Buying an Investment Property in Hawaii: How to Avoid Overpaying

Buying an Investment Property in Hawaii: How to Avoid OverpayingIf you're considering an investment property the Big Island, you're likely putting together a strategy to make sure it quickly becomes profitable. One of the keys to a profitable investment property, whether it's a short term vacation rental or a long term rental home, is not overpaying for it in the first place. We have some tips to help you move forward with a confident purchase, knowing you've done your part to avoid overpaying. 

Before you buy a home on the Big Island, check out these tips to make sure you're getting a great deal.

Know Your Local Market

The first thing you want to do is make sure you understand the market you're shopping in. The best way to do this? Working with a local agent who has been in the area for many years, like our team. We've lived on the Big Island for years, and we've been helping buyers and sellers for so long on this island that we truly understand date nuances of each market here. 

One of the most reliable methods to gauge a property’s fair market value is by analyzing comparable sales. These are recently sold properties with similar features (size, age, location, and condition). Comps provide a benchmark for what you should expect to pay for a similar property. Combining that data with what we've learned through years of experience, we can make sure the price you are considering is fair market value. 

Pay Attention to the Inspection

Don't neglect a comprehensive inspection of the property to identify any potential issues that could affect its value or require costly repairs. Review the inspection report for structural problems, plumbing and electrical issues, roofing conditions, and pest infestations.

We will also include an inspection contingency in your offer so that you have options if the inspection reveals the property is not worth what you expected. An inspection report can be a powerful negotiation tool if significant issues are found, allowing you to avoid overpaying for a home that is not in the condition you expected.

Take the Appraisal Seriously

Another detail that most of our clients include in their offers is the appraisal contingency. Take the appraisal of the property seriously, because this is the metric that is going to show you how banks will valuate the property. Even if you can afford to, hesitate before putting more money down in order to bridge an appraisal gap. 

Instead, we can help you negotiate with the seller if the appraisal is lower than the offered price, finding a middle ground that can give you peace of mind that you are getting a good deal. 

Keep Emotions in Check

Some buyers find themselves overpaying because they let their emotions lead. When you're buying an investment property, you need to stay focused on the data to guide you. Set a firm budget, identify the features you need the property to offer, and stay open minded in case an inspection or appraisal reveals that the property is not what you thought it was.

Be prepared to walk away if you need to, not letting yourself get attached to any property before you close on it. While real estate transactions can be an emotional roller coaster, your future self will thank you for staying grounded and making a smart decision. 

Be Smart About the Location

The location of your investment property is key. A smart investment involves not just a property that is in good condition and fits your criteria, but a location that will allow the rental property to be in high demand. Pay attention to future development plans in the area and how they might impact the value of the property. 

Greg Smith with Boulder Home Source explained that the location of the investment property is essential to consider when he said, "Pay attention to future development plans around your investment property, as they can significantly impact property values, rental demand, and overall investment potential, transforming a good purchase into a great one."

Ready to learn more about Big Island real estate? We can help you find what you're looking for, so contact us any time. 

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