As the economy continues to recover from its all-time lows after 2008’s sub-prime mortgage crisis, more and more lenders are willing to provide consumers with affordable mortgage loans. With home values consistently increasing year after year, for those considering trying their hand at Hawaii real estate investing, there’s no better time than now. Before you enter the Hawaii market, you’ll want to consider taking the following steps to ensure you begin your venture in the most profitable position possible.
Evaluate Your Current Financial Situation
Financial experts typically advise buyers relying on mortgage loans to finance their real estate investing ventures to put down at least 20 percent of a home’s purchase price when they buy. Most real estate professionals also generally recommend that buyers avoid taking out a second mortgage loan to purchase their investment property if they are currently paying off a mortgage on their primary residence. Obviously, purchasing your real estate investment property outright without taking out a loan requires plenty of savings, but if this is a potential option for you, you might want to opt for a foreclosed property. Foreclosed properties are typically listed below the local market median.
Leveraging Your Purchasing Power
If you are lucky enough to strike a golden Hawaii real estate investment opportunity but require financing in order to afford it, you might want to consider living in your investment property as your primary residence so you can take advantage of more favorable owner-occupant mortgage rates. The good news: you don’t have to live there forever. Lenders typically require just one year of residency in order for borrowers to lock in this lower mortgage rate for the entire life of their loan. Owner-occupied interest rates are usually more favorable than loans for a secondary home or income producing rental property. And should you be a fortunate enough real estate investor that is able to purchase multiple income producing properties at once, it’s important you choose the right financing. By utilizing cheap 30-year fixed-rate mortgages, buyers are able to leverage their investment capital and use their available funds to purchase as many income producing properties as possible – which allows them to accelerate their wealth-building with turnkey properties.
Project Your Potential Cash Flow
Thanks to the growing popularity of home improvement shows in recent years, buyers often assume that house flipping is an easy way to turn quick profits. Unless you are experienced in large-scale home renovations, you should not assume you can successfully flip a house, or that you can successfully flip a home without investing a significant amount of money and especially, time. Renting out your investment property allows you to cover any of your costs associated with your homes taxes, mortgage, insurance and utility payments, and the ability to reinvest your income over time by making gradual improvements to your home. Even if you make minimal improvements to your Hawaii home, in just a few years you should be able to make a substantial profit off of its sale.
When it comes to Hawaii real estate investing, your personal finances and preferences are just two pieces of your investment puzzle. It’s imperative you do extensive research and understand the ins and outs of your target real estate market. You’ll want to decide on your investment type, and whether you want to directly or indirectly invest in the real estate market.