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Wow, I'm glad I reached and appreciate the feedback.
I can't believe ownership is so troubling but honestly that must be why you see so many units up for sale.
The dream is on hold although I do see myself buying once I retire and can live in the condo half the time.
No question Kauai is one of the most wonderful places in the world and time spent there is never a mistake
Mahalo
We're planning something similar, but with a longer timeline (5-6 years).
The difference for us is that we generally visit 3-4 times a year, probably more once the kids are older, so we can count the cost of $4000+ dollars in hotel expenses against the mortgage payment (two months covered right there). In addition, we'd probably visit much more (once a month) if we didn't have to worry about finding a place to stay that is reasonable at short notice.
It still won't pencil out entirely, but we're looking at the potential vacation rental income as being a subsidy on the mortgage payment beyond that. If we can cover half the yearly output on the property with vacation rental plus money we don't spend on a hotel for visits, then the appreciation of the property makes it a good investment.
Unless you're able to get over to the island a lot, it's probably not a good move. You'd be better off investing your money and using it to buy when you're ready to live there.
We're planning something similar, but with a longer timeline (5-6 years).
The difference for us is that we generally visit 3-4 times a year, probably more once the kids are older, so we can count the cost of $4000+ dollars in hotel expenses against the mortgage payment (two months covered right there). In addition, we'd probably visit much more (once a month) if we didn't have to worry about finding a place to stay that is reasonable at short notice.
It still won't pencil out entirely, but we're looking at the potential vacation rental income as being a subsidy on the mortgage payment beyond that. If we can cover half the yearly output on the property with vacation rental plus money we don't spend on a hotel for visits, then the appreciation of the property makes it a good investment.
Unless you're able to get over to the island a lot, it's probably not a good move. You'd be better off investing your money and using it to buy when you're ready to live there.
I have a beach vacation home 8 miles from my primary house for around 4 years. By year three the kids did not really want to go much anymore. Stayed over 2 days last year. Luckily I have a tenant 9 months out of year who works in area. So I only have it three months a year. This summer wife wants me to rent it for most of summer. If I lose winter tenant may get a year round tenant.
It is amazing I love it, but kids rather be home near friends. Plus my oldest 16 now has a summer job and youngest 9 wants to go to camp with friends. My middle one for now is too old for camp too young to work does not mind going. But lately we go for a few hours during day.
I was hoping to spend whole summer there but that is not happening. My friends has same experience. It was good for young kids, under 8, but once kids get to teens they wont want to use it till their 20s and you are not there.
My friend loves "Dad when are you going to beach house"? As twenty something son only wants to know so he knows what weeks not to go.
I have a beach vacation home 8 miles from my primary house for around 4 years. By year three the kids did not really want to go much anymore. Stayed over 2 days last year. Luckily I have a tenant 9 months out of year who works in area. So I only have it three months a year. This summer wife wants me to rent it for most of summer. If I lose winter tenant may get a year round tenant.
It is amazing I love it, but kids rather be home near friends. Plus my oldest 16 now has a summer job and youngest 9 wants to go to camp with friends. My middle one for now is too old for camp too young to work does not mind going. But lately we go for a few hours during day.
I was hoping to spend whole summer there but that is not happening. My friends has same experience. It was good for young kids, under 8, but once kids get to teens they wont want to use it till their 20s and you are not there.
My friend loves "Dad when are you going to beach house"? As twenty something son only wants to know so he knows what weeks not to go.
The "once the kids are older" refers to when they're out of the house more than teenagers. My oldest is 16, and we never have an issue with him (or the two younger kids) not wanting to visit. The biggest restriction on how often we can go currently is their school and personal schedules. Once they're off and on their own, I can see us going more often.
That is one of the reasons why we're on a 5-6 year schedule though. It gives us time to save up a bigger down payment, and see if our interest changes.
First off, monthly HOA fees at the Plantation of Princeville are $617 for the downstairs 2BR and $735 for the upstairs 3BR. At a place like the Waipouli resort in Kapaa, it is over $1000 per month (water slides don't run for free). That does not include other expenses such as GET tax and property management. And don't forget income tax on rental income.
Frankly, I am a bit put off by 2 things. First that people expect rental income to cover the mortgage, as if everyone with a down payment was entitled to receive a free property upon retirement. The rental market and the real-estate market are only very loosely coupled, especially in a tourist destination with limited land. On top of that, people expect the property to rent itself and fix itself, so they do not have to pay any management percentage.
Secondly, people expect to receive competent real-estate and investment advice on these forums. Whitevpr1 gave a broad feasibility answer that was much more appropriate, but the original question was much more detailed. To answer it fully would require the expertise of a buyer's agent, the kind who get paid for their work. Heck for all you know, those who steer you away are local investors who don't want the competition--once they have their investment, they'll flog it to you for a higher price (and tell you what a great deal it is).
People believe that Kauai or Hawaii is this simple little paradise that they can buy into, just like that 4-plex in their home town. The truth is it is a complex market driven by many factors people aren't even aware of (land zoning, development, tourism, airfares, and ultimately the cost of oil), and it is already being played by tons of actors (developers, brokers, int'l investors). This place was "discovered" long ago, and is already full of people who got in before you. All these people are using the desirability to squeeze money out of those who want in.
For example while researching Plantations at Princeville, I found a listing for 1/16th of an LLC that owns one condo. It's not a timeshare nor a fractional ownership, because those are already regulated, it's some new way to slice the pie and market it. Seeing as how the price is 115K and monthly fees of 345 (multiplied by 16, I imagine), someone is fleecing someone else.
First off, monthly HOA fees at the Plantation of Princeville are $617 for the downstairs 2BR and $735 for the upstairs 3BR. At a place like the Waipouli resort in Kapaa, it is over $1000 per month (water slides don't run for free). That does not include other expenses such as GET tax and property management. And don't forget income tax on rental income.
Frankly, I am a bit put off by 2 things. First that people expect rental income to cover the mortgage, as if everyone with a down payment was entitled to receive a free property upon retirement. The rental market and the real-estate market are only very loosely coupled, especially in a tourist destination with limited land. On top of that, people expect the property to rent itself and fix itself, so they do not have to pay any management percentage.
Secondly, people expect to receive competent real-estate and investment advice on these forums. Whitevpr1 gave a broad feasibility answer that was much more appropriate, but the original question was much more detailed. To answer it fully would require the expertise of a buyer's agent, the kind who get paid for their work. Heck for all you know, those who steer you away are local investors who don't want the competition--once they have their investment, they'll flog it to you for a higher price (and tell you what a great deal it is).
People believe that Kauai or Hawaii is this simple little paradise that they can buy into, just like that 4-plex in their home town. The truth is it is a complex market driven by many factors people aren't even aware of (land zoning, development, tourism, airfares, and ultimately the cost of oil), and it is already being played by tons of actors (developers, brokers, int'l investors). This place was "discovered" long ago, and is already full of people who got in before you. All these people are using the desirability to squeeze money out of those who want in.
For example while researching Plantations at Princeville, I found a listing for 1/16th of an LLC that owns one condo. It's not a timeshare nor a fractional ownership, because those are already regulated, it's some new way to slice the pie and market it. Seeing as how the price is 115K and monthly fees of 345 (multiplied by 16, I imagine), someone is fleecing someone else.
First off, monthly HOA fees at the Plantation of Princeville are $617 for the downstairs 2BR and $735 for the upstairs 3BR. At a place like the Waipouli resort in Kapaa, it is over $1000 per month (water slides don't run for free). That does not include other expenses such as GET tax and property management. And don't forget income tax on rental income.
Frankly, I am a bit put off by 2 things. First that people expect rental income to cover the mortgage, as if everyone with a down payment was entitled to receive a free property upon retirement. The rental market and the real-estate market are only very loosely coupled, especially in a tourist destination with limited land. On top of that, people expect the property to rent itself and fix itself, so they do not have to pay any management percentage.
Secondly, people expect to receive competent real-estate and investment advice on these forums. Whitevpr1 gave a broad feasibility answer that was much more appropriate, but the original question was much more detailed. To answer it fully would require the expertise of a buyer's agent, the kind who get paid for their work. Heck for all you know, those who steer you away are local investors who don't want the competition--once they have their investment, they'll flog it to you for a higher price (and tell you what a great deal it is).
People believe that Kauai or Hawaii is this simple little paradise that they can buy into, just like that 4-plex in their home town. The truth is it is a complex market driven by many factors people aren't even aware of (land zoning, development, tourism, airfares, and ultimately the cost of oil), and it is already being played by tons of actors (developers, brokers, int'l investors). This place was "discovered" long ago, and is already full of people who got in before you. All these people are using the desirability to squeeze money out of those who want in.
For example while researching Plantations at Princeville, I found a listing for 1/16th of an LLC that owns one condo. It's not a timeshare nor a fractional ownership, because those are already regulated, it's some new way to slice the pie and market it. Seeing as how the price is 115K and monthly fees of 345 (multiplied by 16, I imagine), someone is fleecing someone else.
First off I appologize for putting you off.
I have taken the time to perform proper research and have determined that the long term risk associated with condo ownership 3000 miles from home is too great. The economy, weather, rental pool and the lack of ability to be onsite every year makes it a bad investment.
that said the assumption that it could pay for itself isn't as far fetched as some make it out to be considering the factors you mention above namely the fact that the real estate market isn't directly coralated to the rental income. If you find a well managed property at a reasonable cost in a great location (ocean view required) it can be possible.
I found that if you manage it yourself and only use an agent for the island representative at 10 percent, you pay 30 percent down and rent out at least 80 percent..... all possible you can break even on the mortgage. I have estimated that on a great property you can bring in 60k per year on a 650 k property. BUT the swing between a well run property rented almost entirely (lots of personal time selling) and an average rental can be up to 25k per year (45 - 70k per year) and I can't come close to obsorbing that kind of cash flow loss in one year.
So once I know when I will be retiring and I'm sure I have at least 50 percent down and breathing room to obsorb the next huricane (loss of revenue for a year) I will take another long hard look to see if I can make it work.
It was sure enticing to dream about having a part time job renting out a condo in Hawaii with the ability to spend half of my retirement there living off the rental income.... might still happen but not in the next 10 years or after the next huricane (huge reduction in real estate costs).
I would also like to add that the Hawaii market is much different than properties around home in that I could never expect to rent a condo in Toronto for more than $100 per night and with all of the very fine highrise hotels there simply isn't a market. Ocean front realty in paradise is as a sure thing as you can get for long term investing.
Also, IF you can make the cash flow work even at a marginal loss every month you will eventually own outright. IF you get there you have won the lottery especially for a Canadian. Let me explain, if you bring in 50k per year in rental revenue and after all fees you are still left with 25 k you have a choice to live in Hawaii for half the year on 10 to 15k or take the 25k and supliment your income. I don't have a pension and can't think of many other retiremnt strategies that allow for a garenteed income stream. Also our dollar fluctuates like crazy and to have US diversification has many international benefits. Canadian dollar low.. don't go to Hawaii that year and convert the US rental income to Canadian or the oposite dollar high stay longer in Hawaii.
All that being said it is much harder than it originally seems and it isn't for the faint of heart.... alot can go wrong so you need a ton of cash to handle all of the ups and downs.
All i know is Hawaii is a place I could spend the rest of my life and if I can figure out how to do that I will.
I would also like to add that the Hawaii market is much different than properties around home in that I could never expect to rent a condo in Toronto for more than $100 per night and with all of the very fine highrise hotels there simply isn't a market. Ocean front realty in paradise is as a sure thing as you can get for long term investing.
Also, IF you can make the cash flow work even at a marginal loss every month you will eventually own outright. IF you get there you have won the lottery especially for a Canadian. Let me explain, if you bring in 50k per year in rental revenue and after all fees you are still left with 25 k you have a choice to live in Hawaii for half the year on 10 to 15k or take the 25k and supliment your income. I don't have a pension and can't think of many other retiremnt strategies that allow for a garenteed income stream. Also our dollar fluctuates like crazy and to have US diversification has many international benefits. Canadian dollar low.. don't go to Hawaii that year and convert the US rental income to Canadian or the oposite dollar high stay longer in Hawaii.
All that being said it is much harder than it originally seems and it isn't for the faint of heart.... alot can go wrong so you need a ton of cash to handle all of the ups and downs.
All i know is Hawaii is a place I could spend the rest of my life and if I can figure out how to do that I will.
cheers
I will say this: Your level of thinking is spot on for a younger person. You are looking for ways to get ahead in life and smart enough to grab an idea and then research to make a good decision. And you are thinking about the future. If you continue to come up with ideas and plans ... and begin to take the next step to execute them, you will do well in life.
The next hurdle for you will be to move past the research stage and execute on an idea or plan. That is sometimes more difficult than coming up with the plan and you may just need to accept the risk and go for it. If it doesn't work out, learn from it and start working on the next one. In my 20's I bought my first house. While living in it, I then bought my neighbors house. I didn't have enough money to really cover the cost but I found a way to scrape together the downpayment but I couldn't handle it if things went wrong. I was under constant financial pressure for the first 6 months and it was stressful. I rented it and the tenants didn't work out. I had to evict them. And when they left I decided to sell the property because I couldn't afford to hold onto it. But I was able to sell it for 30% more than I paid for it. Taking that risk and working through the cash flow problem and the stress eventually worked out and after the sale, it put me in a better cash position to buy another house ... and with less risk because I had more cash. And from there, I just kept rolling forward. The point is, in the end there are no sure bets and you will need to trust yourself and accept a level of risk and execute on it in order to get going. I agree that Hawaii may not be the right place to start. But I like your thinking.
The Hawaii market always looks like a great idea from the outside. But there are a lot of people from all around the world looking at the market and thinking the same thing. It's just not always as easy as it may seem on the surface.
I am on the board of my investment condo. I tell you what primary residents will use every opportunity to charge fees to folks who rent to subsidize their own monthly costs. They also will try to ban renting. Remember, no one in unit less work for condo and you have to pay full fees or they can foreclose.
I am active on board. The most active to tell you the truth. Something I did not expect.
My last condo years ago, I actually lived in that one. We had to jack monthly costs due to a lot of upcoming expenses. Instead we charged folks who rent 13 months a year fees. Plus an approval fee. My maint went up zero since I lived there. But it ate into landlords income.
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discovered long ago
