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My wife and I are looking into living & investing in Maui and I am trying to wrap my mind around the local real estate scene.
Here's what I mean...
Goal: To build a 3000 sq ft home on 1+ acres on a quiet lot w/ view of the ocean. At the same time, buy and rehab a vacation rental in another location for rental income.
Background: My wife is a licensed substance abuse counselor and I buy, renovate, and resell homes. We are in our early 40's and prefer rural over urban (but not Hana rural). Would love a large lot with space between neighbors but understand price makes this prohibitive.
Perhaps someone might have some insight on the following questions?
1. BUYING TO RENT OUT - What would you consider the best return-on-investment? Condo, TH, or detached home?
Reading this forum & county sites I have discovered that we would be restricted to purchasing a house/condo in a Hotel, Business, or Historic (etc.?) zone to legally rent out as a vacation rental (TVR). The exception being to apply for a TVR permit outside these zoned areas.
Thoughts - Condo vs House:
Condos are often cheaper, more plentiful, and are more likely to be in a vacation rental zone. However, they usually have high condo fees and appreciate slower than SFHs. The more sought after condos have "good" ocean views which come at a premium $400k - $1mil+.
SFHs seem harder to find in the vacation rental zone - especially ones with views of the ocean. But, they may appreciate more over time. I have no idea if a tourist family (my target market) would prefer a 2 br condo with ocean view or a more spacious SFH without ocean view.
So if you had $600-$700k to invest in a rental property (to live off of), would it be more profitable to buy & rent out: 2 condos or 1 house?
2. REHAB & RESELL - If a house or condo is renovated right, and priced appropriately for the area it is in (a hair above neighborhood comps to account for the renovation). What is the average time it would sit on the market before getting a contract? (understanding that escrow is 30-60 days longer after ratified contract).
== Questions for Building & Living ==
3. Although there is a lot of good info here on rental locations, how hard is it to BUILD a home on Maui?
We are thinking of a 3000 sq home - 2 levels, on 1+ acre of land with ocean view. It looks like the Agricultural zone is the way to go for this either north in Haiku / Paia or Upcountry. I like to grow (poorly & experimental) fruits & veg so it I think it would work nicely.
Maybe there are areas I'm missing? (Hana is too remote for us)
4. BASEMENTS? Do any homes have below-ground basements on Maui? Seems like it may be too costly but would make a wonderful shelter during hurricane season.
5. REAL ESTATE WEBSITES - Zillow and realtor.com are good but rarely list condo/HOA dues. Is there a better website which does?
Any help and insight would be greatly appreciated!
Mahalo
BTW, came across these 2 "perfect" properties. The first is listed on AirBnB in Haiku , the second is on the market in Upcountry.
I wish you the best of luck and hope someone can answer your questions.
But I can say that basements are very cost prohibitive (have to literally blast through rock) and they are not very good in the event of a hurricane as hurricanes brings LOTS of flooding and you would quickly have an in-ground pool.
Almost every single home on Maui is in some sort of flood zone because most homes are below mountain level and water naturally runs from mountain to ocean (obviously). If heavy rains didn't flood your basements, run off water would.
So if you had $600-$700k to invest in a rental property (to live off of), would it be more profitable to buy & rent out: 2 condos or 1 house?
$600-$700K for Maui for 2 condos or a SFH doesn't sound like enough for an appealing rental(s) - regardless, I generally find SFH's a far better investment (lower maintenance fees and no special assessments) - with a SFH you control your own destiny - with condos, you are at the mercy of a HOA (potentially restrict temporary rentals, assessments, raising maintenance fees, etc)
Ever been here? Any reason to believe you'd want to live here?
As far as knocking living in Hana, I dunno, there was a guy here a while back proposed creating a traveling drum circle for the 5 hour round trip every day into Kahului...that may not appeal, but you can bet whoever does figure that commute out, is gonna make a killing!
My wife and I are looking into living & investing in Maui and I am trying to wrap my mind around the local real estate scene.
Here's what I mean...
Goal: To build a 3000 sq ft home on 1+ acres on a quiet lot w/ view of the ocean. At the same time, buy and rehab a vacation rental in another location for rental income.
Background: My wife is a licensed substance abuse counselor and I buy, renovate, and resell homes. We are in our early 40's and prefer rural over urban (but not Hana rural). Would love a large lot with space between neighbors but understand price makes this prohibitive.
Perhaps someone might have some insight on the following questions?
1. BUYING TO RENT OUT - What would you consider the best return-on-investment? Condo, TH, or detached home?
Reading this forum & county sites I have discovered that we would be restricted to purchasing a house/condo in a Hotel, Business, or Historic (etc.?) zone to legally rent out as a vacation rental (TVR). The exception being to apply for a TVR permit outside these zoned areas.
Thoughts - Condo vs House:
Condos are often cheaper, more plentiful, and are more likely to be in a vacation rental zone. However, they usually have high condo fees and appreciate slower than SFHs. The more sought after condos have "good" ocean views which come at a premium $400k - $1mil+.
SFHs seem harder to find in the vacation rental zone - especially ones with views of the ocean. But, they may appreciate more over time. I have no idea if a tourist family (my target market) would prefer a 2 br condo with ocean view or a more spacious SFH without ocean view.
So if you had $600-$700k to invest in a rental property (to live off of), would it be more profitable to buy & rent out: 2 condos or 1 house?
we have bought and sold 3 condos since we have been on island and one single family house. you seem to have the right thoughts on the subject as far as my experience has been. you have tons of options for vacation rental almost all condos allow it in kihei, maalaea, lahaina and father up the west coast. a great deal of them are ocean front.
you are also right when you add the asso/maintenance dues the mortgage payment sometimes doubles your monthly nut. for vacation rental IMO your best bet is a condo, with an ocean view close to town. most people are here for a week or two and want the convenience of a beach and food right outside their door. you don't get this in a SFH. most SFH are rented to local people who live here.
I would buy the condo and not the home
2. REHAB & RESELL - If a house or condo is renovated right, and priced appropriately for the area it is in (a hair above neighborhood comps to account for the renovation). What is the average time it would sit on the market before getting a contract? (understanding that escrow is 30-60 days longer after ratified contract).
all my properties were staged, priced right and ready to go. all sold within a week.
== Questions for Building & Living ==
3. Although there is a lot of good info here on rental locations, how hard is it to BUILD a home on Maui?
We are thinking of a 3000 sq home - 2 levels, on 1+ acre of land with ocean view. It looks like the Agricultural zone is the way to go for this either north in Haiku / Paia or Upcountry. I like to grow (poorly & experimental) fruits & veg so it I think it would work nicely.
Maybe there are areas I'm missing? (Hana is too remote for us)
4. BASEMENTS? Do any homes have below-ground basements on Maui? Seems like it may be too costly but would make a wonderful shelter during hurricane season.
5. REAL ESTATE WEBSITES - Zillow and realtor.com are good but rarely list condo/HOA dues. Is there a better website which does?
Any help and insight would be greatly appreciated!
Mahalo
BTW, came across these 2 "perfect" properties. The first is listed on AirBnB in Haiku , the second is on the market in Upcountry.
Haiku:
Kula:
sorry I have to run, but delmore has asso dues listed. I will try to get back if I come w/ more info
the other thing I would add is your budget will probably be best for one condo. splitting it in half will buy you a studio maybe a one bedroom, add in the fees and it is a ton of money for something so small. if you buy a property that is lease hold you will have to factor that fee into your payment as well. we looked into building 7 years or so ago and at the time if I remember right it was at least 250 a sq foot, I would guess it is more now.
Although a SFH is historically a better bet to appreciate, I don't think you'll get as much bang for your buck as buying two condos.
We have a 2-bedroom/2-bath condo in Kihei (now worth about $450-500K) with a nice ocean view. We bought it as a 2nd home and will one day live there full-time and we couldn't be more pleased with our purchase. We spend about 20-25% of the year there. It's been pretty easy to rent out at about $175-225 per night when we're not using it. We're on VRBO on not real aggressive about trying to book it, but still end up renting out about 175-200 night per year. There are far fewer 2-bedroom condos than 1-bedrooms, so there's more demand (and higher rents) because it's better suited for families or couples travelling together.
I know there are places in upcountry on VRBO, but not sure how much demand there is for them because it seems like most people visiting the island want to be close to the beach.
In your price range, I think you might be able to manage to buy a 2-bedroom and a 1-bedroom As far as renting out a condo vs. SFH, I think you'll typically get more per night for a SFH, but not necessarily enough to cover the extra purchase price.
Regarding condo fees, I don't have a big problem with them as long the finances are well-managed. It mostly covers things we'd have to pay for anyway, like insurance, landscaping/cleaning/pool service and maintenance, with the added benefit of a security patrol at night. The biggest thing we fear regarding the HOA/AAO is that one day the owners vote to disallow short-term rentals, at least before we move there full-time. I've previously served as a treasurer for a different HOA and the biggest thing to beware of is special assessments, especially ones that are paying for past sins. A properly run condo should be charging enough in fees that there shouldn't be any surprises special assessments.
Hopefully Mitch Tempo (a Realtor) sees this thread and can chime in on the subject.
A lot of this is just generalities, too. Specific properties make a difference. Run the numbers and see what works for you. Maybe a VRBO is too much work? You have to meet the people, give them keys, clean the place, etc. or pay someone else to do the work and that cuts into the bottom line. With a plain rental, it's a lot less work, but maybe you make less. Run the numbers and see. If you can afford multiple "lesser" rentals, then you're not dependent on keeping the one prime location rented all the time. But, you've got more houses to take care of. So, it's all over the map.
You may want to move there and rent for awhile before you decide you need 3,000 square feet on a one acre lot. That has the sounds of someone talking who has a mainland value set. Once you actually get to the islands and live there for awhile, your values will change and you may find you'd have preferred something else.
If you're contemplating buying one of the two properties shown in the pictures, if it were me, I'd go for the first one just because of the proximity to the water. You can't fix location and that looks to be a much better location. The house looks much nicer, too. But, obviously, the database to base that opinion is severely limited.
Understanding Maui Real Estate - Digging Deeper...
Hey, these are some terrific comments! Let me jump right in....
Mauilocalboy - That makes perfect sense regarding basements. I have noticed that some homes, especially those in the lush part of the island are built 1-2 feet above ground -- on pylons? I am guessing lush = rainfall = more flooding potential. Is this a standard practice? Or has new building codes addressed this potential for flooding, and allowed the home to sit on the ground. Or am I wrong and its just a builders preference?
wtlloyd - Yes. We've been to Maui in 2010 and Oahu in 2014. Love this islands for obvious reasons. My wife loves the warm weather and I the water activities that we don't find here in Northern Virginia (DC Suburbs). There are many other reasons too, and have seen other threads get into the pros & cons, but I'd like to focus this thread on real estate. Didn't mean to sound like I am knocking Hana -- personally I love Hana! Just that it is too remote for working / accessing the rest of the island. My wife couldn't take the windy road twice a day -- we know our limits. What is a traveling drum circle??
I'm slowly getting the sense that, reluctantly, condo's might be the preferred vehicle for tourist investment property. Although my thoughts are more in-line with whtviper1 - I REALLY don't like paying for the added Condo fees and prefer to control my own destiny. Research is revealing that a tourist investment property needs a view of, and proximity to, the ocean. Finding a SFH which meets that criteria, IN a rental zone, might be too expensive or not available. Because we will be living off of rental income, it all boils down to the question, "How can I maximize income for the least amount of investment." I don't mind property management work -- heck, its pretty much what I do now fixing up homes. The thought had occurred to me that aside from managing the property(s) we have, I could throw out a shingle and manage others in addition -- provided the market isn't saturated with competent managers already. Its quite clear that having/creating a job in-line with the hospitality & tourism industries on the island is the way to go.
I understand condo fees usually include maintenance/landscaping, insurance, and in some cases utilities but even with all that, they seem disproportionally high. And what are the origins of a "special assessment"? What "past sins" would they be trying to rectify? And does this happen often?
hothulamaui - congratuations on your 4 property sales! curious though, with the market being that active (~1 week on market), do you find that staging them is worth the trouble?
I have staged homes to boost speed of sale in a down market, -or- to get closer to my asking price in a hot market. However, at the end of the day, moving all that furniture around and storing it is a pain. Although I mostly rehab SFHs, I quit staging. Now I have a basement full of unused furniture kept around "in case" of a market turn.
So here's a thought, or more of a feeling... It "seems" that property values are higher in Lahaina than in Maalaea. And maybe equal to Kihei. If you had the same ocean front property (condo or SFH), which area would you get the most for it? Which area the least? All other factors being equal.
MauiPartTimer - great, great info! Could I ask, of the time you ARE actively renting your condo, what is your average occupancy percentage? I am currently factoring in a yearly occupancy rate of 80%.
Here are my figures on a 2br condo, please let me know if I've overlooked something or estimated incorrectly:
Mortgage: $2k / month ($400k loan for 30 years @ 4.5 APR)
Condo Fees: $500 / month (estimate)
Occupancy Rate per Year: 80%
Rental Rate: $200 / day (avg)
yearly income: $1,580 * 12 (months/year) - $2000 real estate tax = $16,960 per year
This can change substantially if the occupancy % is off. Which, is why I'm asking...
hotzcatz - you are correct with the logistics of vacation renting and its something I'd like to try. Meeting renters can be overcome with a combination door lock emailed before arrival - thereby relaxing any pressure to "meet" at a certain time or at all. Difficult for guests when flying so far with flight delays, rental car issues, food, jet lag etc. to consider. NEST for thermostat control, etc.
Exactly! Multiple "lesser" rentals may be a viable option over 1 single property. Not only is it multi-"lesser" properties vs. single high-end property. But also, vacation rental vs. yearly local rental -- the numbers on that seem to favor vacation rentals (much to the dismay of the county govt.)
Heck, if the investment vehicle was purchasing a boat to rent out for more $$, I'd look into that too. This is the quintessential reason of this thread. What investment "vehicle" offers the best ROI for the least amount of cash?
Ohana's - understand that the word means "family" and in real estate terms, refers to a secondary, smaller, auxiliary home on the same property lot as the main house. Does anyone know the regulations behind building/allowing one? Is there a certain minimum lot size one must have. Are there sq ft limits to the structure? Other conditions? Have to assume it must be smaller than the main house. Any ideas?
Lease-Hold - Summed up, a long term lease on a property with a large initial deposit. But what are the common reasons anyone would buy one? I can guess an example might be that someone who wants to spend the remaining 10? years of their life in a property they couldn't ordinary afford. Any other reasons I'm missing? Seems like an awfully high deposit to forfeit once the lease is over.
Mahalo
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, the second is on the market in Upcountry.
Understanding Maui Real Estate - Digging Deeper...
What is a traveling drum circle??
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