Wednesday, June 16, 2010


The real estate market in Hawaii County is volatile right now so here are some things we think are important to consider before purchasing a property.

Research the Market
  • Use online resources like to see the latest real estate transactions;
  • Subscribe to to track foreclosures and short sales in the area of interest;
  • Set Google alerts for the condo complex name or street names of interest to point to new articles and postings about sales, rentals, and crimes; 
  • Visit the public property auctions in Kona and Hilo;
  • Hawaii County foreclosures have been increasing and many properties are being sold through short sales or warehoused by the banks; realtors usually do not disclose information about foreclosures or pending foreclosures in the areas they are showing.

Learn the Neighborhood
  • Rent in the area for a month or more to find out what the challenges will be living there. If you talk to the residents, within a few months you will start to find out about the issues in the area, accessibility to shopping, crime, and if you feel safe.  Hawaii is very different from area to area and you can’t tell if you will like the neighborhood by touring houses with a realtor;
  • If you are buying a condo make sure you are comfortable with the people that own and rent there.  Talk to the complex manager and the owners running the home owners association and find out what the issues are at the complex;
  • In Hawaii, everyone keeps their windows open and the close proximity living makes it important to one’s quality of life to be able to get along with neighbors; 
  • Law enforcement in Hawaii county is slow to respond and often unable to do anything about a crime. Many crimes are not reported by the police or newspapers. Crime and drug use was up in Hawaii County in 2008 and statistics for 2009 and 2010 are not available by the county or state, so word of mouth is one of the best ways to get information. Neighbors and owners associations are the primary deterrents to crime, so living near people that are looking out for each other makes a big difference in Hawaii.

Research the Hidden Costs
  • Utilities and taxes are much higher in Hawaii than on the mainland. The cost of electricity is high (four times or more than most places on the mainland) and on voggy days you may have to use AC.  Find out what others are really spending on electric.
  • Maintenance fees at condo complexes can be  astronomical and every complex includes different things in the fees, some include cable, electric, hot water, grounds lighting and security while other complexes only include water or grounds upkeep. Fees can also be vastly different from one unit to another in the same complex;
  • Find out if any upgrades are planned for the condo; it is not uncommon for condo complexes to plan major upgrades to the exterior funded by a special assessment on the owners. We know of a condo complex in Kona that assessed their owners $60K for a major upgrade to the building, more than some owners paid for their unit;
  • Even undeveloped property may have mandatory owners fees or road maintenance fees;
  • Check out what your house and car insurance will cost. Don’t assume the insurance company you have had a long relationship with on the mainland will cover real estate, cars, or property in Hawaii. You may have to find new insurance providers and have higher costs due to being in a Tsunami zone, lava flow zone, or being remote from a fire department.

Understand the Property’s Zoning and Owner Rules.
  • Many buyers don’t realize the restrictions (or lack of restrictions) of Hawaii’s property zoning.  Some gated residential complexes are in areas zoned for agriculture and though the owner’s covenants may prohibit agricultural use of the property, there may be no legal way to stop a pig farm from starting up next door. It can be hard to get enforcement of owner’s covenants on agricultural zoned land. Some properties are zoned conservation or have other protected zoning that limit or prohibit building;
  • Condos can be zoned for short term rentals or only allow rentals for 30 days or more.  If you are counting on an income from a short term rental program, make sure it is allowed, and if you are planning quiet days around the pool, make sure the complex isn’t being run like a hotel with a new party showing up each day;
  • Condos rules can include animal restrictions, parking restrictions, plant, noise, BBQ restrictions.  There are usually fines associated with not following the rules depending upon the strictness of the owners association and the manager of the complex.
  • Some complexes use loud blowers, herbicides, pesticides, rodent poisons, and others do very little upkeep.  Hawaii is tropical; bugs and fast growing foliage are a big expense for most homeowners and condos.

Understand the Special Risks of Buying in Hawaii
  • Hawaii’s real estate market is highly volatile and a lot of very smart and wealthy people have lost staggering sums of money investing in it. Hawaii real estate prices were hit hard in the 1980’s when Japan’s economy had a downturn and to this day there are luxury condos that still sell for less than half of what they did in the 1970s;
  • Beware of changes in lending standards which may impact the liquidity of Hawaii real estate.  A large percentage of Hawaii County properties are second homes and vacation rentals, a class of properties that has greatly benefited from liberal lending standards. Returning to the strict lending policies of the past combined with the higher cost of Hawaii’s real estate may make the income qualifications substantially higher;
  • Hawaii County’s remoteness and lack of jobs makes real estate a different proposition than on the mainland where many homes have a basic value due to nearby jobs, schools, and amenities.
  • The current downturn on the mainland is hitting real estate prices in Hawaii County and investment properties and condos are going into foreclosure. It is best not to assume that a property in Hawaii will increase in value or that it will maintain its current price.

It feels odd to offer so many cautions about real estate in Hawaii County because we are very upbeat about the long term value of property on the island. But we have met a lot of people that purchased houses and condos and had buyer’s regret because they felt they overpaid or the living situation wasn’t what they were expecting.  Hawaii county offers a lot more choices in real estate than any other island in Hawaii and the key is to take the time to find the place that is ideal for you.


SMNinja9 said...

I wanted to say thank you for the continuing insight into life in Hawaii. Being presently obsessed with the idea of transitioning to a better quality of life now (instead of the perennial 'someday'), I have been making it a point to read and research over an extended period. Time and again, I have found myself returning (be it intentionally or circumstantially)to either one of your sites or those of people you have linked to. Again, thank you for the wealth of information and observations.

Dani Stratford said...

Hawaii is an awesome place to live in. The realty market after the housing bubble burst has caused property prices to drop. So if it has always been your dream to own a Hawaiian property, now is the time to buy one! Thanks for sharing the awesome information on your blog,

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