PCS’ing to Hawaii… Should You Buy or Rent?

The 2018 PCS season is upon us!  For those of you who received your Hawaii orders already, you’re probably wondering what you should do regarding your housing. As a Hawai‘i Life Military Specialized Team leader, I know many factors go into this important decision. Read on for more insight you can use with the infamous buy vs. rent question.

Pros to Buying

• The BAH is much higher in Hawaii, so you have basically more Government money to help you purchase real estate.
• The VA loan limit is very high in Hawaii, so you can buy more house with 100% financing – up to $721,050.
• The Hawaii real estate market is historically strong, so it is a wonderful vehicle to leverage your money to build wealth with virtually little out of pocket expense.
• Although purchase prices are high, the long-standing trend is that home values appreciate steadily year on year.
• The rental market is solid in Hawaii as well, so if you want to hold onto your asset to get better appreciation when you need to PCS out, your tenant will be paying down your mortgage.

Cons to Buying

• Low inventory and high demand makes for a competitive real estate market, so it may take a while to get your offer accepted.
• The price of paradise: it’s expensive to buy in Hawaii, so sticker shock is our worst enemy here.
• At times you may need to be a bit flexible with your home search criteria due to limited inventory, which means prioritizing what’s really important in a home.
• It may sometimes be harder to buy in a preferred neighborhood or school district since prices reflect demand for the location.

Pros to Renting

• You may get a bigger, “nicer” rental that you perhaps wouldn’t be able to afford if you wanted to buy that property.
• No “commitments” or hassles when you need to PCS.
• Less out of pocket expenses when something breaks and you need repairs or maintenance
• You can “test” out a neighborhood before buying.

Cons to Renting

• You get nothing at the end of your rental lease.
• You may be forced to find a new place if the landlord wants to sell or move back into the home.
• Uncertainty: your rent can increase at the end of your term.
• You can’t necessarily make the property your own since it’s not yours
• If you do make improvements, you don’t benefit financially from it in the end.

Courtesy of Honolulu Board of Realtors and TZ Economics

The range of 4.5-5.0 percent nominal Oahu existing home sales price appreciation is evident in the HBR monthly data since mid-2011. The nominal appreciation rate for single-family homes on Oahu has gravitated towards a path characterized by a 4.5 percent annual appreciation rate, roughly. Past performance is no guarantee of future returns.

If you need assistance to determine whether buying, renting, or living on base makes sense for you, I can help. While in many cases it makes sense to buy, it’s not the situation for every military member. I can also put you in touch with experienced VA lending specialists that are key to understanding your buying power.

If you decide to buy, I can further assist in arming you with options and deep knowledge of the Hawaii real estate market to make your experience as smooth and positive as it can be.