“Akamai Money” seeks out local experts to answer questions about business in Hawaii. If you have an issue you would like us to tackle, please email it to business@staradvertiser.com and put “Akamai Money” in the subject line. 

QUESTION: How can people build net worth through buying an investment property?

ANSWER: A person can build net worth through real estate in much the same way that he or she can through other types of investments — buy at a lower price and sell at a higher price. As with any investment, there is risk involved, but generally speaking, the historical track record of Hawaii’s real estate market shows a solid return on investment. For example, according to the Honolulu Board of Realtors, from 1985 to 2011 the median condominium sales price on Oahu increased 234.1 percent, an average annual increase of 4.75 percent.

Q: What are some strategies to keep in mind when considering investing in residential real estate?

A: Depending on your goals, you could either choose a short-term or long-term strategy. A short-term strategy might be to purchase a "fixer-upper," remodel it and then sell it for a profit. A long-term strategy might be to purchase a property and rent it out to help pay for the mortgage as you wait for the property to appreciate over time.

Q: How can I minimize my risk when I’m purchasing an investment property?

A: As with any investment, you should have a clear picture of your financial situation before moving forward with the purchase of an investment property. In addition to talking to your Realtor, talk to a loan officer and financial planner to ensure that you have a thorough understanding. Always keep in mind your individual investment budget. One should not be stretched financially in purchasing investment properties.

Q: What’s the best way for an investment buyer to find the right property that will yield the right return on investment?

A: Looking for residential investment properties is different from looking for a place to live. Whereas you may choose a place to live based on how it suits your lifestyle, choosing an investment property involves analysis of the property itself, the neighborhood, market activity and other factors that maximize the potential for a return on investment.

Q: What types of loans are available in today’s environment, and what do you need to get one?

A: Generally speaking, mortgage interest rates for investors are slightly higher than the interest rates for owner-occupants, and investor loans may require a slightly higher down payment of 20 percent or more. Adjustable-rate mortgages may be suitable if you are pursuing a short-term investment strategy, as the interest rate is usually fixed at a lower, more attractive rate for a short period, generally between one and seven years. Be prepared to show full income, asset and debt documentation when applying for a loan.

Q: In Hawaii it’s often difficult for investors to obtain enough rent to cover the full mortgage. If the rent doesn’t cover the mortgage, when would it still be a good idea?

A: While it’s true that Hawaii’s higher home prices sometimes make it difficult to obtain enough rent to cover the full mortgage, investing in real estate may still make sense for your goals and financial situation, depending on the tax advantages and the property’s projected long-term appreciation. Consult with your tax adviser.