Outside Investment Opportunities

It’s constantly in the news: Hawaii’s median home prices are skyrocketing!

It is bad enough if you are looking to buy your own home, but what about those who are looking to invest?

There are two challenges to Hawaii investors in today’s market. One is the down payment. Because investor loans require a minimum of 20%, the rising home prices make it difficult for anyone to come up with that kind of money. If the median price of a single-family home on Oahu is $1 million, then 20% down would require $200,000 in addition to closing costs.

The second challenge is the rental income. Most investors prefer to at least break even. Going back to our example, the $800,000 mortgage will likely result in a $4,500 monthly payment, so you will need to rent this out for $4,500 to break even. This does not include other potential costs, such as repairs and maintenance and management fees.

Hawaii investors may want to look outside of Hawaii. There are many places on the mainland, where the prices are affordable and the cash flow is positive! In addition, the properties are in excellent condition — sometimes brand new — they are in good economic areas, and sellers are even offering closing cost credits! Many have connections to property management companies that only charge 5% versus the usual 10%.

Lets see an example: Purchase price is $300,000 with 20% down ($60,000), total payment may come out to be $1,500. The rental income can be as high as $2,500 — so even if you allocate $1,000 per month for property management fees, repairs and maintenance, you will still see a positive cash flow of $900 per month!

I have seen properties in other states going for $250,000. These are single-family homes (almost new constructions) in stable areas. The down payment on these would be $50,000, the estimated payment would be $1,400 and the rental income would be $2,000 per month. This is a positive cash flow of $900 per month. Add that back to the principal loan amount and your loan can be paid off in 13 years. After that, it is all rental income! If you would like to find out more, please contact Cross Country Mortgage at 808-222-2411. We are able to transact loans in all 50 states from right here in Hawaii!