When most people think of Hawaii, images of sandy beaches, hula dancing, and luxurious sunsets come to mind. But for savvy tax lien and deed investors, the Aloha State may offer more than just a tropical escape—it could be a unique opportunity to earn high returns with relatively low competition. Hawaii’s property tax system operates on what’s known as redemption deeds, a less common but potentially lucrative niche in the world of tax investing.
In this article, we’ll explore why Hawaii’s redemption deed process is attracting attention, how it works, what risks are involved, and whether it truly lives up to the “investor’s paradise” reputation.
How Hawaii’s Redemption Deeds Work
To understand why Hawaii might be appealing to tax investors, you need to understand the mechanics of redemption deeds, how they differ from tax liens and tax deeds, and what makes Hawaii’s version so distinct.
What Is a Redemption Deed?
A redemption deed is a hybrid of a tax lien and a tax deed. When a property owner fails to pay their property taxes, the county offers the property at auction. However, unlike traditional tax deed states where the winning bidder immediately owns the property, Hawaii gives the delinquent owner a redemption period—typically one year—to pay the back taxes plus interest.
If the property owner redeems the property within that year, the investor receives their initial investment plus interest. If the owner fails to redeem, the investor can petition the court for a deed to the property.
This system offers two paths for profit:
- Interest on redeemed properties
- Acquisition of undervalued property if unredeemed
Why Hawaii Is Unique
Unlike many U.S. states, Hawaii holds tax sales only once a year or even less frequently, and they are handled at the county level. That means fewer properties are available for auction, but also far less competition compared to high-volume states like Florida or Texas.
Let’s take a quick look at how Hawaii stacks up against other types of tax sale states:
| State | Type of Tax Sale | Redemption Period | Investor Outcome | Interest/Return |
| Hawaii | Redemption Deed | 1 year | Interest or Property | Varies by case |
| Florida | Tax Lien | 2 years (min) | Interest, then lien foreclosure | Up to 18% |
| Texas | Redemption Deed | 6 months–2 years | Penalty return or property | 25–50% penalty |
| Georgia | Redemption Deed | 1 year | 20% return or property | 20% flat return |
| California | Tax Deed | None | Immediate deed to property | No interest |
As you can see, Hawaii offers a similar structure to Georgia or Texas, but with some important distinctions.
Benefits of Investing in Hawaii’s Tax Redemption Deeds
At first glance, Hawaii might seem like a difficult or obscure place to get started with tax deed investing. But there are several benefits that make it appealing—especially for experienced investors or those seeking less competition.
Limited Competition
Most investors chase states with frequent auctions and large volumes, like Arizona or Illinois. Hawaii’s infrequent auctions and complex process filter out the crowds. This opens up room for well-informed investors to pick up valuable properties without bidding wars.
Potential for High Returns
While Hawaii doesn’t set a specific interest rate like some states, the returns can be significant depending on the amount due, penalties, and legal fees included. The redemption amounts often include all back taxes, interest, and auction-related costs—meaning your payoff could be sizable.
Real Property Acquisition in Prime Locations
Hawaii has a limited land supply, and many of its properties are in high-demand tourist or coastal areas. Even small lots can carry strong resale value or long-term appreciation potential. If the property isn’t redeemed, you might walk away with a high-value piece of real estate for a fraction of the market price.
Judicial Oversight
Because Hawaii’s process requires court approval for final ownership, it offers legal protection and transparency. Unlike some states where title clouds and improper notifications can haunt investors, Hawaii’s redemption process is more structured and documented.
Risks and Challenges to Be Aware Of
Of course, not everything is sunshine and coconut palms. Investing in Hawaii’s redemption deeds comes with its fair share of challenges.
Infrequent and Unpredictable Sales
Each of Hawaii’s counties—like Honolulu (Oahu), Maui, Kauai, and Hawaii County (Big Island)—holds tax auctions at irregular intervals. Sometimes they go years without offering properties. That means investors need patience and excellent timing.
Research Can Be Complicated
Hawaii’s tax auctions require extensive due diligence. You’ll need to research land ownership, zoning laws, liens, access rights, and property encumbrances. Some parcels may be landlocked or unbuildable, especially in lava flow zones or environmentally protected areas.
High Entry Costs
Properties in Hawaii often have higher starting bids than mainland properties because the value of the land is generally higher. You’ll need a larger capital reserve to participate meaningfully, and expect competition from local insiders or out-of-state investors who know the terrain.
Redemption Risk
If you’re banking on acquiring the property, remember that most owners do redeem within the year. So if your only strategy is to obtain property, you may be disappointed. Many investors view the interest return as the primary benefit.
Getting Started: How to Participate in Hawaii’s Redemption Deed Auctions
If you’re intrigued and want to dip your toes into this tropical tax investment space, here are the steps to follow:
Step 1: Choose Your County
Hawaii has four main counties:
- Honolulu County (Oahu)
- Hawaii County (Big Island)
- Maui County (includes Maui, Molokai, Lanai)
- Kauai County
Each runs its own tax sale system. Check the county website regularly or contact the Treasurer’s Office or Real Property Tax Division for auction notices.
Step 2: Sign Up for Auction Alerts
Most counties now post online auction announcements via the county website or a partner platform like Bid4Assets.com or Public Surplus.
Step 3: Perform Due Diligence
Research everything about the property before bidding:
- Use the county GIS maps
- Check access roads
- Investigate HOA or association dues
- Understand local building codes
- Confirm occupancy status
Don’t assume you’re buying a beachside mansion. It could be a rocky hillside with no road.
Step 4: Bid at Auction
Most auctions are in-person or online and require a deposit to bid. Bids usually start at the amount of taxes owed, but some properties can escalate in price quickly depending on location.
Step 5: Wait for Redemption or Petition for Deed
If the property owner pays within the redemption period (1 year), you’ll receive your investment back plus interest. If not, you can petition the court for the deed—a process that can take a few more months and may involve legal counsel.
Frequently Asked Questions About Hawaii Redemption Deeds
Is Hawaii a tax lien or tax deed state?
Hawaii is a redemption deed state, which is a hybrid. Investors purchase a tax deed, but owners have 1 year to redeem before the investor can claim the title.
How often are tax sales held in Hawaii?
Each county runs auctions independently and infrequently. Some counties may go several years without holding a tax sale.
Can I buy properties online in Hawaii’s tax sales?
Some counties have moved auctions online through platforms like Bid4Assets. Others still use in-person auctions, so always check the county’s official website.
How much interest do I earn if the owner redeems?
The return varies depending on the delinquent tax amount, fees, and county rules. There’s no guaranteed rate like in traditional lien states, but double-digit returns are possible.
Do I automatically get the property if the owner doesn’t redeem?
No. You must petition the court for a deed transfer after the redemption period ends. It’s not automatic and may require legal steps.
Are there risks of existing liens or mortgages?
Yes. You may inherit municipal liens, HOA fees, or other obligations. It’s crucial to research the property’s title and encumbrances before bidding.
Conclusion: Is Hawaii Really a Paradise for Tax Investors?
Yes—and no. Hawaii’s redemption deed system is undoubtedly appealing for tax investors looking to diversify into a low-volume, high-value niche. The potential to earn attractive interest returns and occasionally acquire prime properties makes it worth investigating.
However, this isn’t a beginner-friendly market. You’ll need to be patient, willing to navigate local bureaucracy, and ready to conduct thorough due diligence. If you go in expecting every deal to end with oceanfront property, you’re likely to be disappointed. But if you approach Hawaii’s system with discipline, research, and realistic expectations, it could be one of the most exotic—and profitable—corners of your investment portfolio.
So is Hawaii a paradise for tax investors? For those with the right strategy and mindset, it just might be.