When people vacation, the first thing they typically think about is the beautiful state of Hawaii. For many years Hawaii has been the ultimate destination for vacationers to enjoy beaches, hikes, and volcanoes. However, what if I told you that Hawaii is also a great destination for real estate investors?
According to the most recent census, Hawaii has a population of just over 1,450,000 people. Of those citizens, nearly 20% are 65 years or older. As a comparison, the United States has roughly 15% of its population aged 65 years or older.
So, what does that mean for you, a real estate investor? It means Hawaii, a state with a large number of senior citizens, retirees, and elderly, is going to have an influx of homes available to buy, sell, or rent as individuals pass away, move in with their children, or move into nursing homes.
A great way to take advantage of this macro Hawaii housing trend is by wholesaling residential real estate. In this article, we are going to tell you how to wholesale real estate in Hawaii so you can access and profit from the booming Hawaii real estate market.
Wholesaling houses is a type of short-term real estate investment strategy. It is the process of connecting potential buyers and sellers in a real estate transaction in exchange for a fee.
The way in which it works is you, the wholesaler, sifts the market for distressed properties and motivated sellers. Then, once you go under contract with your seller you immediately assign your contract over to another investor. Usually, your end buyer will be a fix-and-flip investor.
Wholesaling real estate is a great strategy because it provides a win-win-win scenario. The initial homeowner is happy to offload their asset, the flipper is happy to get access to an attractively priced house, and the wholesaler is happy because they’ve secured a fee with little - to no - money down. Similar to owning a rental property, wholesaling is a great way to generate cash flow.
In the following nine steps, we’ll show you how to wholesale properties in Aloha State. Be sure to check out our in-depth video showing you how to wholesale real estate step by step here:
Here's our simple step by step process for wholesaling real estate in Hawaii:
Before you enter any real estate market, you are going to want to get in touch with a wholesale mentor. A wholesale mentor is an individual who has experience with the Hawaii wholesale and broader real estate markets. They’ll be able to put you in touch with cash buyers for your cash buyer list, attorneys to provide legal advice on your transactions, and distressed property owners.
These mentors have a plethora of experience that a wholesale beginner can piggyback off of. Accessing their network can provide you with a leg up against your competition.
Before diving into any one of the Honolulu, HI, Hilo, Hi, or any one of the other Hawaii markets, you’ll want to understand the state’s wholesaling laws and contracts.
The Hawaii Revised Statutes - Chapter 467 discusses the laws regarding real estate brokers and salespersons. Although as a wholesaler you won’t need a real estate license (more on that later), you’ll still want to know the laws associated with brokering deals in the Aloha State.
In Hawaii, a real estate broker or salesperson is anyone who sells a property in exchange for compensation. Remember, wholesaling is selling the equitable right to a purchase agreement, it is not selling the actual property itself. So, since you won’t be engaging in the marketing and sale of the property itself, you can avoid the need for a license.
But, even so, the rules surrounding wholesaling are rather opaque and not explicitly discussed in the Hawaii Revised Statutes. You’ll want to be extremely diligent to ensure you aren’t acting as a broker without an actual license.
You should also familiarize yourself with a standard Purchase Agreement typically used for Hawaii real estate. Here is an example of the Hawaii Association of Realtors Purchase Agreement. It's a smart idea to review the contract with your mentor or an attorney before signing and executing the transaction.
Once you get a good grasp of the legal nuances, you’ll want to start the due diligence phase of your wholesaling journey.
After getting a good grasp of the Hawaii real estate laws and contracts, you’ll want to start doing some significant research to determine the right submarkets to explore wholesaling houses. As part of your research, a good place to start would be glossing through the many online realtor resources Hawaii has to offer. Here are a handful of resources for some of the larger Hawaiian markets:
Each of these sites has educational content, contact numbers, event calendars, and other resources you might find helpful as you begin your hunt for wholesale deals.
You may also want to consider searching social media sites like Facebook and Twitter to reach out to local investors in the region that can put you in touch with lawyers, real estate agents, and other professionals to assist you.
Keep in mind Hawaii is predominantly a vacation spot. Unlike wholesaling deals on the mainland, Hawaii deals might be closely related to the vacation industry and short-term rental markets. Checking out travel websites, blogs, and speaking to travel agents could be a great way to expand your knowledge of the region and understand what typical home buyers look for.
Building a cash buyer list is essential to the wholesaling process. When you find a particularly attractive investment and go under contract with its seller, you are going to want to offload that contract to a predetermined, pre-vetted list of cash buyers.
Compiling this list of fix and flip investors ahead of time will help the closing process go smoothly and without any delay.
You can also check out this video on how to find cash buyers!
Once you’ve compiled a list of cash buyers, it’s time to find motivated sellers and distressed properties to wholesale.
Motivated sellers are homeowners that are looking to offload their property very quickly. These owners are typically in a cash crunch or have inherited an unwanted property. These individuals could also be owners of a dilapidated house that they’d rather sell to a flipper instead of renovating themselves. Regardless, these sellers would rather sell their property quickly to a wholesaler for below-market value in an off-market deal rather than wait for a higher offer. Find these motivated sellers and ask them the right questions - they can be a great source of attractive investments.
You’ll also want to search the market for distressed properties. Distressed properties are properties that are in a less-than-ideal condition. Perhaps a previous tenant damaged the property or the owner was foreclosed on by a bank or a hard money lender and now the property is in poor shape. Fix and flip investors love distressed properties because they can renovate them, stabilize them, and relist them on the Multiple Listing Service (MLS).
Search the web, bank auction sites, and foreclosure listings to find these distressed properties to wholesale.
Once you’ve found the right property, it’s time to put it under contract. Considering that you, the wholesale investor, need to be cost-conscious – what is the right price to offer?
This is where the Maximum Allowable Offer or MAO Formula comes into play. This is what the formula looks like:
Maximum Allowable Offer (MAO) = After Repair Value - Rehab Costs - Desired Profit - Wholesale Fee.
The MAO is the maximum purchase price a wholesaler should pay for an asset. Following this formula will ensure you and your fix or flip investor will make a profit.
Your goal as a wholesale investor should be to find motivated sellers and discounted properties to sell to other investors. The maximum allowable offer will help you stay within a range of prices that will ensure your transactions - and the ultimate sale of the contract - are successful.
Step one is calculating the After Repair Value (ARV). The ARV is the value of a property after renovating it and bringing it up to its full potential. You can calibrate the ARV by networking with appraisers, lawyers, and realtors to determine what similar properties of surrounding markets have recently sold for.
For example, if you are renovating a two-bedroom home in Maui or Honolulu, you’ll want to walk the surrounding streets, talk to local realty companies, and determine what the house would sell for once you perform the necessary repairs. That could mean simply renovating the kitchen, updating the landscaping, or adding a bedroom or bathroom to the house’s configuration.
Next, you’ll have to estimate the rehab costs necessary to fix up your distressed property. Is the property going to need new stovetops, dishwashers, or a solar system added? What about a new paint job and updated landscaping? Answering these questions will help give you an idea of the time, cost, and scope of the renovation project.
Then, you’ll need to determine the flipper’s and your desired profit.
If you are investing in a property with a $1,500,000 ARV, you might want to bake in a large desired profit for you and the flipper due to the large size of the transaction. Hawaii is a much more expensive market than the rest of America - be sure you understand that distressed properties and ARVs will differ drastically from other states and markets.
A good rule of thumb is to assume a cash buyer would want to make about 30% gross profit on a flip. This is calculated using a formula called the 70% Rule.
Once you calculate the MAO, put an offer for the property at, or below, your calculated number.
Once you’ve calculated the MAO and agreed upon a price with the seller you’ll go under contract with him or her. Next, you’ll reach out to your cash buyer, draw up an assignment contract, and assign it to them.
Here is an example of a downloadable assignment contract.
It might be a good idea to seek legal advice when drafting the assignment of contract. As a wholesaler, the assignment contract is your primary tool to create income for your work. Be sure your interests are aligned, liabilities are taken care of, and your fee is accounted for.
Once you’ve drafted the assignment contract and agreed upon a price with a cash buyer, you will then assign the purchase agreement over to the new buyer and collect your assignment fee.
It’s that simple! Now, it’s time to send out more postcards, make more cold calls, and reach out to real estate brokers because now you are ready to wholesale your next deal.
There are multiple ways to do wholesale deals. Either you could go the traditional route and simply find an attractive distressed property, put an offer on it, and assign the purchase agreement over to a new buyer. Or, you can do what’s called a double closing and wholetailing. These two methods of wholesaling are great methods to add to your repertoire.
A double closing is a transaction where you nix an assignment contract entirely. Instead of going under contract with the homeowner and assigning the contract to a new buyer, you’ll actually go under contract with the seller and then simultaneously go under contract with your buyer. Then, the title company will close on both purchases at the same time - at two different prices.
For example, if you see an attractively-priced home for $250,000 and wish to wholesale it, in a double closing, you’ll go under contract with the seller at $250,000, put down an earnest money deposit into escrow, and simultaneously go under contract with a different buyer at $275,000 - effectively collecting the delta (in this case $25,000) as your wholesale profit.
In an ideal situation, your end buyer will actually fund your purchase of the property from your seller.
However, double closings are not without their handful of challenges. Since you are going under contract with a cash buyer before actually owning the underlying property, you might encounter some setbacks from your title insurance company. One solution is obtaining a hard money loan or transactional funding - these types of lenders might be expensive, but they can close quickly and help workaround some of the challenges associated with double closing.
Wholetailing is also another wholesaling method you might want to consider.
Wholetailing is a mix between a full fix and flip and a standard wholesale deal. In wholetailing, you’ll take ownership of the home, do some light renovations, and then re-list the property shortly thereafter on the market. It isn’t a full flip because you don’t do a complete scope renovation, however, it's not a wholesale deal either because you aren’t simply flipping a contract. It’s right there in the middle!
It is a great exit strategy because you are able to increase the value of the house and access a larger pool of buyers when you re-list the property on the MLS.
Yes, wholesaling real estate in Hawaii is legal. But, as mentioned before, as a wholesaler you’ll want to be extremely careful you aren’t overstepping any Hawaii licensing requirements.
A wholesaler can not engage in the brokerage or development of a property or acquire an interest in real property with the purpose of evading Hawaii’s licensing requirements. He or she can also not market the property publicly to various investors or cash buyers. By ensuring all parties to the transaction have complete knowledge of your intentions, you can likely avoid any hurdles that might come about on the legal side.
You might also want to consider a double close. A double close effectively eliminates the potential of violating licensing law by ensuring all parties involved know they are participating in a lawful real estate transaction.
The average wholesale deal brings in about $10,000 - $25,000. The actual wholesale salary amount can fluctuate greatly depending on the state in which the deal is conducted, the size of the property and the discount the property is to its ultimate ARV.
Given that the market is pricier, a wholesaler will likely be able to charge a larger fee on the transaction. We approximate that the typical wholesaler in Hawaii will bring in about $25,000 per transaction. If you can focus on wholesaling enough to close one deal a month, you’ll bring in over $250,000 in wholesaling business before taxes!
No, you do not need a license to wholesale real estate. Only those individuals marketing a property and earning a commission for the sale of a property need a license. Any person who is an owner, acting as a trustee, leasing a property, or managing it does not need a license.
Likewise, a wholesaler - or an individual selling the equitable interest in a contract, rather than the property itself - does not need a license.
However, it might be a good idea to get one anyway. Real estate agents have access to a number of exclusive resources that could help a wholesaler find attractive investment properties. Getting licensed will give you access to the MLS and other networks exclusive to realtors and brokerage firms. As a wholesaler, you’ll want to seize any opportunity to give you an advantage over your competition. Getting a license could be that advantage.
No, but it can be easier with a coach, a mentor, and the proper training. Like anything in life, wholesaling won’t be easy for the first few go-arounds. Undoubtedly, it’ll take some time to learn the ropes.
Enrolling in a guided mentorship program like the Real Estate Skills Pro Wholesaler VIP Program could be a great way to shorten the learning curve and reach your level of success quickly. The Pro Wholesale VIP program is a world-class immersive experience that provides you with the necessary guidance you need to become successful.
The Pro Wholesaler VIP Program is designed for the modern entrepreneur to learn the basics and how to avoid the pitfalls typically found by new real estate wholesalers. It is 100% online and is used for local and virtual real estate wholesaling.
If you are looking to get involved in the Honolulu, Oahu, or Maui real estate markets - or any Hawaii market for that matter - you should consider wholesaling. It is a fantastic real estate business that requires no prior experience and little money down.
Find yourself a mentor, search Zillow and other online real estate sites, and start looking for your distressed properties and cash buyers. The first few deals will be tough, but with the right mentorship and guidance, you’ll be wholesaling deals in no time.
Check out our brand new free training on how we help investors all across the country wholesale and flip houses from the MLS using only a laptop and a cell phone.
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