Can You Buy Property in Hawaii?

Yes, you can purchase property in Hawaii as a non-resident. However, there are a few things to keep in mind.

First, nonresidents are subject to additional taxes and fees, which we will discuss later.

Additionally, if you are not a U.S. citizen, you may need approval from the Foreign Investment Review Board before purchasing property in Hawaii.

What are the Requirements for Buying Property in Hawaii?

The requirements for buying property in Hawaii are similar to those in other states. You must have a down payment, a good credit score, and proof of income.

Additionally, you must work with a licensed real estate agent and attorney to complete the transaction.

It’s important to note that Hawaii has some unique regulations regarding property ownership, such as restrictions on the sale of certain types of land.

Popular Locations for Real Estate Investment in Hawaii

Hawaii has many beautiful locations for real estate investment. The most popular areas include Honolulu, Maui, and the Big Island.

Honolulu is the state capital and largest city, making it a popular choice for those looking for urban living.

Maui is known for its beautiful beaches and luxury resorts, while the Big Island offers a more rustic, natural setting.

Real Estate Market Trends in Hawaii

The real estate market in Hawaii has been vital in recent years, with prices continuing to rise.

According to Zillow, the median home value in Hawaii is $673,400, which is higher than the national average.

There are signs that the market may be slowing down, with inventory levels increasing and price growth slowing.

Financing Options for Purchasing Property in Hawaii

There are several financing options available for those looking to purchase property in Hawaii.

These include traditional mortgages, FHA loans, and V.A. loans. WingWorking with a lender familiar with the Hawaii market is essential, and who can guide you through the process is necessary.

Taxes and Fees Associated with Buying Property in Hawaii

As mentioned earlier, nonresidents are subject to additional taxes and fees when purchasing property in Hawaii.

These include a 10% Transient Accommodations Tax and a 4.5% General Excise Tax.

There may be fees associated with obtaining approval from the Foreign Investment Review Board.

How to Buy My First Rental Property?

Is it hard to buy a house in Hawaii?

Buying a house in Hawaii can be challenging for several reasons:

Housing costs are high. The median home price in Hawaii is significantly higher than the U.S. average, making it difficult for many buyers to afford a home. 4

According to Zillow, the median home value in Hawaii was $645,000 as of July 2020, compared to $225,000 in the U.S.

Supply is limited. Hawaii has limited land available for development, constraining the housing supply. This puts upward pressure on home prices.

The cost of living is high. In addition to high housing costs, the cost of living, in general, is more elevated in Hawaii due to transportation costs and utility bills. This means buyers need a higher income to afford a mortgage.

Strict zoning and regulations. Hawaii has several strict zoning laws and building codes that can limit new residential construction. Some argue this restricts the housing supply and keeps prices elevated.

High transaction costs. Closing costs, title insurance, real estate broker commissions and other transaction fees tend to be relatively high in Hawaii, adding to the burden for homebuyers.

Can you legally own land in Hawaii?

Yes, you can legally own land in Hawaii, both residential and commercial property. However, there are some restrictions and considerations:

Foreign ownership: Non-U.S. citizens and entities cannot generally own land in Hawaii in fee simple absolute. There are some exceptions, but only U.S. citizens and entities incorporated in the U.S. can have full legal ownership of Hawaiian land.

Conservation lands: Much of Hawaii’s land is owned by the federal or state governments for conservation and public use. Only a portion of the total land area is available for private ownership.

Native Hawaiian lands: Some land in Hawaii is owned by Native Hawaiian groups or held in trust for Native Hawaiian beneficiaries. This land is generally not available for purchase by outsiders.

Restrictive covenants: Some properties in Hawaii have private deed restrictions or covenants that limit who can purchase or use the land. These are legally binding but vary property by property.

Estates and inheritances: Transferring land ownership through estates and inheritances can sometimes be complex in Hawaii due to state laws governing wills and trusts. An estate planning attorney can help navigate this process.

High costs: As discussed in my previous response, housing and living expenses are relatively high in Hawaii. This limits who can afford to purchase land, especially for residential use.

Can a foreigner buy a house in Hawaii?

Foreigners can buy houses in Hawaii, but there are some restrictions:

Foreign individuals and companies cannot own land in Hawaii in fee simple absolute. This means they cannot have full legal ownership of the property.
Foreigners can buy houses through a particular landholding entity called a Cavendish corporation. U.S. citizens or permanent residents mostly own this domestic U.S. corporation.

The Cavendish Corporation then holds legal title to the property and leases it to the foreign owner. The lease can be for up to 99 years.
The state government must approve all transactions involving the sale of Hawaiian land to foreigners. This is to ensure compliance with state laws.
Foreigners must pay a 10% nonresident tax on capital gains when selling the property. Resident taxpayers only pay a 4% capital gains tax.

Many housing communities and developments in Hawaii have deed restrictions that forbid foreign ownership. So not all properties are available to foreigners.
Financing a home purchase can be challenging for foreigners due to more stringent lending requirements.

FAQ

What is the minimum down payment required to buy property in Hawaii?

The minimum down payment required to buy property in Hawaii varies depending on your loan type. Generally, you can expect to need a down payment of at least 3.5% for an FHA loan or 5% for a conventional loan.

Are there any restrictions on the type of property that can be purchased in Hawaii?

Yes, there are some restrictions on the type of property that can be purchased in Hawaii. For example, there are restrictions on the sale of certain types of land, such as Hawaiian Home Lands and conservation lands.

Can I use a property management company to manage my investment property in Hawaii?

Yes, you can use a property management company to manage your investment property in Hawaii. This can be especially helpful if you do not live in Hawaii full-time.

Are there any tax benefits to owning property in Hawaii?

There may be some tax benefits to owning property in Hawaii, such as being able to deduct mortgage interest and property taxes on your federal income tax return.

How long does it take to purchase property in Hawaii?

The timeline for purchasing property in Hawaii can vary depending on several factors, such as the type of loan you are using and the complexity of the transaction. Generally, the process can take anywhere from 30 to 60 days.