A Blog of the Big Island

Big Island Veteran's Day Parade

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Mon, 21 Dec 2009 09:58:55 -0800

http://www.flickr.com/photos/johndirgo/sets/72157622631129925/

Huge House with Pool

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Mon, 21 Dec 2009 09:53:19 -0800

Black Sand Beach Home for Sale

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Mon, 21 Dec 2009 09:51:11 -0800

Doing the Right Stuff - Prospecting

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Thu, 14 May 2009 18:20:04 -0700

This is great advice for anyone in sales, not just real estate agents

Via Anna 'Banana' Kruchten, Anna Banana Realty, Phoenix AZ:

Do The Right Stuff!

Ask this guy about doing the right stuff and he'll tell you. Short, simple and to the point. You need a pan, a donkey, the right tools and lots of stamina, and all the while you must stay focused on what you're looking for...gold.

When you're looking for your gold mine in real estate, you need to do the same stuff over and over and over again. And then start all over. It's not complicated. It's not hard. It's not rocket science. Just do it. Here are the tools the agents in our office are taught to follow every day. Not once in awhile, every work day.

1. First thing every day, think of all the stuff you are grateful for and continue doing so throughout the day. Keep a grateful journal if that helps you stay in touch with all the good happening in your life. Share your grateful list with office mates. That's kind of like 'sharing the wealth'. Spread only the good stuff around and focus only on the good stuff. JDI.

2. Show up with a can-do attitude. You do know what that looks like, right? Of course you do. Smile. JDI.

3. Work 'on' your business for the first hour. Do not open emails or take phone calls. Stay focused on the project on hand and get it done first. Why no emails or calls? You know why. Emails can suck up a lot of time and then ......whoa......it's 11:00 and you don't have anything accomplished yet. Just try this for a week and see what a difference it can make. JDI.

4. Personal notes, write at least 2 a day. There are many people who understand the power of the 'old fashioned' hand written note. They are the successful agents. Model their behavior. This is a simple relationship building tool that takes less than 5 minutes a day. JDI.

5. Look over your 'hot list' of prospects/clients. Always be thinking, who is ready to buy or list their home, THIS week? These are the hot ones that will buy or list with somebody. It may as well be you, right? JDI.

6. Look over your 'warm' list of prospects/clients. Is there anybody that needs an MLS search set up, a CMA sent to them, an invite to coffee or lunch. This warm list most certainly will turn into the hot list when the time is right for them. If you are at the 'top of their mind' they will most likely call you when ready to buy or sell. JDI.

7. Love calls (come on now be serious, stay focused here). These calls are short, no more than 3 to 5 minutes because you don't want to be the 'one' that people think.....on no it's him/her calling....how will I ever get them off the phone. Ask FORD questions ( Family, Occupation, Recreation, Dreams) and then LISTEN to what they are saying. The gold is in the listening part. Are they getting married or divorced? New baby on the way? Big loud teenagers that need their own space? College kids out of nest soon? Older parents moving in with them? There are many reasons to buy or sell and it's your job to listen to their current and/or future needs and wants. Think of something of value for them. Follow up. JDI.

8. Schedule 2 coffees or lunches with prospective clients and/or business associates weekly. No explanation needed here. Everyone knows about Starbucks. JDI.

9. Network weekly. Get out in the flow of people. Join the chamber of commerce or other groups and get involved in your community. JDI.

10. Blog. I'd like to say blog every day but I know that a lot of agents will groan loudly. So do this....blog 2 to 3 times a week until you understand the power of what blogging can do for your business and then start blogging 5 days a week. Along with blogging, join the Active Rain Social Network. JDI.

11. Talk to 50 people per week face to face. Or more. Every live person counts as long as it's not family or friends. Don't cheat yourself. This is a real gold mine producer. JDI.

12. Course Correct. If you find you're not doing the right stuff, course correct. Don't get out the sledge hammer - that takes way too much energy. Just simply review the list and start over. If you need support, ask for it. Don't wait a week or month for help. Ask right away if you're going off course. A great team will be there to assist you. And so will your Broker. JDI.

Now I know there are many other real estate related activities that need to be accomplished ie: open houses, farming, newsletters, correspondence etc. Fit them in as required. But don't get bogged down in the details and forget to prospect. Many agents do this very thing and wonder what happend 90 days or so out and wonder where the clients went. I know, I was one of them years ago before my new broker taught me the right stuff to do.

That's it. Do the right stuff and you will create a gold mine. JDI.

See you on the Mountain!

Gorgeous House in Orchidlan

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Thu, 09 Apr 2009 18:08:58 -0700

Beautifully remodeled and renovated house in Orchidland on a square three-acre parcel. There's a lot of great custom touches in the home including extra wide hallways and doors, skylights in the dining area and hall bathroom and tons of storage. Some of the features include: * Instant-on hot water and a two-stage filter in the kitchen * Solar hot water * Magnetic door stops * Heater bars in the closets * Automatic attic fan (turns on when the temperature or humidity reaches user-defined levels) * Insulation in a couple of walls to keep the bedrooms cooler The open floor plan is inviting and comfortable with the kitchen and its center island open to the living and dining areas. Large comfortable tiled lanais at the front and on the side give you quality outdoor living area. The carport and workshop area is large and fully electrified for your use. There is also a separate storage shed that is getting a new roof shortly. The house is positioned roughly in the center of the square three acre parcel. Its very private from the road, with a curving driveway flanked by beautiful palms and other tropical plants. The catchment system for the house is unusually large (around 29,000 gallons) so you will never run out of water. Before the house was built 4,000 lbs of BTB was put under the slab and all of the framing was treated for 2 weeks with Hi-Bor. The whole house has been caulked to keep insects out. The house is in super condition and ready for a new owner. There are so many features in this house that there isn't space to describe them all. It has to be seen to be believed. Owner is planning to complete pressure-washing and repainting of the exterior of the house. The front lanai will be tiled after the painting is complete.

Off-Grid Cabin in Fern Acres

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Tue, 10 Mar 2009 18:59:49 -0700

Unpermitted but Beautiful

• 760 sq. ft., 1 bath, 1 bdrm single story - MLS® $99,000

Fern Acres, Hawai'i - Unpermitted off-grid but very self-sufficient cottage in Fern Acres. Very nicely built and completely livable. The driveway curves in for privacy and no other buildings are visible from the property. The driveway continues down to a nice house pad area. There's a peek-a-boo view of the ocean (you can see the cruise ships go by at night).

Property information

Great Lot near Tidepools in Kapoho

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Tue, 10 Mar 2009 18:55:19 -0700

Close to the Ocean and Tidepools

• lot / land - MLS® $87,000 - Lowest Price in the Area

Kapoho Vacationland, Hawai'i - A fantastic lot and best priced in the area. Short walk to all water activities in and around the famous tide pools.

Owners are licensed realtors in Hawaii and hoped to move here and build their dream home.

This is the opportunity for someone to own and live in this magnificent area. A great place to live, love and relax. Lots of vacation rentals including the adjacent property.
The home on the ocean side of the property is across the street from the ocean so it would be mentioned there should be great ocean views from the upper levels and after clearing, possible from the lower levels.

The second picture is one of the tide pools that are a five minute walk from this property.

Property information

Beautiful Lot Close to the Ocean

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Tue, 10 Mar 2009 18:49:29 -0700

• lot / land - MLS® $45,000 - Good price for lower HPP

Hawaiian Paradise Park, Hawai'i - Really nice lot on 3rd in HPP. No albizias here, just ohias and other native plants. Low to the ground, no huge trees to clear before you build and landscape to your heart's content.

Property information

Artistic Restored Plantation Home near Downtown Hilo

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Thu, 08 Jan 2009 18:47:30 -0800

Photo Gallery

Description

Really darling restored Kama'aina Charming two story home located near everything! Close to downtown, walking distance to Hilo Bay and the downtown post office.

Small very lushly landscaped parcel is quite private from the road and neighbors.

The 1924 charming home was renovated a few years ago with extensive hand painted murals throughout the upstairs by a famed Hawaii artist. There are custom real wood louver window treatments that afford total privacy to the living quarters upstairs.

The upstairs has a kitchen, living room and dining area with two bedrooms and a really sweet bathroom. The vanity was made from a antique hutch piece of furniture and turned into a vanity with matching mirror. The floors upstairs are hardwood, as are the kitchen cabinets. Updated lighting and fans.

Downstairs has a bathroom and several rooms that could be perfect for an extended family, mother-in-law or separate rental. The downstairs practically doubles the square footage of the home. There is real value in this property for a first time home buyer, a rental property or a vacation rental.

The entire exterior of the home was completely repainted a couple of years ago. The countertops in the kitchen and all appliances were replaced at that time. Also the back yard was given a privacy fence. The home is in remarkably good condition for it's age and is one of the lowest priced homes in Hilo! Check with the planning department regarding the residential multi-family zoning and what your options are with this property.

It is really worthy of your consideration.

Features

Bedrooms:	3
Bathrooms:	2
Parking Spaces:	0
Year Built:	1924
Subdivision:	Puueo
Lot Size:	4824
Garage Size:	0
Square Footage:	1270
Agent Name:	John Dirgo, R, BIC, ABR, e-PRO, EcoBroker
Broker:	Aloha Coast Realty, LLC
MLS #:	218575

Location

130 Wainaku Street Hilo HI 96720

vFlyer Id: 2168045

Kapoho Fish Pond Proposal Approved

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Wed, 04 Jun 2008 19:44:27 -0700

DLNR has approved a proposal by a landowner in the Kapoho area to restore an old, deteriorated fishpond in Kapoho. This is a 4.3 acre fishpond that was built sometime before 1893 and maintained until the mid-1900s. However, in recent years, the pond has fallen into disrepair. His proposal was to restore the pond it about a foot above the high-tide mark and leaving it ungated as a no-fishing zone. Of course, traditional, cultural, and religious practices in the area would still be allowed under the PASH (Public Access to Shoreline in Hawaii) laws. The owner still has to submit a preservation plan to DLNR’s State Historic Preservation Division. He’ll also have to submit preservation plans and consult with the Division of Aquatic Resources to stop or at least minimize the spread of invasive algae.

Downtown Hilo KTA Store to Get More Parking

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Fri, 16 May 2008 17:35:55 -0700

The Vice President of Administration for KTA Super Stores issues the following statement yesterday:

"It is our intention to make improvements to the property. We evaluated many different options and concluded that additional parking for our store would be in our best interest. Currently, we are in the preliminary planning phase. Our consultants are working with the appropriate county departments (i.e. building, planning, fire, etc.) to ensure we comply with current codes and unique restrictions of the downtown area."

This has been rumored for a long time and its very true that the KTA store in downtown is desperately in need of more parking. While it is sad to see an older building come down, right across the street a very old (and previously somewhat derelict) building is getting a much-needed facelift.

Parking in downtown Hilo is always an issue -- especially on Wednesdays and Saturdays when the Farmer's Market is at its busiest. The addition of additional parking for KTA will also impact traffic on Mamo Street because often there are a number of cars waiting and stopping traffic on Mamo waiting to turn into KTA, due to the lack of parking.

The changes could begin as soon as June. At least one of the tenants of the existing building has been told that they may have to be out by the end of May. One is already vacating and the third is awaiting final word from KTA headquarters as to when they should plan to be out.

Kapoho Tide Pools Get Funds

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Tue, 29 Apr 2008 17:25:32 -0700

The Tribune-Herald reported today (sorry, that link will probably only be good for a couple of weeks) that the County Council had approved funds to pay for a part-time "visitor access manager" to help educate people about the tidepools. Of course, not many people realize that the Vacationland Hawaii Community Association has been paying for port-a-potties and a guard/educator down there for the last year or so. Its great that the County is helping out.

Merrie Monarch Parade

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Sat, 05 Apr 2008 20:39:05 -0700

Today's Merrie Monarch Parade was great fun. The weather cooperated (a little rain before to cool things down). You gotta love a town where the parade has the mayor walking down the street in a pair of jeans and waving to everyone.

See a lot more photos at http://www.flickr.com/photos/johndirgo/

There were Pa'u riders representing each of the islands (including Ni'ihau) in their ceremonial colors. Even the horses were adorned for the event. A number of high schools bands, various county departments and office, the police, firefighters, etc. Of course, several halau were there dancing on their floats and musicians playing.

It took over 2 hours to finish -- but like so many things that was just because it was running on "Hawaiian time" -- no rush, no worries, it'll be done when it gets done.

Broker/Manager Compensation

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Wed, 02 Apr 2008 14:09:58 -0700

New area for me -- I've always managed my offices myself. Now I'm in a position where I'll have a broker/manager for one of the offices. I need some ideas on how other people have structured the overrides to fairly compensate and motivate my broker/manager but not run me into the ground either.

Any thoughts?

Merrie Monarch Festival

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Mon, 31 Mar 2008 19:00:30 -0700

Its a busy time on the Big Island right now -- its Merrie Monarch Week! Now, to many people, their first reaction is "huh?". But to those in the hula and Hawaiian culture world, this is a BIG EVENT. Some have called the Merrie Monarch hula competition "the World Series of Hula" or "the Superbowl of Hula". And it is. To even have the chance to compete at Merrie Monarch, you have to be really good at the hula and all the cultural knowledge and experience that goes with it. Tickets go on sale the day after Christmas and are sold out usually on the first day. It started yesterday with the Ho'olaule'a, where seven halau (hula "troops" or "teams") performed in an exhibition. This event is not a part of the competition, but you wouldn't know it from the spirit of the groups performing. The big competitive nights are Thursday, Friday and Saturday, but there are performances all week long at the different hotels and other venues. Wednesday night is the Ho'ike. This is a "free night" where you don't need tickets, but get there early because it will be packed with people early. Thursday is the Miss Aloha Hula competition. The ladies prepare for years for this competition. To be "Miss Aloha Hula" is big. Friday and Saturday are the group hula competitions. Friday night is the Hula Kahiko (traditional) and Saturday is the Hula 'Auana (modern). If you can't be here to celebrate the history and majesty of hula, you can view the competition later in the week online. Some history can be found here.

Historic Downtown Hilo

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Fri, 28 Mar 2008 17:15:30 -0700

The Polynesians arrived in the Hawai'i sometime after about 1100 A.C. They are believed to have encountered and settled first on the Big Island. They eventually inhabited the area now known as Hilo where they farmed and fished. Oral histories show that there was trading of goods as well. Some reports put the native “pre-contact” (prior to discovery of Hawai'i by the western world) population as larger than the current population.

In those times, Hilo was known for its rich land and thriving waterways which supported the population of native Hawaiians. The rivers rivers, streams, lands and coastline are well recorded in ancient meles. Contemporary musicians often sing of these same parts of Hilo's history. While much of the history, culture and dance of old Hawaii was lost with the arrival of the missionaries, in recent years there has been a resurgence of interest in this history and an incredible growth of new students of the unique aspects of the “old Hawaiian ways”.

By the late 1700's, King Kamehameha was the ruler and Hilo was the center of political activity and social growth. Hilo was used by the King to build his army of ships with the intent of conquering all the Hawaiian Islands. But that didn't mean that the native Hawaiians stayed on their home islands. By that time, Hawaiians had traveled as far as the United States and China. The King also met and became friends with many of the foreigners who traveled to the islands. With such considerable traveling, the Hawaiian way of life soon became influenced by products ranging from iron to livestock to non-native seeds.

With its large deep-water harbor, Hilo was a vital connection between the plantations and their agriculture and the rest of the world. While they are not in operation anymore, evidence of the railways that linked the plantations to the harbor can still be seen all over the east side of the island. Of course, not all traffic at the harbor was products leaving the island – much of it was food and supplies being brought onto the island for local use in the plantations and the town.

As with any bustling harbor, business and commerce soon centered around the town of Hilo. Former contract workers brought to the island to work the plantation, such as people of Portuguese, Puerto Rican, Filipino, Chinese and Japanese origin, soon caught the entrepreneurial “bug” and created many of the company that fueled the town's growth and continue to drive the local economy. This "melting pot" of people remains the foundation of today's “rainbow” of people, cultures and festivals. Hilo remains true to this cultural heritage in its building, businesses and people.

Of course, the native Polynesian culture, since the cultural renaissance of Hawaiian history and story, serves as the backdrop upon which each of these cultures expresses itself. The impact of the Hawaiian culture can never be underestimated on the Big Island of Hawai'i. Much of the credit for the revival or “renaissance” of Hawaiian culture is due to the impact of one man – King Kalakaua. King Kalakaua took the throne of the Hawaiian Kingdom in 1874 and reigned over his people until his death in 1891.

The missionaries that controlled the culture in Hawai'i had forbidden the study or practice of native Hawaiian culture since their arrival. Kalakaua broke those rules and, with essentially no support outside of the Native Hawaiian community, restored many of the cultural traditions of the Hawaiian people.

The people of ancient Hawai'i did not have a written language. Instead, their history and culture was based on the spoken word in the form of chants and the dance called hula. The chants (mele) and hula recorded Hawaiian genealogy, mythology, and prayers. Through the hula, the culture, history, stories and almost every aspect of Hawaiian life were preserved, expressed and passed down through the generations.

But all was not paradise in this time between the “old days” and modern Hilo. In the last 100 years, in 1946, and again in 1960,two destructive tsunamis swept Hilo's bayfront area causing many deaths and the relocation of Hilo's government and much of the commercial life. When the town was rebuilt, a large park and roadway were situated between the buildings and the shoreline to absorb future tidal waves.

Hilo and its historic architecture remain the best example of an old-style plantation town in the state. The local terms "mixed plate" or “kapakahi” (mixed up) describe the impact made by Polynesians, Chinese, Japanese, Portuguese, Koreans, other Pacific Islanders and Europeans on Hilo's mixed-race culture of today. Besides being a rare surviving example of an Hawaiian plantation town, cultural diversity is one of Hilo's special charms. All these ethnic groups blend in the faces of the people who give Hilo its charm. Its diverse shopping opportunities, its small scale and its friendliness makes Hilo the perfect town in which to linger just a little longer.

(my apologies for the photos -- it was very cloudy today)

Paging Captain Obvious -- Study Says "Curb Appeal Helps Sell Houses"

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Thu, 27 Mar 2008 20:41:46 -0700

I am so glad that we, as Realtors, didn't pay for this survey. I mean, isn't this Real Estate 101? Curb Appeal Helps Sell Houses. Now some of the other findings of the study are really interesting. Some of them touch on things that I've mentioned in a previous blog entry (energy-efficient features and universal design), so I'm glad to see some statistical support for that.

Open-Realty -- Other Users and A Tip

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Mon, 24 Mar 2008 21:21:24 -0700

Anyone else out there using Open-Realty? Its a free, open-source content management solution for real estate companies (note: I am in no way involved with Open-Realty or any webhosting company that offers Open-Realty as a part of their product suite -- I'm just a user).

I've really found it to be pretty powerful. Now my web guru did have to buy a relatively inexpensive add-on, sold by a third-party, to get the IDX integration working, but all in all, it was a good inexpensive solution for my needs. And as I'm working with it more and more, I find there's a lot of power there.

For example, I think we all know that, in the search-engine optimization world, the page titles are very important. I found out (today in fact) that I can have the page titles for property search results include information from the listing itself. For example, if the property is in the Hawaiian Paradise Park subdivision, I can make that the first part of the page title. I can follow it with the address, or street name. All of these things should (over time), help my site to get better rankings for our listings. Now, this is not deceiving the search engines -- the properties are legitimately in those areas -- but it does make use the simple logical fact that titles do (and should) matter.

Which of these page titles do you think should be higher ranked:

"ABC Realty, Quality Agents and Superior Service for Real Estate on the Big Island" --or--

"Kapoho Vacationland, Kahi Loli, $80,00 : ABC Realty, Quality Agents and Superior Service for Real Estate of the Big Island"

I was happily surprised to find that Open-Realty can create those more descriptive and helpful (as well as search engine friendly) page titles on the fly.

Share your Open-Realty discoveries!

To many of you, I'm an SEO rookie, so be gentle. I do look forward to learning from all of you (I already have).

Property Tax on the Big Island

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Sat, 22 Mar 2008 18:27:50 -0700

Very interesting article about property tax assessments in the Hilo and Puna areas in the Hawaii Tribune-Herald (you may have to register and after another week or so it will be gone). A couple of quotes:

“Despite declining Big Island real estate values, many landowners are facing higher property taxes — some up 100 percent or more — due to the new way Hawaii County assesses homes, stores and other buildings. Annual tax notices mailed last week reflect a preliminary 12.2 percent — or $3.2 billion — increase in county-assigned property values. That means the county stands to collect an extra $25.8 million for the fiscal year starting July 1. New construction accounts for only 3.3 percent, or $7.1 million of the increase, with the rest attributed to higher property tax assessments.”

But one big question comes to mind: why, if values are down a bit?

Stan Sitko, the county’s newly appointed property tax administrator, maintains the timing is right because previous assessments were low and depreciation excessive. “This year, I took the big step. We recalibrated,” he said regarding how the value of improvements is determined. “Why are our assessed values still coming up when the market is correcting itself?” Sitko asked in an internal e-mail shared with the Tribune-Herald. “Two very good reasons: Our level lagged far behind the market in 2007 and 2006; and the volume of sales may have gone down in 2007, but the prices didn’t radically drop.”

A couple of things to consider: Just remember, owner-occupied properties cannot increase in assessed value more than 3% per year. If your homes are owner-occupied (and you bought more than a year ago) they should not be making any dramatic adjustments. KathyH, since you just bought, they may be making an “on-sale”-type adjustment this year, and next year you’ll be subject to the 3% cap — however, I’d still call them and make sure they are assessing properly. As for not having received it yet — don’t sweat for a while. March 15th (yesterday) was the deadline for the County to mail them — give it a while to get there. Some of us just got them early. Another note — if your house here is a rental and falls below the “affordable housing” rental rates, you can also file for special tax rates that the County gives to homeowners that provide “affordable housing” to renters. You have to provide a copy of the lease and fill out some forms, and its not a huge amount of money anyway, but its worth knowing. In some cases it makes sense. Hypothetical example — you could rent for $1100 a month, but the affordable rental rate for your house is (for example) $1080. If you dropped the rent to $1075, you might save enough in taxes to more than make up for the lost $25 a month. But then your rental expenses would change and that could have income tax implications…so, its not a simple thing, but you should get the info to be informed. Homeowners are also assessed at a lower rate (per thousand) than non-owner occupied properties. Live in your home and you can avoid a lot of property tax. I am not kidding when I say that I pay more in property taxes for one lot in Kapoho than I do on my home and that’s been true for years. Another thing to keep in mind is that (at least for me) the standard homeowner’s exemption is $40,000 but starting in 2005, an additional exemption of 20% of the total assessed value was passed. For example, my exemption is actually almost $70,000 after the 20% was added on. However, this 20% addition may not be law and could be currently granted as a gift from the County Council that they could also take away.

Q & A With a 1031 Specialist

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Sat, 22 Mar 2008 18:00:55 -0700

I recently had the opportunity to spend some time with Julie Tumbaga, a Vice-President of OREXCO, which is a qualified 1031 exchange intermediary company. It was a great learning experience and I thought I’d share some Q&A with her to the readers of the blog. If you would like to reach Julie, she and her associates can be reached at (877) 591-1031 (toll-free from the neighbor islands) or 524-6737 on O’ahu.

Q: A 1031 exchange seems simple on the surface, but in learning more about them with you, I found that there was a lot more to them (and a lot more options for investors) than I had previously thought. In principle the idea is simple, but there are a lot of nuances to the process and legalities of a 1031 exchange. In your experience, what are several of the biggest areas of confusion for people considering or executing a 1031 exchange?

A: There are a number of things…

1. They have to reinvest both their basis and their gain, not the net proceeds. So, if they sell something for 500K, the replacement property needs to be equal to or greater than 500K for 100% deferral.

2. They need to be selling and purchasing like-kind property. Like-Kind is any combination of real property to include single family homes, condominiums, vacant land, commercial, industrial, golf courses and leasehold property with more that 30 years remaining on the lease. All properties need to be used for investment or for productive use in a business or trade.

Q: In continuing in the same general area of question, what is the single largest mistake you see people make (that could risk their tax-deferral) when doing a 1031 exchange?

A: A couple of things…..

1. They don’t identify property timely

2. They don’t use all of their money because they got a mortgage that is too high.

3. Don’t consult with their CPA or tax advisor.

Q: I know that depending on the type of exchange, the duties and responsibilities of a Qualified Intermediary (QI) can vary greatly but can you give us a description of some of the duties of a Qualified Intermediary (QI) in most tax-deferred 1031 exchanges?

A: Some of the duties include:

Consult with your tax advisor to assure your transaction is properly structured to qualify for tax-deferred status;
Prepare the legal documents necessary to facilitate your transaction, including: the exchange agreement, the assignment, the exchange contract addendum and the exchange account closing summary.
Execute closing documents and where necessary, reviews and executes financing documents;
Acts as the principal, by way of an assignment, in your purchase and sale transactions
Holds your exchange proceeds so that you do not have actual or constructive receipt of the funds; and
Coordinates with your real estate agent, tax advisor and/or attorney, escrow/closing officer and lender to ensure the smooth and accurate processing of your exchange transaction.

Q: One of the things I learned from you is that there are no established standards or guidelines for someone to call themself a QI. No national licensing, no experience or financial requirements and no genuine oversight. Since a QI is often handling significant amounts of money and/or titles to real estate, this is a serious risk to consumers and investors. What questions should someone considering a 1031 exchange ask of their Qualified Intermediary to be sure that their money and property are safe?

A: Some things to ask would be:

What is the QIs financial strength? Obtain a copy of the QIs annual financial statement.
Does the QI have a fidelity bond? If so, what is the amount?
Does the QI have professional liability insurance? If so, what is the amount?
Can the QI provide a written guarantee?
Where is the QI holding the funds? In an investment account or bank account?
Is an account summary available on demand?
Is the QI subject to and compliant with Sarbanes-Oxley?
Is the QI an independent organization/entity or is it affiliated with a larger corporate parent and/or sister company (ies) with substantial assets?

Q: In most real estate transactions, we already have buyers, sellers, buyer’s agent, seller’s agent and the escrow officer involved. When its a 1031 tax-deferred exchange, we also have the Qualified Intermediary company and its representatives involved to make sure that the IRS deadlines and requirements are met to ensure a legal exchange. What would your advice be to these other parties so that the transaction can move ahead quickly efficiently and legally?

A: Whenever there is an exchange, everyone needs to talk to each other. Agents, Lenders and Escrow….we all have our own specialties, however, when there is an exchange involved, some of the normal everyday practices don’t suit the exchange. So constant communication is vital so there are no surprises at the end.

EcoBroker Discount

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Fri, 21 Mar 2008 15:27:09 -0700

I know I'm being cheap here, but hey, a boy's got to save where he can. Any one know of any discounts available for the EcoBroker certification & classes?

Population Changes (Not Major) on the Islands

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Thu, 20 Mar 2008 14:40:08 -0700

Interesting -- it appears that the population on the islands may be shifting a little bit. Today's Star-Bulletin has this article about some minor population shifts in the islands. What is interesting is the growth of part-time residents. I know I've seen signs of this on the Big Island. We have a lot of part-time residents as well as a number of full-time residents that never even considered O'ahu due to crowding, cost and traffic. Many are retirees, so the lower amount of conventional employment is less of a concern.

Gay and the Housing Market

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Wed, 19 Mar 2008 18:01:34 -0700

Definitely worth checking out: The results show signi…cant correlation between the spatial concentration of same-sex couples and housing values; furthermore, housing values are higher in a city where the proportion of same-sex couples was higher a decade ago, suggesting that same-sex couples make better communities. Love it -- like we didn't know this to be true!

Simple Green

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Tue, 18 Mar 2008 17:39:14 -0700

A lot of people think that being more “green” in real estate is something that is difficult or can only be done as part of a new construction or major remodeling project. That is far from the truth. Very often, simple things can be done to reduce home energy usage and improve the “greenness” of a house.

For example, I was recently asked about "what would the energy savings be if I replaced the hot water heater with a solar one?" My questions back to them were "do you have an insulating blanket around the existing hot water heater?" and "have you put the hot water heater on a timer so its turned off when you're not around the house to use hot water?". The answer to both questions was "no".

Sometimes the simplest things are great places to start. I'd rather put on an insulating blanket and install a time for (at most) a couple of hundred bucks than to have someone tearing up my roof and spending thousands (even after the tax breaks) on a solar hot water heater. Now when the hot water heater is worn out and its time to replace it, that's a different story.

Of course, I gave this advice to a number of people BEFORE I bought my own insulating blanket and timer and now our local Home Depot is sold out...darn.

Many things that are great ideas for the mainland don't apply here in Hawaii (ceiling insulation, heating ducts -- what are those?), but the advice of "start with the basics" definitely applies.

On one house I own, I had a solar attic fan installed at a cost of around $600 (it was a few years ago, so forgive me if I have the amount wrong). When the sun hits it, it turns on and sucks hot air out of the attic. The temperature in the house dropped by about 5 degrees immediately. Its not a “cure-all” for hot houses, but it sure helps. And there's no on-going cost and I expect it to last many years.

Of course, ceiling fans are a way of life in Hawaii – often we have at least one in every room. What I did not know until fairly recently was that older ceiling fans can be quite energy-inefficient. Newer ones are much better. Again, if you don't have to replace them, the energy savings is probably not enough to justify it, but when it is time to replace one, look for an energy-efficient model.

Speaking of appliances and other durable goods in general, its not the most “green” thing to do to replace anything unless there's a pre-existing need. To use the ceiling fax example, removing a functional ceiling fan in order to replace it with a more energy-efficent model is probably not a good idea unless you have someone that can use the old fan or you can use it yourself (perhaps in a little-used guest bedroom). To take out the older fan and have it end up in a landfill defeats the purpose.

I often hear of people replacing the main refrigerator in the house with an EnergyStar model and then taking the old one out to the garage or carport and using it a secondary or “beer” fridge. Again, that kind of defeats the purpose – you now have the old energy-inefficient model AND the new one both running. It would be better to have one, larger, energy-efficient fridge.

If you haven't encountered it yet, FreeCycle is an amazing thing where you can offer up, for free (and only for free) anything you have that may be working, but you no longer need. The person wanting it will usually pick it up (or at least meet you at a convenient location), get the item and put it into use. Less in the landfill is always “green”. Check it out at http://www.freecycle.org.

Just a few tips to make life in your existing home a little “greener”.

For Consumers: Renting Never Makes Sense

John Dirgo, R, BIC, e-PRO, ABR, EcoBroker (Aloha Coast Realty) — Tue, 18 Mar 2008 15:58:12 -0700

A lot of people are saying right now “oh, don't buy now, things are still going to go down”. Whether or not that's true, I don't know, but I think people are forgetting the inherent advantages of home ownership. This is all obvious, so if you're familiar with this, you can skip this blog entry. Same thing for people that already own a home; this may not apply to you.

Let's say you are renting a 3 bedroom house for $1200 a month (a common price here on the East Side of the Big Island). That's $14,400 a year.

Now, let's say that you find a great house for $200,000 or $250,000 (you can find a really good house, pretty new, for $250,000 in HPP right now). Let's say you have nothing to put down, but have really good credit (yes, 100% mortgages ARE still possible). Your payment will be in the $1700 a month range (including taxes, insurance and private mortgage insurance). So, at first blush, it looks like you're taking a loss of $500 a month.

Factor in the tax advantages though and the picture changes. First of all, the interest is deductible from your income, so on the $250,000 mortgage you're paying about $14,400 a year in interest plus another $1200 in private mortgage insurance and about $600 or so in property taxes. All of these are deductible and total just over $16,000 a year. So, if it totals $16,200 (the total of the example figures I used), you can deduct that from your taxable income. At a 25% tax rate (a common one), that will save you $4,050 a year or $337.50 a month. So the actual amount paid, in real terms, comes down to $1362.50 a month.

Still higher than rent, that's true. But if you look at the equity build-up, you've paid down the mortgage by somewhere near $3000.

Note: these figures are rounded and are generalizations – everyone's situation is different, so trust a tax person or your accountant to give you the real figures for you. Your actual cash out of pocket is about the same, but you've stuck a few grand in the “bank”, so to speak.

Let's look at the scenario where prices decline another 10%. So that $250,000 house is now $225,000. Man, you've lost money! Not really. You'd save about $200 a month in the payments, so maybe now you're at breakeven versus the rent. In the meantime, you've lost months worth of tax savings and have paid someone else's mortgage. Its not like your rent went down.

If you have a job or other income, decent credit and don't plan to leave the island in the next year or so, homeownership always makes sense. Gyrations of the market not withstanding.