When you come to Hawaii, two things are very obvious:
- There are a lot of tourists at any given point on island.
- We have a lot of military members on Oahu.
Actually, the military is the second largest industry for the state behind tourism. Most of the military come for their PCS move for at least a 3 year terms. Depending on your assignment and job, your time on Oahu might be extended. Many military members are coming from out of state and some have never been to Hawaii before. This can make a move very stressful especially if you don’t know the area you are now moving to. The upside of that is that with today’s technology, most of the information you want and need can be found online. This is not to say that everything can be resolved with a quick internet search, but with the help of a good local real estate agent and the internet, a lot can be discovered.
Investing in Hawaii Real Estate
It has been a proven fact that one of the best investments someone can make is in real estate. This is especially true with Hawaii, which tends to stay somewhat insulated from the markets on the mainland. Every market in the country had a downturn when the mortgage bubble burst, but Hawaii did much better than most states. It also rebounded much faster and corrected ahead of the mainland markets.
PCS to Hawaii – Should Your Buy or Rent?
Financially speaking, there are very few instances that it makes sense for a VA buyer to rent versus buy in Hawaii. Generally speaking, the Hawaii market appreciates year after year. This means that if you buy a property correctly today it should increase in value tomorrow. Nobody has a crystal ball or can predict the future, but a good real estate agent who is knowledgeable with the market and pricing can certainly help to increase the odds of appreciation. So even if you are only stationed on island for the usual three year term, in most instances, the buyer will come out just fine should you sell when you PCS out of Hawaii.
Buying a Home in Hawaii
One of the obvious benefits for a VA buyer is zero to almost no money out of pocket on a purchase. Contrast that to a conventional buyer who may need anywhere from 10-20% as a down payment plus closing costs. For a down payment using simple math, let’s say a $700K single family home in Hawaii as an example. That can translate into anywhere from $70K to $140K for a conventional buyer out of pocket versus ZERO dollars for a VA buyer. The current VA cap on Oahu is $721,050, but a VA buyer can go higher with a small amount of money out of pocket. If approved, a VA buyer will only need 25% between the VA limit and the sales price. This means if a home is listed for $750K and the limit is $721,050 the VA buyer will need to pay 25% of the difference above the cap and the property’s sale price, or $7237.50 in this example. This is $750K minus $721,050 and then you take 25% of that amount. The lender will loan the difference.
Renting in Hawaii
Most of Oahu falls under the rental rules for the city and county of Honolulu. Under those rules, the minimum rent is usually 30 days. The reality is most people do not rent for 30 day increments and generally seek a year rental agreement. The landlords want to cover their expense as much as possible, so a renter is generally making someone else’s monthly mortgage payment. This is not a great benefit to the renter but is fantastic for the landlord. This also will include a security deposit, which in Hawaii cannot exceed one month’s rent. There can be additional amounts of money for a deposit with a pet should a landlord be agreeable to a rental with pets, though it’s generally a hard sell.
VA Buyer Benefits
The good news for a VA buyer when they come to island is they have some immediate benefits. This includes hotels costs which are currently 60 days, per diem costs to cover meals, and COLA starts when you arrive and so does BAH. TLA which is an OCONUS allowance used to offset the “more than normal” expenses while searching for a home. This is usually provided in 10 day increments and is based on number of dependents and current per diem rates. The VA interest rates are also fairly low compared to the other interests rates. This is in part to having the VA guarantee loans made by lenders releasing many of the nonpayment worries lenders have.
So in a nutshell, you have a great residential market in Hawaii that has historically appreciated, but you have higher than average rents, which make renting not such a great financial decision. Since a VA buyer has lower interests rates, BAH, COLA, and TLA, this certainly makes financial sense to use a VA entitlement to make a real estate purchase in this market versus a lower cost mainland market. With the help and guidance of a good agent and the internet, you should do research on drive times, neighborhoods, schools, walkability ratings, and demographics before arrival. This is not to say that potentially moving to an area and buying a house in a market you do not know is without worry. It absolutely is a concern but with the proper support and guidance the worry can be greatly reduced and hopefully turned into a positive and successful buying experience.
Want to Know More About Hawaii Life?
As a proud member of the Hawaii Life MST (Military Specialized Team), I have helped numerous VA buyers and sellers successfully navigate the real estate market. This also includes having some fantastic local assets to help in the process from VA specialized lenders, to home inspection companies, repair people, cleaning crews, and just about any contact you could need on island.
If you want to know more about the local market please do not hesitate to call, text or email me any time. I am always more than happy to help in any way.
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