Hawaii Residents… Rent vs Own? What Makes the Most Sense?

We’ve all been told that paying rent is a waste of money. While building equity through home ownership certainly pays off in the long run, renting has its perks. If you’re currently debating whether or not to purchase a home, consider the following.

What to Keep in Mind if You Choose to Purchase

1. You’re going to need cash for the down payment

While you don’t necessarily need 20% down, even a 5% percent down payment can be substantial. In looking for a basic 2-bedroom condo in today’s market, you’re looking at around $300K. That’s $15,000 for 5%. Add approximately 1% for closing costs and you’ll need $18,000 to get the keys.

2. HOA fees, repairs, and maintenance

One of the perks of renting is the simplicity. The first of the month rolls around, you pay your rent and that’s it! When owning, association fees, mortgage and insurance are your responsibility. Also, when the toilet leaks, the refrigerator breaks, and the roof needs to be replaced — it’s on you.

3. You no longer have such flexibility to relocate

When you want to move, it’s not so easy. This is especially important with Hawaii being such a transient place. If you’re not confident you want to live in Hawaii for the next 5 years, perhaps renting is a better option. To give your landlord moving notice can be as easy as writing a letter, packing some boxes and cleaning. Deciding to move while owning can be much more time-consuming and expensive.

4. It’s going to take work

Before calling up your local Realtor to start your house hunt, you need to become pre-qualified. Your bank or mortgage broker will need various documents and information pertaining to your financial situation. This can sometimes be tedious and uncomfortable.

Pros of Owning a Home

Given the flexibility and ease of renting, not coughing up a big down payment and continuing to rent can be a smart choice. If you’ve considered the pros of renting vs. owning and believe home ownership is for you, here’s what you have to look forward to…

1. Your housing expense is now a savings account

While once you were putting money towards your landlord’s retirement, now you’re building equity. Housing in Hawaii is expensive, but it’s the diligent homeowners who started with a starter home years ago who now own million-dollar properties. In addition to building equity through monthly mortgage payments, any improvement you make to the home will usually be returned with interest when you go to sell.

2. You can’t be evicted by your landlord

For anyone who has been given a notice to vacate, you know how stressful receiving that letter can be. Being evicted isn’t just for those who caused trouble or missed a few rent payments. If you’re on a month-to-month lease, landlords may decide to list their property for sale or move in themselves. With an annual lease, this possibility is a reality each and every year.

3. Your monthly payment remains (nearly) the same

If you have a fixed-rate loan, your mortgage will be the same today as it will be 10 or 25 years from now. While taxes, insurance, HOA fees, and home maintenance cost will most likely increase over time, you won’t have to worry about a landlord raising your rent every year due to market demand.

4. Your home is yours… and everything in it

There are certain rules while renting that don’t apply to homeowners. Want to paint the walls, hang pictures everywhere, or replace the carpet in your bedroom? As someone who rents, making these changes can be expensive and time-consuming when it comes time to move. As an owner, as long as you’re not breaking any association rules, make it your own! Get creative and take pride in where you live.

In Conclusion

The opportunity to live in Hawaii is a blessing. One of the greatest joys of being a Realtor here on Maui is speaking with people from all over the world who are interested in calling this place their home. While I make a living through real estate sales, buying isn’t always the best option for everyone. For some, the timing isn’t right given their situation or they are unclear as to whether Hawaii is to be their permanent home.

Whether you choose to buy or rent while living here in Hawaii remember this: each day here is a blessing. At the end of our lives, it won’t be the properties we’ve owned or the rentals we’ve lived in that we will remember. It will be the relationships we’ve made and the experiences we’ve shared. Mahalo for reading and enjoy the sunshine!