Hawaii’s balmy year-round weather and relaxed lifestyle make it an ideal location for those seeking a vacation or retirement home. At the end of the first quarter of 2015, Hawaiian real estate sales to foreigners accounted for approximately 2% of all foreign real estate sales in the US, a market worth approximately $1.3 trillion, or nearly 8% of the existing home purchases in the US, in 2014. Despite the strengthening of the US dollar against most major currencies, the US real estate market is still considered an attractive, stable investment opportunity for foreign investors.
Before starting your Hawaiian property search, however, it’s important to familiarize yourself with the home-buying process in the US, and in Hawaii. Fortunately, the US real estate market is well-regulated, but it’s important to be aware of any differences or specific steps in the purchasing process that are specific to the state of Hawaii. It’s a good idea (and strongly recommended) to find a licensed real estate agent who is familiar with both US and Hawaiian real estate law to guide you through the purchase process.
The following steps can also help you navigate through the US home-buying process. Taking some time to think through each stage can help to save you time and money in the long run:
- Create your blueprint
- Define your goal
- Do the math
- Fill in the details
- Get to know the neighborhood
- Research your financing options
- Learn the rules for where you want to buy
- Look for ways to save
Keep reading to become an expert in buying real estate in Hawaii.
Create your blueprint
Buying a home is a complicated process, especially when it’s in another country. Taking the time to research any local or federal laws that could affect your purchase, as well as your financing options, can prepare you to make the best decision possible.
Define your goal
Start by defining your investment objective, or goal. What do you want to accomplish by purchasing an American property? While there are any number of reasons to purchase in the US, it’s a good idea to clearly define this goal as soon as possible so that you can target your search to properties that match your needs. Ask yourself, what do you plan to use this property for? Will it be a rental that is meant to generate income, a future retirement home, or a vacation home to enjoy with family and friends?
Defining your investment objective can help you make the best decision for your needs. Once you’ve established your investment objective, the next step is to factor in not only the property’s purchase price, but also any other relevant costs associated with the property. Costs like property taxes, closing costs, any ongoing costs of managing the property (if you’re living overseas, who will handle any repairs and ongoing maintenance?), and handling maintenance or repair work. Some things to consider:
- Property taxes
- Closing costs
- Agent / attorney fees
- Repairs and ongoing maintenance
- Insurance
Accounting for all costs associated with the property will help you to determine how much you can afford, and hopefully help you to avoid any unpleasant surprises when it comes to cost. Doing this as early as possible in the process will help you to figure out how much you’re able to spend before you commit to anything.
Do the math
Once you’ve established the investment objective and started to identify potential costs, the next step is to put together a budget.
Sending money overseas can be expensive, and the fluctuations of foreign currency markets can be intimidating. You can save yourself a lot of time and hassle by talking with a money transfer service provider, or currency specialist, about your options. By using an currency specialist to make an international money transfer, you can save time and money when transferring funds abroad. Using a currency broker to send money can help you in a number of ways, including helping you find the best international transfer rates, helping you to lower or avoid costly international transfer fees when you send money internationally, and even helping to determine if you should pay in your home currency or in US dollars. By working with a currency specialist to find the safest, fastest, and most cost-effective options available to fund your overseas home purchase, you’ll most likely save yourself time and money in the long run. If you need to send large amounts of money, or need to send regular payments, such as monthly mortgage payments, an FX broker can be especially helpful. An FX broker can offer strategies to help protect you against fluctuating foreign exchange rates. These strategies include futures contracts, hedging options, and the ability to lock in a favorable current rate for a future payment. Refer to the overseas property guide for questions to consider, and use our volatility tool for a big picture view of current currency market trends.
Look for Ways to Save
Lastly, it’s a good idea to give yourself time to explore financing options, as well as options for sending money abroad. If you take the time to research all options available, you’ll find that often it’s money transfer service providers that offer the safest, fastest, and most cost-effective ways to send money to the US to fund your real estate purchase. FX broker, also called currency specialists, typically offer a variety of international money transfer services that can help you save in the long run. From better currency exchange rates compared to what a bank offers, to sending money at lower fees than a bank, often the better option is to go with the services of a currency broker. FX brokers typically do not limit how much you can send at one time, either, helping you to avoid costly transfer fees each time you need to send money abroad. Money transfer companies also offer the ability to set up regularly-scheduled payments and lock-in favorable current rates for future use. It’s important to shop around and compare different providers to find the best international money transfer service for your needs. See the difference and savings in rates for pounds to dollars and euros to dollar now, with our comparison tool.
Fill in the Details
Know the Neighborhood
It’s important to find out as much as possible about the area before you make any decisions. Your intended purpose for the property, the investment goal that you defined earlier in the process, is the most important reason for what you ultimately decide to buy, but there are additional factors which can influence the property’s current and future value. Checking local statistics for the area is a good place to start. A licensed agent will likely already have these statistics, or know where you can find them. Look at factors such as the neighborhood’s current and expected future demographics, job growth forecasts (if you plan to move here while still working), crime and safety statistics, public transportation, local taxes, or any future city, state, or federal development plans that could have an effect on the property or the general area. All these things are important to know and could impact your final decision. If you’re working with a local agent, they may have additional statistics that will help you make an informed decision.
Learn the Rules
The American real estate market is well-regulated at the federal and state levels, but there may be real estate laws or regulations that are specific to the state of Hawaii. It’s recommended that you find a real estate agent who is licensed to work in Hawaii and can help guide you through the buying process. Using the services of a licensed agent and/or a real estate attorney knowledgeable about the Hawaiian real estate market can help to ensure a successful home purchase. A real estate attorney can also help guide you through an important requirement for any real estate purchase within the US: obtaining an Individual Taxpayer Identification Number (commonly referred to as ITIN). The ITIN is required to finalize any real estate purchase in the US, and must be acquired by application to the IRS (Internal Revenue Service), a process which can take up to five weeks.
Research Financing Options
For non-US citizens and non-residents of the US, it can be difficult to obtain financing from a US lending institution or bank. US financial requirements typically require any foreigners seeking financing to prove they either have a US-based income, or they can provide documented proof they’ve filed tax returns in the US. Because of the difficulties in obtaining financing, it’s become common for foreign buyers to make an all-cash purchase for their new home. However, if you choose to make an all-cash purchase, be aware that you may face special US tax filing requirements, as well as withholding taxes, when you sell the property.
