FEATURED PROPERTY:
Pohailani #201
Direct Oceanfront, remodeled studio condo. Amazing 2 island, unobstructed Views! Large lanai to enjoy whales, sunset and island views.

FEATURED PROPERTY:
Royal Kahana #1015
Oceanview 1 Bedroom 1 Bath Fee Simple Condo. Views Views Views! 10th floor oceanview unit in popular building with a sandy beach.

How VRs work | Fee Simple/Leasehold | Buying Real Estate | Questions to Ask

Real Estate Headlines:

How Vacation Rentals Work

Many people who purchase oceanfront condominiums and resort condominiums rent out their properties as vacation rentals (also known as short-term rentals). This helps you to cover your monthly condo payments while at the same time allowing you to enjoy your condo when you come visit Maui.

How do I rent my condo? You have different options in renting out your condo.

Front Desk. Some condos have a front desk that is either run by an outside contractor or by the condo association. Renting through the front desk costs between 35% and 55% of your gross rental income and includes full service management from cleaning the condo between stays to booking guests, managing problems, and doing necessary repairs.
Outside Agent. Another option is to use a real estate agent to manage your short-term rentals. (Contact Melissa Meeker for a list of these companies). These companies charge between 20% and 40% of the gross rental income and provide you the same full-service management, except that the guest cannot use the front desk services.
Website. Many people book their vacations online now. There are different websites available on which to advertise, and some condos are sold with their own websites. Just remember, Hawaii state law dictates that you must have an on-island representative to manage your property. Some real estate agents will let you supplement their bookings with people that came off your website.

Taxes. There is a 11% General Excise Tax (GET) due on gross rental income. This cost is usually passed on to the guests and paid to the state by you quarterly.

Is it Legal? It is important to determine whether or not your property allows vacation rentals legally. While there are many people who are currently renting out their condos and homes on a short term basis illegally, this activity should be strongly discouraged. The county of Maui has recently appointed several full time people to shut down illegal vacation rental and enforce the current zoning laws.

The county zonings that are currently legal to vacation rent in are: Hotel zoned properties (H-M, H-1, or H-2), Business or commercially zoned properties (B-1, B-2, or B-3), or Apartment zoned properties if the condo was build before 1983 and has been used openly as a vacation rental or short-term rental property through the present time (A-1 or A-2).

Property Taxes Contact Melissa to determine your county zoning.

Real Property Tax Rates in Maui (for fiscal Year July 1, 2007 to June 30, 2008)

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Fee Simple Vs Leasehold

The ownership of your land is described as Leasehold or Fee Simple ownership.

Fee Simple (FS) Fee Simple is full ownership of the land that your house or condo is located on (in a condo, you own a percentage of the land equal to the percentage of interest in your condo). Fee Simple ownership describes that you own the land outright. The opposite of Fee Simple (FS) is Leasehold (LH).

Leasehold (LH) In Leasehold properties, a separate, third party owns the land, and the condo owner pays a lease amount to have his or her condo on the land. This fee changes when the lease is renegotiated.

Renegotiation date: the date that your lease rent increases based on the appraised value of the land. Usually based on the average of three separate land appraisals that determine the current market value of the land. Your condo ownership percentage determines what percentage of the total lease amount you pay monthly.

Expiration Date: The lease expiration date is the date that the lease expires, and the Buyer signs an agreement that he or she will surrender the condo with no compensation at the end of the lease, on this date.

Surrender Clause: The clause in the lease that dictates the owner will surrender the property at the expiration of the lease with no compensations or claims to the property.

Lending: Banks will loan 5 years prior to the expiration date. For instance, if you have 30 years left on the lease, the lender will do a 25 year loan (not the typical 30 year loan).

Case studies: To date no one in the State of Hawaii has had to surrender their property. A court order on Oahu made the Leasor either extend the lease, or make the fee available to the condo owners. (The property then becomes fee simple, and the fees usually cost $40k to $150k). Remember though, you sign a Leasehold contract that agrees to the surrender clause.

Benefits to LH (leasehold) you get more property for your money. You are paying reduced rates for appraised land values from 20 to 40 years prior (at least until renegotiation). If the fee becomes available, it sometimes, but not always, adds value to the property.

Disadvantages to LH Risk of surrendering the condo- you sign a lease agreeing to this. There is not usually a cap to the monthly lease rent, so it could go up quite a bit. There are more uncertainties to the costs of owning this type of property.

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Buying Real Estate In Maui

3 Steps To Buying Real Estate In Maui

Get pre-qualified by a reputable lender in Maui to get a ballpark price range for your purchase and the interest rate you qualify for (recommendations available upon request).
Choose a property that fits your needs - answer questions below and Melissa will select a few good properties that fit your requirements
Write an offer to Purchase, get it accepted and open escrow

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Questions to Answer when Buying Real Estate in Maui:

Who is this property for?
(you, your family, or friends you travel with?)
What are your plans for it?
(how often and when would you use it?)
Why are you buying it?
(How long to you want to keep it? Do you expect long-term appreciation?)
When do you want to Buy it or Sell it?
(Do you have tax benefits to realize with buying/selling timelines? Are you going to retire here?)
Where do you like to spend your time/stay when you are on Maui?
(Make this fun- it is about what you like to do, where you like to be)
How much do you want to spend per month?
(even with vacation rental income, Maui properties tend to be cash flow negative, when you have a loan and use a rental management company).

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