Wednesday, 2 December 2009

Hawaii Real Estate

Now here's an off-topic post...

We're back once again for our now-annual Hawaii venture, staying once again at the Maui Vista.

When I first came to Maui in 1992, you could buy a place (+/- 600 sq. ft. 1 bedroom) in the Vista for $30,000. A few years later, I considered buying a place here when the price was in the $140,000 range. A few years after that the price broke $200,000, then in the early 2000's, the price went up to the $450,000 range. In the crash of 2008, the prices started to fall slowly. This week, I have seen places advertised from $199,999 to $349,000. I know that some of the places (like 3215) have been amazingly upgraded, so know that there is a big range of value in this complex.

This week, I looked at Maui Homes and Land. There are still places on the island listed for over 12 MM$. I see OK places on the island at the $500,000 mark. But if you want to buy something on Maui worth living in, you need to spend at least $600,000.

Which is stupid.

Let me do the math of a cheap, $200,000 place in the Vista.

Current occupancy rate: 60%
Rental agent take: 50% of gross
Annual average nightly rate: $100
Gross revenue = 365 X 0.6 X 100 X 50% = $10,950/yr
Cleaning fees (assume 15/yr @ $100/time) = $1,500/yr
Current condo fee: $325/month = $3,900/yr
General maintenance ($100/month) = $1,200/yr to cover various costs to maintain "stuff"

Net revenue after expenses = 10.95 - 1.5 - 3.9 - 1.2 = $4,350/yr

Now, $4,350/yr is $362/month. That's the payment on a $76,000 mortgage at 4% interest for a 30 year term. So you would need to put down $124,000 -- on which there would be no income.

Where is the sense in this?

And people wonder why I don't own a place in Maui.


Astrid said...

I think the same goes for all recreation property ... just not worthit!

Derek & Karen said...

Not true. Our place in Canmore comes to mind. I think it actually has more to do with the use you will get from it.