Kailua is a city in Honolulu County, and it is a suburb 12 miles northeast of Honolulu. Kailua means “two seas” in Hawaiian and is named that because of two currents that run through the bay — Kawainui and Ka’elepulu. In the past several decades, the population in Kailua has been decreasing, but in the past couple of years, the population has seen a resurgence. According to the 2020 census, there was a population of 40,514 in the 2020 census.
Kailua is the famous home to multiple beaches, waterfalls, and a Marine Corps base. It was the location of Barack Obama’s Christmas vacation home. Kailua is considered one of the best places to live in Hawaii. It is a suburb that has great public schools, is great for families, has terrific nightlife, and above all, is incredibly diverse. Kailua had a median home value of $959,200 and a median rent of $2,500, which makes it a very expensive suburb, even within Hawaii.
Right now, Kailua is a seller’s market. Demand is rapidly exceeding demand in Kailua, and homes are selling for much higher than the listing price. They’re also selling very fast. Real estate investors in Kailua might get into bidding wars for homes.
For the Kailua real estate market, hard money loans might be the best way of investing in real estate. Hard money loans have the huge benefit of being approved very quickly and making a real estate investor instantly competitive. While traditional mortgage lenders can take more or less a month to finance a home, hard money loans can be approved within a couple of days.
This speed is made possible because of less stringent requirements, as well as the asset hard money loans are based on. Hard money loans are based on the property. They use the after-repair value of the property to calculate the terms and rates of the loan. Hard money loans are mostly used for real estate transactions like fix and flips, long-term rentals, and repairs for distressed homes, but hard money loans are also different from traditional financing in that they are not based on the credit score of the borrower. Since they use the property as collateral, if a borrower defaults on a hard money loan, the borrower takes on the property. But if a borrower defaults on a mortgage, the lender (bank) initiates foreclosure proceedings.
Because of the added risk taken on by the lender, hard money loans are much riskier and the interest rates, repayment periods, and LTV ratios of hard money loans reflect this risk. Hard money loans have interest rates of 8–15%. This is significantly higher than the interest rates of traditional financing, which are just above 4% on average. Hard money loans also have repayment periods of more or less a year, which are significantly shorter than traditional mortgages which usually have 15 to 30 year repayment periods.
It’s also important to be very selective when choosing hard money lenders. Not every hard money lender is trustworthy, and many hard money lenders may tack on extraneous fees like origination fees, closing costs, and underwriting fees. New investors may also have a very hard time getting hard money loans.
We have you covered at Hard Money Lenders IO — we made a list of the best hard money lenders in Kailua to help you invest in the market. Look no further for a financing partner.