How To Flip Houses In Hawaii: Step By Step (2024)

If you're drawn to the natural beauty of the Hawaiian Islands and have a penchant for real estate investing, learning how to flip houses in Hawaii can be an exciting and lucrative venture. With its unique blend of stunning landscapes, vibrant culture, and thriving real estate market, Hawaii offers much for investors seeking profitable opportunities.

In particular, demand remains persistent, despite significant increases in home values and interest rates. Prices are near historic highs, and the number of days homes spend on the market is down year-to-date, according to the Federal Reserve Bank of St. Louis; that means pent-up demand is stronger than the negative sentiment surrounding interest rates and should continue to boost profits for Hawaii home flippers.

Whether you're a seasoned investor or just starting out, this article will equip you with the knowledge you need to embark on a successful house-flipping journey in the Hawaiian real estate market, including:

• What Is Flipping Houses?
• Hawaii House Flipping Statistics
• How To Flip Houses In Hawaii (7 Steps)
• How To Find Houses To Flip In Hawaii
• Do You Need A License To Flip Houses In Hawaii?
• How To Flip A House In Hawaii With No Money
• Best Cities To Flip Houses In Hawaii
• Final Thoughts On Flipping Homes In Hawaii

*Before we begin our guide, we also invite you to view our video on How To FLIP A HOUSE For Beginners (Step-by-Step). Host and CEO of Real Estate Skills, Alex Martinez, & Stan Gendlin share how to flip a house from start to finish in Hawaii! 

Together, Alex & Stan have completed over 1,000+ house flips. What you learn in this video will give you the confidence and guidance to successfully complete your fix-and-flip project!

What Is Flipping Houses?

House flipping has emerged as one of the most lucrative real estate investment strategies, embraced by successful investors due to its substantial income potential. According to the latest Year-End Home Flipping Report by ATTOM Data Solutions, the average flipped home generated a nationwide gross profit of $67,900; that translates to a 26.9% return on investment.

But what exactly is house flipping? Beyond its surface definition as an investment strategy involving the purchase, rehabilitation, and resale of properties for profit, flipping houses is a meticulously orchestrated process that demands synergy between various stages to minimize risks and maximize returns.

To thrive in the Hawaii house flipping market, it's crucial to understand the local real estate market's unique dynamics, identify potential properties, execute cost-effective renovations, and strategically sell them for maximum profit. By navigating these essential aspects, investors can unlock the potential of house flipping in Hawaii and achieve success in this rewarding investment strategy.

Hawaii House Flipping Statistics

To succeed as a house flipper in Hawaii, it is essential to grasp the vital data and metrics that drive the local real estate market. Understanding these key factors can significantly enhance investors’ chances of success. Here's an overview of the essential data and metrics that every aspiring house flipper in Hawaii should know:

• Average Home Value: $834,499
• Median Sale Price: $1,000,125
• 1-Year Appreciation Rate: -1.5%
• Median Days To Pending Sale: 20
• Median Days On Market: 65
• Homes For Sale: 4,915
• Homes Sold: 1,124
• New Listings: 1,116
• Months Of Supply: 3
• Foreclosure Rate: One in every 9,282 households
• Population: 1,440,196
• Median Household Income: $88,005
• Unemployment Rate: 1%

*All Hawaii housing market statistics are as of the second quarter of 2023.

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How To Flip Houses In Hawaii (7 Steps)

Aspiring investors looking to master the art of flipping houses in Hawaii can begin their journey by following these seven crucial steps. By understanding and implementing the steps listed below, investors can navigate the unique real estate landscape of Hawaii and increase their chances of success:

1. Find A House-Flipping Mentor
2. Research The Local Housing Market
3. Find & Analyze Distressed Properties
4. Raise Capital To Fund The Deal
5. Close On The House
6. Renovate The Property
7. Resell The House

1. Find A House-Flipping Mentor

While house flipping is possible for new investors, a mentor's guidance offers substantial benefits. Leveraging a mentor's expertise grants real-world insights, strategies, and a supportive network for growth. More importantly, however, a mentor fosters confidence, transforming obstacles into stepping stones for untapped potential.

Finding a mentor can be done by networking, paying for their services, or seeking recommendations. Either way, investing in an experienced mentor upfront is wise for first-time flippers who want to avoid mistakes and improve decisiveness. Embracing mentorship is crucial in mastering house flipping.

Ready to start house-flipping in Hawaii? Join Alex Martinez at his FREE training to learn how to get started with house-flipping and wholesaling!

2. Research The Local Housing Market

To excel in flipping houses in Hawaii, it is crucial to possess comprehensive knowledge of the local market. For invaluable insights into the state's housing sector, investors should familiarize themselves with the following resources:

• Zillow Housing Data Research
• Zillow’s Hawaii Market Overview
• Redfin’s Hawaii Housing Market Overview
• Hawaii Realtors Association Market Data
• Realtor.com’s Hawaii Market Overview
• ATTOM Data Solutions’ Hawaii Real Estate & Property Data
• Federal Reserve Bank of St. Louis’ Hawaii Data
• SoFi’s State Foreclosure Data
• U.S. Census Bureau’s Hawaii Data
• Bureau Of Labor Statistics’ Hawaii Economic Data

3. Find & Analyze Distressed Properties

When it comes to finding and analyzing distressed properties in Hawaii, investors have several opportunities at their disposal. One effective method to evaluate potential deals is employing the 70% rule, which offers a solid starting point for analysis, especially for new investors.

First, investors must determine the property's after-repair value (ARV). The ARV represents the estimated value of the investment property after it has been renovated to its desired condition; this can be calculated by comparing the property to nearby comparable homes or using an ARV calculator.

Once the ARV is determined, investors can apply the 70% rule by multiplying the ARV by 70% (or 0.70) and then subtracting the estimated rehab costs. The resulting figure represents the maximum allowable offer (MAO) that investors should not exceed when purchasing. Adhering to the MAO helps ensure sufficient profit margins and a favorable return on investment.

Here is the formula:

ARV - Fixed Cost - Rehab Costs - Desired Profit = Maximum Allowable Offer (MAO)

To find distressed properties in Hawaii, investors can explore various avenues, such as researching public records, engaging in direct mail campaigns, attending foreclosure auctions, or driving through neighborhoods to identify potential opportunities. It's also advisable to seek the expertise of contractors for accurate rehab cost estimates.

Investors can effectively find and analyze distressed properties in Hawaii by combining these strategies and employing the 70% rule, ultimately increasing their chances of realizing success.

4. Raise Capital To Fund The Deal

Investors are awarded several opportunities to raise capital to fund their deals. Still, exploring external funding sources is crucial to preserve personal savings and enable business expansion. Therefore, investors should seek private or hard money loans tailored for home flippers instead of using their money.

By borrowing funds externally, investors can avoid financial constraints and scale their business more effectively than relying solely on personal resources. While these loans often come with higher interest rates, the speed at which funds can be accessed justifies the additional costs. Private and hard money loans provide short-term capital placement, allowing investors to act swiftly in a competitive market.

Apart from private and hard money loans, alternative financing options such as joint venture partnerships can also be explored. These partnerships offer opportunities to pool resources and share risks with other investors. Additionally, conducting thorough research and due diligence on terms, conditions, fees, and repayment requirements is essential when considering these funding options.

5. Close On The House

When closing on a house flip in Hawaii, the process involves several important steps. While the specific details may vary, the following outline provides a general overview:

• Purchase Agreement: After identifying a suitable property and negotiating the terms of the sale, both parties sign a real estate purchase agreement. Before signing, conducting due diligence and thoroughly understanding the terms is essential.
• Proof Of Funds: The seller may request proof of funds to ensure the real estate investor can proceed with the deal; this may involve paying an upfront amount and providing a proof of funds letter, signed by a bank official, demonstrating the availability of funds for the remaining balance.
• Title Search: A title company conducts a title search to identify any liens on the property, verify property boundaries, and issue title insurance. This step ensures a smooth transfer of ownership.
• Attorney Assistance: A qualified attorney manages the closing process, including handling documents, arranging fund transfers, and completing legal paperwork required for recording the sale.
• Property Inspection: It's advisable to conduct a property inspection, even if buying "as is," to identify any contract violations or issues that need resolution.
• Closing Costs: While cash buyers typically have fewer closing costs than those obtaining a mortgage, investors should be prepared to cover their share of attorney fees, title search fees, escrow fees, and prorated homeowners insurance and property taxes.
• Closing: Once all documents are signed, and fees are paid, the buyer provides payment, and the seller hands over the keys.
• Recording: The closing documents are sent to the county's recording office to establish the new owner's legal rights officially.

By following these steps, investors can successfully close on a house flip in Hawaii and finalize the transaction, securing the property for renovation and future profit potential.

6. Renovate The Property

When renovating a property for a successful house flip, time management, and strategic decision-making are crucial. Striking a balance is essential, ensuring the renovated home stands out in the neighborhood without exceeding its value.

Prioritize improvements that make the property visually appealing and align with the neighborhood's expectations and market demands. Investors can maximize their investment potential by emphasizing cost-effective renovations, enhancing curb appeal, and focusing on projects with a high ROI.

According to Remodeling Magazine, the renovations that return the most money to investors at the time of a sale in Hawaii (and the rest of the Pacific region) are:

• Electric HVAC Conversion: Recoups 104.8% of the original cost
• Vinyl Siding Replacement: Recoups 98.3% of the original cost
• Garage Door Replacement: Recoups 96.8% of the original cost
• Steel Entry Door Replacement: Recoups 88.7% of the original cost
• Fiber-Cement Siding Replacement: Recoups 86.9% of the original cost

7. Resell The House

Selling the renovated house promptly and for profit is the key goal for investors. The longer the property remains unsold, the more costs accumulate, including property taxes, holding costs, repair expenses, and missed opportunities. To maximize profit margins, selling the house as soon as it is restored to its desired condition is crucial.

The main objective is to sell the property at a price that exceeds the total investment. If the property was acquired at a significantly lower cost than its fair market value and the renovations have increased its worth considerably, investors should be in a favorable position to generate a profit. Timing is crucial; selling the house quickly can help minimize additional expenses and maximize returns.

Consider collaborating with a real estate professional, such as a Realtor or agent, despite the higher upfront costs. Their expertise and network can contribute to selling the home faster and at a higher purchase price, compensating for the added expense. These professionals possess knowledge of the local market, potential home buyers, and effective marketing strategies through platforms like the Multiple Listing Service (MLS). Their insights and resources can be invaluable in attracting interested buyers and navigating the selling process smoothly.

How To Find Houses To Flip In Hawaii

When finding houses to flip in Hawaii, it's important to consistently employ effective strategies to identify potential properties. Here are some proven methods to help investors discover distressed properties and maximize their opportunities:

• Collaborate With Local Real Estate Agents: Tap into the extensive market knowledge and expertise of local real estate agents. They possess valuable insights on both on-market and off-market properties, providing investors with various options.
• Access The Multiple Listing Service (MLS): Consider becoming a licensed agent or working with an agent who can grant access to the MLS. This comprehensive database of real estate listings offers a wealth of information on distressed properties and can be valuable.
• Attend Foreclosure Auctions: Foreclosure auctions, organized by banking institutions, present excellent opportunities to secure properties below market value. Proactive investors can participate in these auctions and acquire distressed properties that can be flipped for profit.
• Research Public Records: Visit the local Recorder's Office to identify properties at risk of foreclosure. Publicly available foreclosure records help investors pinpoint distressed homeowners and properties that may present potential opportunities for flipping.
• Launch Targeted Marketing Campaigns: Implement a targeted direct mail campaign to reach homeowners in the desired area. Investors increase their chances of finding motivated sellers by letting them know about their interest in purchasing distressed properties and their ability to close quickly.
• Explore Neglected Properties: Drive around neighborhoods and look for neglected properties. While not always indicative, neglected homes suggest owners are more inclined to sell, potentially leading to profitable opportunities for investors.

Combining these strategies allows investors to develop a reliable pipeline of potential properties to flip in Hawaii. Remember to conduct thorough due diligence and analysis to ensure the viability and profitability of each opportunity.

Do You Need A License To Flip Houses In Hawaii?

Flipping houses in Hawaii does not require a real estate license. Anyone interested in house flipping can do so.

However, it's important to note that acting as a real estate agent or broker without a license is prohibited. Sellers in Hawaii are also obligated to disclose any known information about a property's condition and their licensed status.

Read Also: How To Get MLS Access: The (Ultimate) Guide

How To Flip A House In Hawaii With No Money

Flipping houses in Hawaii offers the advantage of not relying on personal funds. Instead, investors can tap into the resources of private and hard money lenders; this eliminates the complexities of dealing with traditional banks, including credit checks and lengthy approval processes. Investors gain immediate access to cash by leveraging private and hard money loans, expediting the house-flipping process.

Even investors who haven't yet mastered the art of flipping houses in Hawaii can still participate with little or no money. Wholesaling allows investors to enter the real estate market without using their funds. Wholesalers earn a fee by connecting sellers with buyers, with the transaction being funded by the end buyer, who pays the wholesaler's fee for their services.

Best Cities To Flip Houses In Hawaii

The best cities to flip houses in Hawaii include, but are not limited to:

• Honolulu: Located on the island of Oahu, Honolulu made the list of “best cities to flip houses in Hawaii.” Thanks to a median home value below the state’s average, Honolulu combines demand with affordability—relative to the rest of the state average.
• Hilo: On the eastern shore of “The Big Island,” just southeast of Maui, Hilo is becoming more popular with investors. Like Honolulu, Hilo is both in demand and relatively affordable. The unique combination bodes well for investors flipping homes.

Final Thoughts On Flipping Homes In Hawaii

Flipping houses in Hawaii can be lucrative with careful planning and execution. By following the step-by-step guide provided in this article, investors can navigate The Aloha State’s unique real estate market, identify profitable opportunities, secure financing, and successfully renovate and sell properties for a profit. With dedication, knowledge, and a strategic approach, learning how to flip houses in Hawaii can lead to financial success and a rewarding real estate career.

At Real Estate Skills, our team of experts is ready to provide you with the tools you need for flipping houses in Hawaii. We're committed to providing the knowledge, resources, and support you need to navigate a Hawaii property flip successfully. So avoid common mistakes and maximize your returns by leveraging our expertise.