what most people think of when buying property. Fee Simple means you own the building and the land underneath - from the center of the earth to the top of the sky.
Leasehold means that you own the building or apartment unit, but someone else owns the land underneath. If the lease ends, the landowner is free to renew the lease (which costs you a lot of money), sell the interest in the land (also a lot of money), or reclaim the land and everything on it (making you potentially homeless and stuck with a mortgage).
Leaseholds are a viable option for some, but I advise most people to stick with Fee Simple.
Tip #2: Hawaiian Homelands
The Department of Hawaiian Hawaiian Home Lands is in charge of building affordable housing for the exclusive use of Native Hawaiians. Sometimes these properties go up for sale, but only people of Native Hawaiian ancestry can buy them. The homes are often on beautiful lands and are nice single-family homes. Unless you're Native Hawaiian, watch out for these properties.
Tip #3: Property is expensive, but appreciates greatly
Hawaii has some of the most expensive properties in the country with the average single-family home costing over $1 million. While the prices are understandably intimidating, you'll most likely make money in the long run.
Homes in Hawaii are increasing in value at a higher rate than almost any other city in America. The reason is simple - Hawaii is surrounded by water. Available land is limited and builders cannot build out, only up. Demand for housing continues to rise, while supply lags further and further. As long as demand continues to grow, prices will continue to rise. When it's time to sell, you'll likely make money on the appreciation.
Tip #4: Get Pre-Qualified Before Buying
It’s a seller’s market in Hawaii, which means that houses sell fast and each home may already have a few interested buyers. You want to be prepared to put in an offer as soon as you find the right house, so make sure your finances are ready to go before you start looking at houses.
Most sellers request offers come with a pre-qualification letter from a lender, so you'll need one to stay competitive. More important, however, you need to know what you can afford, and only a lender can give you that information. Ask your agent to connect you to a preferred mortgage broker sooner than later.
Tip #5: Aloha Letters
This tip is a bit tricky because you don't want to get caught up in Fair Housing laws, but done well it could get your offer picked. An Aloha Letter, or Love Letter, is when you attach a letter to your offer explaining why you want the house and noting your appreciation for the improvements they have made and the care given to the property.
In cases where there are multiple offers, a couple that wants to retire in a home might be chosen over an out-of-state investor, for example. Be sure to write these letters ahead of time because you want to attach them to an offer. Make sure your agent reviews the letters to avoid any issues.
