Author: admin

Investing in real estate is a great way to obtain cash flow and/or capital gains while you have someone else pay your mortgage, but there are also other benefits that you may not have thought about when investing in real estate.

1. Cash Flow

Cash flow is the income that is generated from the rental income after expenses have been paid. This is money going directly into your bank account every month — like an extra pay check.  This can increase over time as rent goes up with the market. Historically rental rates have gone up in Hawaii, so potential exists for your monthly cash flow to increase over time as rental rates rise.

2. Capital Gains

Capital gains or appreciation is the increase in the value of the property over time. We have seen prices double in Hawaii a couple of times in the past and all you have to do is to own the property to take advantage of this increase.  This is an added benefit of owning a real estate investment.

3. Leverage

Using leverage to invest in real estate is a benefit that cannot be attained with other investments. For example, when purchasing stocks it will cost you $200,000 to buy $200,000 worth of a particular stock.  When purchasing real estate, you could purchase a $200,000 investment property but only need to pay cash for 20% ($40,000) of the total property price. If prices go up 5% in this scenario, the increase in value to both the stocks and the property is $10,000, but with a real estate purchase, your only cost is an upfront investment of $40,000 to have the property value increase by $10,000, whereas with the stocks it cost you $200,000 to make the same $10,000.

Even if real estate is a high-cost investment, less out-of-pocket is usually required to purchase an investment. This all depends on your borrowing qualifications with a financial institution.  The amount of cash that each individual buyer needs to have on hand to purchase a property all depends on their personal borrowing qualifications with a financial institution, and the best thing to do is to talk to a loan officer to find out your buying power and to set out your options.

4. Inflation Resistance

Since your monthly mortgage payment is fixed, there is inflation resistance with real estate. Goods and services go up in price, but your monthly mortgage payment does not.  You may actually increase your income when you raise the rent over time for your renters and not for you.

5. Tax Incentives

The not so obvious benefits are the tax incentives: depreciation, business expense deductions, investing tax-free with self-directed IRAs and my favorite, the IRC (Internal Revenue Code) 1031 Exchange.  In an IRC 1031 Exchange, an investor is able to sell their investment and buy other, like-kind investments, tax deferred.

An example of this is a client of mine who had a free and clear property that was in the family since the 1960s and had been rented out for years. If they sold the house and tried to take the cash, they would have been liable for huge capital gains since the property was originally bought for $60,000 and would sell for over $1,000,000 in today’s market. They would have had to pay taxes on the $940,000 capital gains, minus any improvements and monies that went into the property throughout the years which would have hurt any bank account, big time.

Instead, the investor took all of the cash and invested it in a few other properties, tax deferred, to not only raise their monthly cash flow but to diversify their real estate portfolio and position it to take full advantage of long-term appreciation.

You may have a similar scenario — or a totally different one.  If you would like to better position your real estate portfolio to take better advantage of the next, up and coming market, let me help lay out your options using my experience with real estate investments and knowledge with 1031 Exchanges.

Have questions about Maui’s real estate market and need expert advice?  For all of your Maui real estate services, please contact Michele Muir White R(S), ABR, SFR Coldwell Banker Island Properties, Wailea 808.298.8448, e-mail: [email protected]  Access the Maui MLS www.Maui RealEstateGuru.com

There were 95 homes sold during October with a median price of $489,000. Last October, there were 74 homes sold at a median price of $482,500. This is a 28% increase in volume and a 1% increase in median price when comparing this October to last.

94 condos have sold during October with a median sales price of $482,500. By comparison, there were 77 condos sold with a median price of $351,495 in October 2011. This means we saw a 22% increase in sales volume and a 37% increase in median price compared to last October.

Land sales remained slow on island last month with only 7 sales reported with a median sales price of $345,000. This was slightly lower than October 2011 activity when 8 sales were reported at a median price of $465,000.

There were 16 bank owned properties sold last month.  Most were single family homes. By comparison, there were 40 bank owned properties that closed in October of 2011. This is a 60% drop in bank owned transactions. Limited bank owned inventory means that we will continue to see fewer bank owned sales.

October was the busiest month for single family home sales during 2012 and it was the slowest month of the year for land sales. There were 25 short sale transactions that closed in October. There were 33 short sale transactions that closed last October.The highest sale for a home this month was $3,142,730 for a 5,126 sf home on 2.35 acres in the Kapalua Plantation Estates. This was one of 3  sales in Plantation Estates. This is considerable since there were only 19 sales in the subdivision since 2003.

Overall Luxury sales were slower this month. The three home sales over $2M was below the seven sales over $2M last October. There was only one sale of $1.5M in the luxury condo market. By comparison, there were five over $1.5M during October, 2011.

We saw slower activity for luxury  home and condo sales this month. The lower luxury sales volume reflects the continuation of a trend in the Maui luxury property market over the course of 2012. For the year, there have been 35 homes sold over $2M. This compares to 44 sold last year over $2M for the same period. That is roughly a 20% dip in activity. For the Maui luxury condo market, there have been 31 condos sold year to date over $1.5M. This compares to 60 sold during the January through October 2011 period. This represents a 48% dip in activity. While the overall Maui market appears to be trending up, the luxury market is lagging. While there are still some luxury buyers willing to pay a premium, many are still seeking value above all else.

The decrease in bank owned inventory has been part of a general decrease in inventory.

Of the most notable numbers from the October stats is that home sales were higher than any other month of the year. While condo sales weren’t as notable, they still showed quite a spike over the September numbers. Inventory remains low.  Well priced properties are seeing multiple offers.  What does this all mean for buyers and sellers? Buyers are continuing to find good values, but constrained inventories among many property types require buyers to obtain pre loan approval. Buyers need to remain proactive so that they can submit offers quickly when the right property comes along. Get pre-approved before you start looking. It will determine your budget and give you a strong position when you submit an offer.

Sellers will need to closely analyze their property segment when determining current market prices.  Sellers need to price well. Well priced properties are getting interest. Overpriced properties are languishing. Contact Michele Muir White R(S), ABR, SFR, Coldwell Banker Island Properties (808) 298.8448, [email protected] if you need assistance buying or selling Maui real estate.

Comparison of Maui Real Estate Sales Volume for September 2011 and September 2012

75 homes sold in Maui County during September. The median sales price was $425,000. By comparison, the September 2011 numbers were 80 homes sold with a median sales price of $412,000. That is a 6% decrease in volume and a 3% increase in median sales price when comparing the two Septembers.

65 condo sales in Maui County last month with a median sales price of $339,563. During September 2011, there were 83 condos sold at a median of $334,900. That calculates to a 22% decrease in sales volume and a 1% increase in median price.

11 land lots sold in Maui County during September with a median sales price of $238,000. The totals for last September were 12 parcels of land sold with a median price of $330,000. That is an 8% drop in volume and a 28% drop in median sales price.

Some notes to consider:

• There were a total of 16 bank owned (REOs) properties sold last month. Most of them were single family homes. By comparison, there were 48 REO properties sold last September. That is a 66% decrease in REO sales volume.
• There were 29 short sale closings last month. During September of 2011, there were 15 short sale closings. This is a 93% increase in short sale activity.
• There was one luxury home sold on Maui this September for over $2m. Last September, there were six sales over $2m.
• The luxury condo market had four transactions over $1,500,000 during September. In September 2011, there was one condo sold over $1,500,000.
• The highest sale on island last month was $2.9m for a residential condo in Launiupoko.

As you can see, there is a huge decrease in bank owned sales. Most likely in direct relation to Act 48, a bill intended to reform the foreclosure process in Hawaii. From the day the law passed, non-judicial foreclosure, the preferred methods for mainland banks to rapidly foreclosure on distressed homeowners, was killed. I believe that it has also encouraged lenders to work with sellers/borrowers in the short sale process. While bank owned sales are down, short sales were up almost 100% over last year. Banks are becoming more cooperative on short sales.

What does this all mean for buyers and sellers? Buyers are continuing to find good values, but constrained inventories among many property types require buyers to obtain pre loan approval. Buyers need to remain proactive so that they can submit offers quickly when the right property comes along. Get pre-approved before you start looking. It will determine your budget and give you a strong position when you submit an offer.

Sellers will need to closely analyze their property segment when determining current market prices. While some segments lack inventory, other segments have inflated inventory.  Sellers need to price well. Well priced properties are getting interest. Overpriced properties are languishing.  Contact Michele Muir White R(S), ABR, SFR, Coldwell Banker Island Properties (808) 298.8448, [email protected] if you need assistance buying or selling Maui real estate.

 

 

RAM reported 71 home sales in July at a median price of $491,000. Last July, there were 68 sales at a median price of $394,500. This is a 4% increase in homes sold and a 20% decrease in median prices.

73 condos sold in July at a median price of $320,000. The July 2011 numbers were 98 sales at a median price of $320,000. That calculates to a 26% reduction in volume.

Land sales numbers for July were 11 sales with a median of $450,000. Last July, RAM reported 14 sales at a median of $340,000. This translates to a 22% decrease in volume and a 32% increase in median price over last year.

RAM’s official stats also included an update on the overall inventory numbers. RAM reported 690 homes for sale on the Maui MLS as of this morning. Last August, there were 871 homes for sale. That is a 21% drop in listings. There are 915 condo listings on the market. Last August, there were 1,120 condos on the market. This is an 18% drop in inventory. There are currently 444 land listings on the market. Last year at this time, there were 531 lots listed for sale. This is a 16% drop in the number of properties available.

The decreasing inventory has been prevalent for the better part of two years, but we are really starting to feel the impact in just the last few months. The inventory has thinned significantly in lower priced market segments. This has resulted in some modest price increases for Maui’s lowest priced condos and homes. Other segments closer to the market median are seeing the potential for price increases. Those segments are seeing a few sales going above recent comparable sales with others at or below comparable sales. Well priced properties are frequently receiving multiple offers shortly after going to market. Willing and ready buyers are finding themselves playing a waiting game for inventory that fits their needs. Any substantial increases in inventory are going to be driven by increases in bank owned properties or short sales. The significant number of home sellers underwater are constraining conventional inventories. This is a phenomenon that we are seeing throughout the U.S. real estate market.

What does it mean for buyers and sellers? Buyers are still going to find good opportunities in this market, but it will require patience and a quick trigger finger when the right opportunity comes along. Cash helps in competitive bidding. Buyers who will require financing should be pre-approved prior to looking for properties. Pre-approval will give you a better sense of what you can afford and offer. It also bolsters your offer by giving a seller some assurances that you can perform. Sellers will find an interesting market. While we are seeing improving conditions in some segments, other parts of the market have significant inventory. Sellers will need to look closely at recent comparable sales activity when determining their go to market prices. Whether you are considering buying or selling Maui real estate, the need for quality, professional representation is especially important with these dynamic market conditions. Contact Michele Muir White R(S), ABR,SFR, Coldwell Banker Island Properties, Wailea (808) 298-8448 (e-mail: [email protected]) today for a free consultation.

 

 

86 homes sold in Maui during June of 2012 at a median price of $575,500. By comparison, the June 2011 numbers were 81 sales at a median of $429,000. That is a 6% increase in volume and a 34% increase in median price when compared with last year.

121 condos sold on Maui during June of 2012 with a median price of $373,990. The June 2011 numbers were 102 sold at a median of $294,500. That translates to a roughly 19% increase in volume and a 27% increase in median price when compared with last year.

There were 13 land transactions in June 2012 with a median price of $310,000. By comparison, the June 2011 land sales numbers were 14 sales at a median of $302,000. That translates to a 7% decrease in volume and around a 3% increase in median prices compared to last June.

Last month saw the purchase of 98% of the land area of the island of Lanai by Larry Ellison, CEO of Oracle, at an undisclosed purchase price. We have heard rumors that the sale was $500 million.

The Maui real estate market has seen the impact of the real estate downturn through price reductions, decreased sales volume and an increase in short sale and bank owned property (REO) transactions. There were a total of 50 REO and short sale transactions last month. Of the 86 homes sold, 25 were REO or short sales. That is roughly 29% of the sales volume. Of the 121 condos sold, 23 were REOs or short sales. That is 19% of the sales volume. Two of the thirteen land sales were bank owned.

The big news for June was the the purchase of 98% of Lanai by Larry Ellison. Lanai is one of the three inhabited islands of Maui County. The island was at one time primarily owned by Dole Pineapple. In 1961 Castle and Cook bought out Dole and unveiled plans to transform the economy from an agricultural economy to a vacation / luxury resort economy. In 1985, billionaire David Murdock acquired Castle and Cook and continued the makeover. The Four Seasons Manele Bay and the Four Seasons Lodge at Koele are the primary economic drivers for Lanai which has been hard hit by the recession. It will be interesting to see what will happen with the Lanai Real Estate market which has really struggled over the last few years. There are two segments to that market with the residential housing of Lanai City and the resort residences around Koele and Manele. My guess is that the added publicity may help boost sales volume of Lanai’s second home properties. We are all waiting to see what Larry has planned for Lanai.

Currently the former estate owned by Reverend Robert Schuller in Haiku is for sale.  This exquisite property boasts 39 acres, has a main dwelling with 10 bedroom and 10 bathrooms and is 9613 sf.  The secondary dwelling is 3 bedrooms and 3 baths and is  1853 sf.  There is also a cottage and caretaker’s quarters. The homes’ finishes are grand and the property boasts a gorgeous heated pool, sauna, tennis courts, panoramic ocean views and manicured grounds. Estate is being sold partially furnished. Located near the charming town of Paia and only minutes from Mama’s Fish House and renowned wind surfing capital of the world, Ho’okipa Beach Park makes it truly ideal. This rare offering is an enduring legacy for a family compound. A tropical retreat, formally known as the Baldwin estate that is second to none. Expansive Pacific ocean views and impeccable grounds with trees from all over the world offering a peaceful secluded haven all year round. Pure original Hawaiiana architecture throughout with attention to detail completes this magnificent estate.  Property is currently listed for $11,900,000

For all of your Maui real estate services, please contact Michele Muir White R(S), ABR, SFR, Coldwell Banker Island Properties, Wailea.  (808) 298.8448.  [email protected]  Access the Maui MLS via my website:  www.MauiRealEstateGuru.com

 

61 homes sold in May 2012 at a median price of $382,500. May 2011, 71 homes sold at a median price of $418,000. This is a 14% drop in volume & approximately a 9% drop in median price.

112 condos sold at a median price of $334,500 for May 2012. May 2011, 114 condos sold at a median price of $349,500. This is less than a 2 percent drop in sales volume and a 4% drop in median price.

There were 17 sales in May 2012 at a median price of $330,000. By comparison, there were 15 sales reported at a median price of $275,000 in May of 2011. That is a 13% increase in volume and a 20% increase in median price when comparing this May to last May.

We are still seeing significant impact from bank owned sales (REO) and short sales. There were a total of 49 bank owned and short sale transactions last month. Of the 61 homes sold, 22 were REOs and shorts. This is approximately 36% of the volume. Of the 112 condos sold, 24 were REOs or shorts. This is 21% of the transaction volume. Of the 17 land sales, three were bank owned.

May is another month where sales volume has under performed compared to last year.

Inventory is low and the luxury condo market is an area where we have seen an a bigger reduction in sales volume. Sales volume is off 56% when you compare the number of condos sold over $1,500,000 through the first five months of this year with the first five months of 2011. This segment has not been impacted by reduced REO inventory. This segment has been mostly devoid of bank owned properties. We have seen a small reduction in new development inventory. The upscale Hoolei complex is almost sold out. Most of the premier units at Honua Kai have sold. We aren’t seeing a similar reduction in the luxury home market. Sales volume this year is within a few percentage points of last year.

What does this all mean for buyers and sellers? Buyers will continue to see opportunities in this market. That being said, most of the good opportunities are attracting multiple offers. Buyers should be prepared to act quickly.  Buyers that require financing should obtain financing pre-approval. Sellers will need to monitor recent comparable sales when pricing their properties so that they area competitive. Overpriced properties aren’t selling.  Please contact Michele Muir White R(S), ABR, SFR Coldwell Banker Island Properties, Wailea 808.298.8448, [email protected] (www.MauiRealEstateGuru) with questions regarding Maui’s real estate or for assistance buying or selling Maui properties.