Yahoo Finance How To Invest in Hawaii’s Hottest Real Estate Like a Billionaire
Due to its high property values, wealthy investors favor the Hawaii real estate market, especially when comparing its performance to that of mainland real estate investments. Since land supply is limited in Hawaii and there are stringent rules governing development, investing can be trickier for an outsider than for a native Hawaiian — or someone who knows the ins and outs of the tropical state.
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There will never be enough supply to satisfy the growing demand from investors on the mainland and beyond, but that hasn’t stopped many from participating. The archipelago is already home to many billionaires who own grand gated mansions in pristine locations and some, like Marc Benioff, are buying up large parcels of the already limited land — sometimes to the annoyance of locals.
According to NPR, Benioff, the chairman and CEO of Salesforce (and owner and co-chair of Time magazine) — worth an estimated $8.9 billion — has been buying up large swathes of land near the rural community of Waimea on Hawaii’s Big Island through a number of anonymous LLCs.
Although the mystery surrounding Benioff’s future plans and intentions has locals concerned, the bigger picture is that many people might be priced out of owning real estate sooner rather than later. For a state with an already exceedingly high cost of housing, scarce amount of land and seemingly endless demand, now might be the time to look into investing in the Aloha State.
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Why Buy in Hawaii?
Everyone would love to own real estate in Hawaii, but does the state provide sound investment opportunities? According to Insider Monkey, Hawaii has the highest housing costs in the U.S. when you look at Zillow’s typical home value ($838,874) and the Census Bureau’s median monthly housing cost ($2,005, adjusted for inflation from 2021 to 2023).
In April 2024, home prices in Hawaii were up 14.0% compared to last year, selling for a median price of $783,700, per Redfin. On average, the number of homes sold was up 11.6% year over year and there were 1,143 homes sold in April this year, up from 1,024 homes sold in April last year.
In short, the housing market in Hawaii is booming — but if you are looking to get in the action, you will need to know what you’re doing and know your type of investment inside-out. Having deep pockets might help, too.
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Research and Location
It should go without saying, but before you dive into investing in Hawaii’s hottest real estate, it is crucial to thoroughly research the market. Understanding the current trends, pricing and demand in different regions of Hawaii can help you make informed decisions about where to invest.
Start by looking at recent sales data, average home prices and rental rates in various neighborhoods. Consider factors such as proximity to beaches, schools and amenities that could impact property values. For this, it might be a good idea to liaise with local real estate experts.
Of course, location is crucial. Properties in highly sought-after areas such as Waikiki or Maui tend to appreciate at a faster rate. You can’t go wrong sticking close to popular tourist destinations — beaches or scenic views tend to attract higher rental income and appreciation. Additionally, investing in properties that offer unique amenities or stunning ocean views can significantly increase rental income and resale value.
And you’ll need to know the risks associated with investing in a state that is prone to natural disasters, like hurricanes, volcanic activity and flooding. You’ll need to know your insurance and emergency mitigation options.
Investment Opportunities in Hawaii
When looking to invest in Hawaii’s real estate market, it’s important to find properties that will yield a high return on investment. To do that, you’ll need to consider the type of property that fits your investment goals, whether it’s a vacation rental, long-term rental or fix-and-flip opportunity. Having a property in Hawaii for personal use has numerous benefits as well.
As Oahu real estate company HiEstates noted, strong appreciation rates and “unique market dynamics heavily favor investors with a long-term investment horizon.” From 1985 through 2022, median sales prices for single family homes and condos on the Hawaii’s third largest island have risen 596.7% and 467.9%, respectively, according to HiCentral.com data.
But high property appreciation means there is also a great opportunity to invest in the rental market. Investors who hold rental properties for the long-term tend to receive high internal rates of return because supply is low and demand high.
And as the Dwell Hawaii/Ho’opili Living firm suggested, you could do very well for yourself looking at outside-the-box investment strategies — like building an accessory dwelling unit (ADU) or secondary tiny home on your property, taking advantage of buying and selling via 1031 exchanges, building wealth using the BRRRR (“buy, rehab, rent, refinance, repeat”) strategy or purchasing an Hawaiian Airbnb.
When you think of bucket list destinations in the U.S., Hawaii spring to mind quickly. Once known primarily as a vacation hot spot, more Americans (and foreigners) are choosing Hawaii as their permanent residence now. Property and land are rare commodities in Hawaii, but if you do your homework, define your investment goals and embrace the aloha way of life, there’s still room for investors to tap into this exotic market.
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This article originally appeared on GOBankingRates.com: How To Invest in Hawaii’s Hottest Real Estate Like a Billionaire
