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So how long after something sells does it retain its value or does it just go to zero after the purchase? Seriously, no value until something sells?
Nobody would suggest no value or zero. I hope you make 80K or more on your property. You don't know for sure if that is the case until you actually sell your property.
Nobody else has chimed in about their real estate windfall since 2008 - I didn't say it couldn't have happened - but it isn't likely.
Who's talking about a windfall? I just said based on comparable sales I'm up $80,000 and that I didn't think I was the only person on all of Oahu that was. You made the outlandish statement that an item can't be valued unless a sales transaction has happened.
Who's talking about a windfall? I just said based on comparable sales I'm up $80,000 and that I didn't think I was the only person on all of Oahu that was. You made the outlandish statement that an item can't be valued unless a sales transaction has happened.
You took my statement of you aren't up a certain amount until you actually sell the place as "an item can't be valued unless a sales transaction has happened." Lol.
Anyway - I named 3 specfic high rise buildings that are well known in Oahu that are down 5-10% based on listing prices since 2008 - which ones are up based on sold units from 2008 to present?
I named the building I live in - the Pinnacle - easily the most desireable building downtown and certainly nobody is making money here - there is no litigation going on here either. Moana Pacifc - great location, new, nobody making money. Coral Strand - diamond head, right on the ocean - nobody making money.
every little bit helps! we know there are questions that we have not even thought about asking, so yes, any information you want to share would be appreciated.
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we started out hoping for a place in the Kona area but we cant really afford it there. we started eliminating other areas based on numbers and such that you can get online from crime statistics and property values and volcano zones for insurance purposes... but that doesn't give 100% of the reality of living there.
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we've gone back and forth between buying just land and building when we retire, to buying a house and trying to rent it out over the next 10 years, to buying a condo and hoping we can sell it and move to Ka'u when we do.
there's still quite a few options open so yes, anything you can share would be appreciated!
While price and timing are certainly big parts of the purchase decision and process, might I suggest for people like Karen and Stan that if you want to 'rent to retire' you need to think about your potential property in terms of 'rentability' first.
Kind of like when I realized, I can make the fanciest spreadsheets, but they do nothing for me if I can't sell the product; or, you can analyze price all day long, but what matters in this case is --- can you get rental income? The point being, be really clear on your purpose: if you want to rent to retire, everything else has to line up with basically running a vacation rental business.
That means you have to think like a tourist on your choice of property. How do people choose where to stay on the Big Island? What places get people staying there more often? Can you find out anything about occupancy rates? Once your years of rental is over and your property has hopefully increased in value, you could flip it to something more suitable to full-time residence.
Another responder mentioned they did vacation rental; if you live off-island, that means finding out who could manage your property for you and interviewing and getting to know them. The couple earlier mentioned it was their cleaning staff; often property managers arrange the cleaners, and it is the managers themselves who are the 'face' of your rental. This is the heart of your rental venture.
Which brings up breaking even. Property managers are expensive, but if they can keep your rental property occupied, that is the key to your income stream. It's really important to ensure you and the property manager have the same goal here (getting rental occupancy); some just like to have your unit on their website; some like to make their income by charging maintenance fees. You have to figure out their motivation and skills. 30% of something is something; 0% of nothing is nothing.
The other side, which gets back to the price debate, is keeping expenses in check. Correct me if I'm wrong oh wise ones, but so far I see the greatests costs are going to be 1) your mortgage 2) condo fees (assuming you go there), and 3) electricity. So, if you can pay a low price, here is where that comes in: but --- and this is also key --- if you need lending, keep your loan as low as possible (put as much down as you can) to minimize your mortage payments. This is really counter-intuitive, and once lenders agree to lend, they like you to have as big a loan as possible. Through our purchase process, the lenders were the biggest obstacle, especially making expensive, unexpected demands days before closing. This is also where timing of the purchase comes in; if the price can be a lot lower, and you aren't taking a big loan, you can likely break-even while you wait for the property values to increase. Otherwise you're 'feeding the beast' every month.
If cash is an issue, consider having partners. That is another topic to investigate thoroughly. There's lots of times it doesn't work, but if it does, everybody comes out ahead.
Condo fees are dependent on the type of property you purchase, but here again, that is driven by 'thinking like a tourist'. What is the use of low/no condo fees if your property won't attract renters? That gets back to your goal in having the property in the first place.
In a nutshell, start with 'what is your goal', and then list all the revenues and costs of having the property as you know them. (Ask people what their cost categories are. As Karen said, it's hard to know what questions to even ask.) Investigate each one, not just price. Someone said they took 9 months to research their property; that's about right. I started last January and by October we understood where and what to put an offer in on (lots of spreadsheets comparing properties, and then lots of break-even spreadsheets). Then the purchase process itself was fairly short (60 days), though intense. But basically it took a year.
And we really found it's not just numbers and dollars: we've met fantastic people through the process, and have truly made some good friends. A big thank you to Big Island people!
I like to think that by bringing rental guests to the Big Island, it increases the dollars that are spent there, which trickles down to benefit everyone living there full time.
Hope these thoughts are what you were looking for.
Bellisima wrote: "I like to think that by bringing rental guests to the Big Island, it increases the dollars that are spent there, which trickles down to benefit everyone living there full time."
We all like to think things that make us feel better about our choices and our impact. I am more on the fence about the good of mainland rent-to-retirees for Hawaii and its people.
First of all, I don't think you are personally bringing guests to the island, except for the few that you refer personally, either to your property to just because you know the area. In general, people choose the island, then look for lodging. It sounds like you have a vacation rental (for tourists), which is has a different impact on the community than a long-term rental (for locals usually). One big question is whether through your purchase, you converted local housing to transient housing. The other question is whether the vacation rental is in a tourist area or whether you are contributing to visitor impact in residential neighborhoods (even if you have a permit to do so).
The other way to measure impact is to "follow the money." Essentially, you are investing your capital in Hawaii, and hoping to make it work for you. Your renters are paying your mortgage, providing return on your capital. For a while, then money is leaving the island, minus the management and maintenance workers that you hire. But since you intend to retire to Hawaii, I suppose this does benefit Hawaii since you will then bring your capital and spend it locally during your retirement.
The biggest question is whether that capital was needed and put to use for the benefit of the community. On the one hand, if it allows the local economy to support more visitors and provide other revenues, that's good. On the other hand, if there is a glut of accomodations, visitors are down, then it is a drain on local resources and creating competition for the local capital. Then there's the question of whether the purchase is encouraging positive development on the island (did you buy in an established area, renovate an older unit) or negative development (buy in a new complex that contributed to over-development and sprawl at the expense of the local community).
Most investors understand the difference between "realized gains/losses" and "unrealized gains/losses." With most investments, the value fluctuates over time. Consider stocks in which the share price changes constantly. For example, suppose you purchased one share of Apple (AAPL) at $325 last August. Today, it's worth $493. Thus, you have an "unrealized gain" of $168. However, if you sell it at that price, the "unrealized gain" becomes a "realized gain." For real estate, the principle is same. For instance, if you purchased a house for $500,000 in 2002 and the "comps" are currently selling for around $580,000, you have a potential "unrealized gain" of $80,000. However, if you sell that house for $580,000, you now have a "realized gain" of $80,000. Of course, when one throws in real estate agent commissions, taxes, etc. the actual "realized gain" might be substantially less than $80,000.
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Taking a bigger perspective...
