Take advantage of low interest rates

Many potential buyers are uncertain as to whether to buy now or wait for real estate prices to decline further (assuming that prices will decrease). For those financing, I would suggest focusing on total cost of purchase rather than fixating on sales price. Today’s historically low interest rates play a critical part in the overall purchase and cannot be overemphasized.

Rather than discussing abstract economic principles, it would be more productive to illustrate this point by actual examples. Let’s say that Bob is interested in a condo currently priced for $200K but he believes prices might dip a bit more.

Scenario A: Bob buys today at $200K with 10% down, securing financing of the remaining $180K at 4.5% interest rate for a 30 year mortgage. His mortgage payment (interest/principal) is $912 per month. But Bob wonders if he should have waited for prices to decrease even more.

Scenario B: Bob waits a year, during which time prices have gone down 5% (which is not out of the realm of possibility) but interest rates have gone up by 1%, which many analysts/economists are predicting. So Bob is very happy that he is able to save $10K from his purchase by buying it at $190K. So with a 10% down payment and financing at 5.5% interest rate on a 30 year mortgage, he assumes that he is in a much better position than he would have been a year ago. But now his mortgage payments are $971 per month.

Scenario C: Bob waits a year, during which time prices have remained flat and interest rates have gone up by 1%. So Bob considers buying it at $210K, with 10% down but interest rates at 5.5% for a 30 year mortgage. So now facing a mortgage payment of $1,068 per month, Bob realizes that he can’t afford it.

Sure, from $971 to $912 is a difference of ‘only’ $59. But in a year that amounts to $708, which over the life of a 30 year mortgage totals $21,240.  With the median sales price of a Maui home at $500K and a Maui condo at $390K, there is certainly plenty of incentive to take advantage of today’s low interest rates.

Maui Condo Deal of the Month

Even in the current real estate market where properties are at rock-bottom prices, there are still properties priced well below market value. One such property is a Kai Makani REO (Bank-owned/Foreclosure) 3 bedroom / 2 bathroom condo priced at $352,900.  This unit encompasses 1,238 square feet of interior living space and features an open floorplan, in-unit stacked washer/dryer, granite countertops, vaulted ceilings, and stainless appliances. Kai Makani was built in 2007 and it shows, as units feature upgraded designs and quality craftsmanship throughout.

How is this unit a good value? Check out other Kai Makani condos currently for sale. As you can see, there are SEVEN smaller (1,075-1,126 sq. ft.) 2 bedroom / 2 bathroom units for sale, ranging from $399K to $625K. The only other 3 bedroom / 2 bathroom unit is listed at $599K. I don’t expect this unit to last long on the market before a savvy buyer or investor swoops in.

Contact Alex at Alex@HawaiiLife.com or Mariah at Mariah@HawaiiLife.com to keep abreast of the best deals in Maui real estate.  Oh, and check out the beach across the street from this unit, the longest walking beach on Maui.

UPDATE: PROPERTY WENT INTO ESCROW WITHIN A FEW DAYS OF HITTING THE MARKET. Contact us if you’d like to be kept abreast of great values in Maui real estate.

Being watchful of the Maui real estate market, we know when new listings represent an amazing value and present that information to our visitors. And as such, we present a new REO (Bank-owned/Foreclosure) in Kahana’s Valley Isle Resort.

Maui oceanfront REO condo is a terrific value

This 1 bedroom / 1 bathroom oceanfront unit (Maui MLS# 344610) is listed for $364,900. How does it compare to other units at Valley Isle Resort? Check out other Valley Isle Resort condos for sale. As you can see, the lowest priced 1 bedroom unit is offered at $565,000, and even a much smaller studio unit has a higher price tag at $425,000. The only condo to have sold in this complex in 2010 was a unit the same size for a price of $650,000.  In the past 5 years, seven 1 bedroom / 1 bathroom units have sold, from as low as $550K to as high as $850K. So at $364,900, obviously this represents an unbelievable deal.

Valley Isle Resort is permitted as a vacation rental, thereby maximizing income potential. Amenities for the exclusive use of residents and visitors include a pool, barbecue areas, and on-site shops. Nearby, some of the most recognized championship golf courses, five star restaurants, exclusive shops and top-rated beaches await. If you would like more information on this or other Maui real estate opportunities, contact Mariah at Mariah@HawaiiLife.com or Alex at Alex@HawaiiLife.com

We receive many requests for information from prospective buyers who would like to invest in Maui real estate but are unsure as to how to proceed. Today we will explore how to successfully implement a ‘Buy and Hold’ strategy. To briefly summarize, ‘buy and hold’ is a long-term plan of action in which an investor purchases a property and rents it to tenants with the goal of maintain positive cash flow while building equity.

Harbor Lights offer tremendous investment returns on Maui real estate

Rather than talk about abstract economic principles, I thought it’d more conducive to illustrate my points by giving actual examples. Let’s take a look at a 2 bedroom / 1.5 bathroom Harbor Lights condominium (Maui MLS# 343800), currently listed for $34,900.  With a down payment of 25% ($8,725), which is typical for investment purchases, financing the remaining 75% ($26,175) with a 30 year fixed rate APR of 4.8% (which is conservative, given that we are experiencing historically low rates) results in a monthly payment of $137.  These units typically rent from $900 to $1,200 per month, so for the sake of argument we’ll take the average of $1,050. Monthly expenses include mortgage payment ($137), maintenance fees, which are extremely high on this particular complex ($688), taxes and insurance (approx. $30), totaling $847. Deduct the rent collected from the monthly expenses, leaving $203 a month. For the first year, you would have a surplus of $2,436 ($203 x 12) and $400 paid towards the principal. So your investment of $8,725 results in a first year ‘profit’ of $2,836. How many investment opportunities give you a rate of return of 32%? Notice that I didn’t take appreciation into account.

Is a Keonekai Villages short sale the right investment for you?

Now let’s take a look a Short Sale 2 bedroom / 1.5 bathroom condo at Keonekai Villages (Maui MLS# 343842) listed for $165,000. With a 25% downpayment ($41,250), financing the remaining 75% ($123,750) at a 30 year fixed APR of 4.8% for a monthly mortgage payment of $650. Additional monthly expenses include monthly maintenance of $340 and approx. $100 for property taxes and insurance, bringing the total of expenses per month to $1,090. These units typically rent for $1,150, leaving a surplus of $60 per month. The first year, the amount paid towards the principal on the mortgage totals $1,892, to which we add $720 ($60 x 12) for a total of $2,612.  Now the original investment of $41,250 ‘only’ returned $2,612 the first year.  Although this property does not enjoy the whooping 32% return that the Harbor Lights unit did, it returns a very respectable 6.3% and is in a much more desirable area (near one of the most popular beaches in Hawaii, Kam III) which makes it more prone to appreciate at a faster pace.

When implementing this type of strategy, remember to build ‘reserves’ for repairs, which would be kept at a minimum in condominiums as compared to single family residences, and take into account vacancy rates and status of special assessments. If you would like to learn more about real estate investing in Maui, contact me at Alex@MauiRealEstateSearch.com

On Sunday August 15, the Maui Arts and Cultural Center (MACC) will be the perfect setting for an evening with ‘The Temptations’ and ‘The Four Tops’.  Imagine listening to some of the greatest and most influential Motown musicians while enjoying the cool Maui breeze under the stars. Although it’s not from my generation, this music has certainly withstood the test of time. The Temptations have inspired generations with such hits as ‘My Girl’, ‘Papa was a Rolling Stone’, ‘Just My Imagination’, and much more. And who can forget such classics from The Four Tops such as ‘I cant help myself (Sugar Pie, Honey Bunch)’, ‘Aint No Woman Like the One I Got’, and ‘Baby, I Need Your Loving’.

For those who have not experienced a musical performance under the stars at the MACC, it is the kind of out-of-this-world experience that can change the way you view music.  For ticket information, visit the MACC website. And if you’d like to chat about this event, Maui, or the Aloha way of life, feel free to post comments.