We want to buy a house. What should I starting thinking about?
Consider your lifestyle and needs such as commute to work, schools, nearby shopping, proximity beaches and recreation. Next, take a look at your your financial situation e.g. your budget, desired monthly payments, resources to put a down payment. Lastly, consider getting a home loan pre-approval. If you need assistance, I can get you in touch with a loan specialist.
We've bought a house before. What's the same in Hawaii?
Like any other metro area, we have a multiple listing service (MLS) and our buying/selling processes prescribe to the rules and regulations of the National Association of Realtors. As for financing, procedures and requirements are similar to those on the mainland.
How is buying in Hawaii different than on the mainland?
Overall, the biggest differences are in the land tenure, customs and practices as well as uniqueness of the environment on the island. There is a reality to the Hawaii market. Even to experienced buyers, it can be a culture shock. Having the right real estate agent familiar with our local customs and practices is essential to the island transition.
I've seen houses cheaper and bigger on the mainland. Why are Hawaii home prices so high?
Limited availability of buildable land on the island, restrictive zoning and building requirements, housing construction materials shipped to the island from the mainland, and high cost of labor contribute to our higher costs for housing.
Value of Land in relationship to the physical improvements is generally the opposite of what most mainland buyers are familiar with as two thirds of the value of a property is in the land and one third in the physical improvements. Thus even if the homes are about the same price as those sold in, for example, the Bay Area when most buyers see the physical improvement they are often disappointed as the physical improvements do not compare favorably with what they are accustomed.
Further because our climate is much less extreme, the quality of construction is not as sturdy as it would be for a home built to with stand a brutal winter. We obviously don’t have those weather extremes which is why you come to live here, but given more moderate temperatures, homes also do not have to be as large and more time is spent outdoors.
What's different about financing in Hawaii?
Depending on the lender, there may be higher loan limits since Hawaii is defined as a high cost living area. For example, in Hawaii the FNMA loan limit is $636,150, the FHA loan limit is $721,050, and the VA loan limit is $721,050. Another difference is that all conventional loans originated in Hawaii are recourse loans versus non-recourse in most of the US. If you need further assistance, I can put you in touch with home financing specialists.
If home prices are so high, will property tax be just as high?
No. Property tax rates are a lot less when compared to most locales on the mainland. Here an owner occupied Home with a value less than $1,000,000 will have maximum property taxes in the $3,800 to $4,000 range per year. This is significantly less than in a lot of major metro areas. The flip side of this is while real property tax rates are lower the home valuations are higher.
What is a TMK?
Tax Map Key is a unique identifier in addition to a street address and is used to identify the property for tax purposes but is also unique to each property.
What is Hawaii Leasehold Property?
While many of the single family properties have converted to fee simple there are still a number, although declining of single family homes, that are leasehold. But there are many condominiums that are still leasehold. The basic terms of a leasehold property is the home owner has a lease on the fee simple property where by a monthly or annual lease rent is paid for the right to have your home on a property. The general terms were 55 years with the first 30 years at fixed lease rents either at intervals or for the entire fixed term of the lease. At the end of the first fixed term (usually 30 years) the lease rent was renegotiated based on the then fair market value of the fee simple property and a rent percentage calculator say 4%.
The rent re-negotiations became fairly controversial as the originally values of the properties when the leases were originated were much lower compared to a value say 30 years later. For example it was not uncommon to have renegotiated lease rent in relationship to the original term be say 12 times greater. For example if the original lease rent was set at $20 per month, and now the property was valued at $1,000,000 the new lease rent would be, based on a 4% lease rent calculator, $4000 a year or $330 per month. Further depending on who the lessor at the end of the lease the property reverted back to the Lessor.
If you are contemplating a purchase of a leasehold property make sure you read the land lease document thoroughly and understand what the rent escalators and end of lease provisions are. There could also be land use covenants that would also restrict your use and what you could build. Financing is also an issue.
I hear Vacation Rentals are great! What do I should I consider before setting one up?
If you are buying a vacation rental property several things must be considered. First, many condominiums as well as neighborhoods have minimum rental periods which can be in conflict with the owner’s desire to move to short term vacation rentals. Violation of these rental restrictions depending on the condominium can be costly or if violating zoning or land use ordinances can result in fines among other remedies. All vacation rents are subject to a Hawaii General Excise Tax of 4.72% and a TAT Rental tax of 9.25%.