Understanding Maui Real Estate (Kahului, Kihei: spring break, foreclosure, rentals)

[CasualEntrepreneur]

"Just our plantation style look. Also we have quite a bit of termites, and ground termites so it may have been a deterrence, just my 2 cents. Most homes near the water are in a flood zone, and elevated ground floor will help your flood insurance cost. The new building codes will require you to be above the flood elevation level anyways."


Mitch, great comment! Your observation had us scratching our heads with the termite problem. With so many termites, why am I seeing wood everywhere? Wood flooring, wood siding, wood pylons etc? Wouldn't this be a major problem for homeowners? How are folks handling them?


Also, after much research, we would be looking to build in the Haiku/Paia area (foremost) with the second option being Kula/Upcountry. Our initial thought was to build on a concrete slab foundation but with the flood zone and elevated ground floor factors, must we now consider crawl space w/ concrete footers?

Are there new regulations as to how high off the ground?

My wife will need wheelchair accessibility which is why elevation is a factor.

[MitchTempo]

There is plenty of slab construction units too, I don't think you'll find issues regarding which type of construction you'd like to build homes with. Ground termites is mostly in Kahului, rest of the island deals with dry wood which is smaller swarms, but they can start anywhere since they fly in to start. Wood is cheaper weight wise for construction material. Redwood/Cedar was what many of the older plantation homes materials which was pretty water rot/termite resistant. You can always get treatments too.

Usually when we list properties or advise buyers we tell them upfront about termites, and how common they are in Hawaii. If they find termites on the inspection its usually an old nest or two, many times on the trim or exposed areas. The inspectors will always recommend to paint/caulk areas to avoid letting the bugs into the home, avoid direct ground contact for wood, and excessive moisture. If you buy a home with termite signs, usually you'll want to get it tented, and that will keep them away for 2-5 years with a warranty from the pest control company. You can get monthly treatments, but even with that there might end up with a small patch of trim with termite damage eventually.

For flood heights I would check with Hawaii's Flood Hazard Assessment Tool: Flood Hazard Assessment Tool and Maui planning department. If its anything other than zone X, I would spend a little more time doing research with contractors/planning department just to make sure. There's some creative uses for the space underneath if it is a flood area which is using it as a garage downstairs etc. You just can't put living sqft in the flood elevation area. You can build a home up to 30ft or so for height.

If you decide to rent here keep in mind that some condos are grandfathered in regarding elevator access. if the building has 3 floors some condos might not have an elevator.

[CasualEntrepreneur]

Looking at leasehold, I understand it to mean:

"Leasehold is a form of land tenure or property tenure where one party buys the right to occupy land or a building for a given length of time. "

I'm a little foggy on how this is financially appealing. is there a down payment? How long is a typical leasehold term? Could you give an example of a typical leasehold transaction without a buyout?



In trying to understand the Maui real estate market, are there price ranges for single-family homes and condos which move faster than others?

For example, here and the Virginia suburbs of Washington DC, single-family homes priced 400–600 move fairly quickly. Homes Priced 600 – 1,000,000 are slower sellers. And homes priced over 1 million are very slow to sell. Is there a similar " Price strata" in Maui?

I understand that condition and ocean views can and do affect the pricing of a home dramatically.

Thanks!

[MitchTempo]

Originally Posted by CasualEntrepreneur

Looking at leasehold, I understand it to mean:

"Leasehold is a form of land tenure or property tenure where one party buys the right to occupy land or a building for a given length of time. "

I'm a little foggy on how this is financially appealing. is there a down payment? How long is a typical leasehold term? Could you give an example of a typical leasehold transaction without a buyout?



In trying to understand the Maui real estate market, are there price ranges for single-family homes and condos which move faster than others?

For example, here and the Virginia suburbs of Washington DC, single-family homes priced 400–600 move fairly quickly. Homes Priced 600 – 1,000,000 are slower sellers. And homes priced over 1 million are very slow to sell. Is there a similar " Price strata" in Maui?

I understand that condition and ocean views can and do affect the pricing of a home dramatically.

Thanks!

That price range is about right. Ramaui.Com is our real estate association mls website. But we post the monthly stats on there. A little behind this month as September stats are not up yet. But august stats are. You'll find the numbers in there to your liking. Also has hoa/leasehold fees for condos.

Lease hold property is more about leverage. @Lauloa in Maalaea. Units are about 350k. Lease buyout about 300k. Lease rent about 1200/month. You can't find a mortgage for 300k for 1200/month. Lease will go up eventually so itll balance out in the future. When lease expires you lose your property. Unless they renegotiate a new lease. Lease expires between 20 and 30 years from many properties right now.

Anyways feel free to call me at 808.385.7892 for some clarification/explanation scenarios.

[mauialoha]

When my wife and I were recently looking at condos in West Maui I read all I could about leasehold and found almost everything written about it to be confusing.

At first I thought you get a property for less money because its only a lease. Then, digging deeper, I saw that you also pay "rent" on the lease. So if we were to buy a condo, we would pay our mortgage, our HOA fee, and rent. Sounds to me like you're paying twice for the leasehold.

I realize the HOA fee is also an addition, but they are providing maintenence, insurance etc, and can't take your property away from you.

Sounds like some outdated arrangement that benefited developers. We pretty quickly eliminated leaseholds from consideration.

[CasualEntrepreneur]

Exactly! I too have eliminated leaseholds from consideration but was fascinated as to how they worked -- never having seen / heard of them before. I know Mitch has been helping explain them above which is appreciated but maybe a "typical" example is necessary? For instance, is there a down payment needed to execute a leasehold? Do all leaseholds have buyout options? How does it differ from simply renting/leasing the property?

I see that it only makes up a small percentage of the real estate market. 5% perhaps?



BTW, thank you Mitch for all your posted links above!! The flood zones, real estate sale statistics, and answers have not gone unnoticed or appreciated! I've seen your posts in other threads and they've always been cheerful, non-inflamitory, thorough, and helpful, so thank you much!

[CasualEntrepreneur]

Switching over to the main reason for this thread, it's obvious we have some pretty intelligent folks here so I'd like to ask....

( directed to Mitch but please, would love to hear from others)

If you were to invest in real estate on Maui, what would you do? And why?

Flip? Buy and rent to residents? Buy and rent to vacationers? Build & sell? Buy on another island? What type of real estate? Condos? SFH? land lots? None of the above? .... Personally.....

[hothulamaui]

not all leaseholds have buyouts. the family/company that owns the land wants to keep the revenue flow. lots of folks buy lease hold. sometime the reason is for the location of the property, oceanfront, golf course. if you were to buy leasehold you should buy one that has at least 25/30 years or more left on the lease so you have "something" to sell when you leave. we bought our leasehold it was bundled with our loan. I don't think there is a down if you don't buy, you just pay it monthly like you do your HOA's, but Mitch would know for sure.

your investment question is hard to answer because I think it depends on your personality, how much money you have and if you want to be an absent owner or live on maui or how much time you want to spend here and how much money you want to make each month.

I personally would never build to sell, land is too expensive, building is expensive and takes too long, your money is tied up a long time before you would get a return, unless you have tons of money then it doesn't matter. buying to rent be it vacation rental or to residents, you have to buy the property at a good price to be able to rent it out at a price well above your mortgage to make a "good" profit. again this all comes down to how much you expect to make, your budget. most vacation rental owners don't make very much income on their units. they cover expenses and or make just a bit over as the units are never full all year round, then add management and cleaning fees, your tax you pay for short term rental, on top of your nut, hoa's and lease hold payment if you have one. we rented out our condo and it was a well rented place with a great view and location. we never "made any money". buying on another island you would have the same problems.

buying to flip could be fun but unless you were here I could see trouble, you would have to have a great contractor you could count on. again not sure how much money you could make after you upgraded a place for 20 to who knows how much money and what you could sell it for. maybe looking at the mls for the low end, estimating how much it would cost and compare it to what a nice place in the same area sells for might help. Mitch would also probably have a better idea.

again depends on your disposable income and if you want to use the property at all. if you have thoughts of using it, then buy a condo, rent it out and block your time out that you want. make sure you find a building that allows short term rentals.

if it was easy or you made a ton on money everybody would do it. either buy and be happy with the low return and come to the islands and enjoy or invest in something else and take long vacations here.

[MitchTempo]

Originally Posted by CasualEntrepreneur

Switching over to the main reason for this thread, it's obvious we have some pretty intelligent folks here so I'd like to ask....

( directed to Mitch but please, would love to hear from others)

If you were to invest in real estate on Maui, what would you do? And why?

Flip? Buy and rent to residents? Buy and rent to vacationers? Build & sell? Buy on another island? What type of real estate? Condos? SFH? land lots? None of the above? .... Personally.....

As Hothulamaui said, it really is up to each individual on how you want to invest, and what your long term goals are.

Building and selling is fairly expensive, and requires a substantial down payment. Maui County permits can take a long time, but even longer and more costly is the drafting process. The land is expensive, especially for an ocean view lot. If you are looking for something with atleast 1 acre with an ocean view. You are looking at Haiku most likely and lot prices are about 350k to start there for something like that, and most likely you'll have to build a water catchment system. Keep in mind that freight to Hawaii is fairly expensive so you'll want to do some additional due diligence with places like Miyake or such to get materials.

Maui's long term rental market is pretty strong. Its hard to find a good rental for families, and especially harder to find something for pet owners. Some foreclosures or short sales are still showing up, and with a little fixing can be turned into something that could be a good buy and hold. An ocean view 600k price range can probably be done for a 3000sqft home if you want to reduce the land size to about 1/4 acre. There's one for sale in old Sandhills in Wailuku right now actually. A house with a detached cottage/ohana would be ideal. Live in one, rent out the other, better yet if you rent out to a landscaper type who maintains the whole property for a discounted rent.

Flipping homes right now some people are doing it, but they bought the properties a little while back. There is some foreclosures that could be flipped, but the margin is fairly small right now. You'll probably end up fixing it to rent. Occasionally a really great deal comes along, but you have to pretty much be ready at a moment's notice to write up an offer.

Condos are great for those who don't want to do lawn/exterior maintenance. Hothulamaui pretty much nailed it. Unless you are buying a condo cash or significant down payment its not a 'money maker'. It might help you with maintenance fees, taxes, and part of a lease/mortgage or maybe break even. But rarely will you see something for sale that will be positive cash flow with a mortgage, and if it does show up, will be gone very fast.

If I lived where it snowed or mostly cloudy in winter, I would probably do this route. Only downside is that the best nightly prices/highest occupied months would be the time of the year that I would like to come over.

Me personally? I would probably retire to a condo. While a single family home would be ideal, I personally don't like to do much yardwork, and a large yard requires a lot of maintenance. Until I retire though I would probably want to own a house/cottage combo and rent it out for income. I don't mind having dogs around as long as the owners clean up the poop. The additional pet deposit you can take in now makes it worth it too, since the tenants will want to get both deposits back when they go.

I wouldn't mind having a condo somewhere near the beach that I could dip into the pool every now and then if I felt like it though. I don't think I'd want to live there full time right now. Traffic in Kihei is pretty hectic during the winters so, I'll probably end up somewhere like Villas @ Kehalani. Ocean view, 2 car garage, no yard, higher elevation so nice and cool, and 10 minutes to Costco/Target/Whole Foods.

[mauialoha]

yep Mitch, and hothulamaui, you guys described what I found in May. My wife and I had decided to look at condos while on vacation and we found a few affordable and so we decided to go for it.

We bought a small 2 bedroom condo on the West side (Kahana) with the thought of moving there in a couple years when I retire. We did put a lot down, and we rent it out long term and break even.

I had seen the prices rise like crazy before and it's a good feeling having a place now that we can move to when the time comes. The Condo was reasonable and I was afraid in two years prices and or interest rates might be higher.