Hawaii has been a growing place to invest in real estate. According to Real Hawaii, Hawaii homes have appreciated in the long term. While the market has some fluctuations, it has historically appreciated due to the tourism industry and more. Median home values have been increasing historically and this has been terrific for homeowners and real estate investors in Hawaii because real estate has been resistant against inflation.
Despite these long-term trends, Hawaii is known as a stable market in terms of demand and appreciation. It has the eighth highest average income in the United States, and its islands make a remarkable real estate market for a variety of reasons. First, there has been tremendous population growth in Hawaii lately, particularly in Maui County and Kauai County. There has also been a need for more housing units, and almost all land is already occupied. Real estate investors can often make a lot of money on rental income, and Hawaii is also, of course, a very popular place to vacation and move permanently.
Cities like Honolulu are great to invest in as highly competitive markets, but so are Hilo, Pearl City, Kailua, and Waipahu.
Because of these trends, Hawaii is clearly a very competitive housing market. Right now, it is a seller’s market and very difficult to actually buy a home. This means demand is outpacing supply in Hawaii. Homes are selling fast and for higher than listing price. In this housing bubble, real estate investors can get into bidding wars to secure property, and have to acquire financing fast to be able to purchase the property.
Hard money loans might be the best way to invest in real estate in Hawaii. Hard money loans are otherwise known as last resort loans, but they’re mostly used for real estate transactions, especially fix and flips, long-term rentals, and repairs of distressed properties.
Hard money loans can be approved within a couple of days. This is much faster than traditional financing through banks, which can take more or less a month to be approved. Hard money loans can be approved so quickly because of the asset they’re based on: the property. Unlike traditional mortgage loans, hard money loans are not dependent on the credit score of the borrower or other aspects of the borrower’s financial standing. Most hard money lenders do require borrowers to have a minimum credit score of 600, however, as a security measure.
Hard money loans are also different from traditional mortgage loans because they use the property as collateral, and if a borrower defaults on a hard money loan, the lenders take on the property, instead of a costly and time-consuming foreclosure process.
Because of this, hard money loans come with significant risks. They have much higher interest rates than traditional financing. While most mortgage loans have interest rates of just above 4% (as a national average), hard money loans are much more unforgiving with interest rates of 8–15%. Hard money loans also need to be repaid much faster with repayment periods of more or less a year, while mortgages have repayment periods of 15 to 30 years. Hard money loans also have lower LTV ratios, which means they require higher down payments from borrowers.
It’s important to only trust the best hard money lenders. That’s why we have compiled a list of the best hard money lenders in Hawaii so you don’t have to.