I blogged over on AlohaLiving about the recently released NAR survey of second home buyers. Although nationwide the respondents indicated that 30% of them plan to use the second home as their retirement home, in my experience that is true of an even higher percentage of buyers looking at real estate here on the Big Island of Hawaii today. I'm surprised how many people for whom retirement is 10 years out are looking for property today. They are savvy enough to know that the real estate market offers them an opportunity that might not be there closer to their anticipated retirement date.
Some prospective buyers arrive having a clear idea of what they want--perhaps to downsize to a resort condo near a golf course and lots of options for dining out, perhaps to own a coffee farm in a rural area. But many buyers aren't sure at the outset, and other times their ideas and objectives will shift midstream as a result of what they learn during the real estate search process itself.
For example, last year I had buyers who were torn between two houses. They liked the floorplan and swimming pool at one house, but preferred the location of the other. They solved their dilemma by purchasing a lot where they can build the retirement home of their dreams.
This year I worked with buyers who were convinced they wanted the flexibility of a condo, the ability to be able to close the door and travel for extended periods without worrying. But after staying at a resort condo for six weeks, they realized they didn't like having a continual stream of vacationers coming in and out of other condos in the building and generally behaving as people do on vacation. Privacy became a more important factor in their minds. Once they started looking at single family homes, the husband started getting itchy to build. Now they are looking outside the resorts and asking "should we buy or build?"
The simple answer is: it depends.
Here are some of the factors to consider.
1. Acquisition cost. In the luxury and resort areas of the Big Island today, there are high end (meaning $3 million, 10 million and up) homes built on spec or bought for investment a
t the wrong moment, Some of them can be purchased for less than the cost of construction. In other cases, more modest homes were bought as fixer-uppers, and the market has brought prices down to far less than they have in the home. In these cases, it is clearly cheaper to buy a completed home rather than to build or remodel.
2. Carrying cost. Maintenance and property taxes are signficantly higher on a residence than on raw land. Depending on where the property is located and your own plans for use, it might be possible to rent on either the long-term or vacation rental market, but won't necessarily generate enoughincome to offset the additional carrying costs.
3. If you aren't paying cash, financing options are very different for land versus homes versus condominiums. Most land loans will require that you build and refinance within three years.
4. Where will you live or stay while your home in Hawaii is being built?
5. Do you have the experience and patience to successfully manage the construction of a home, especially if you can't be here to supervise and make the seemingly endless daily decisions your contractor will ask of you?
There are wonderful lots and acreages available in North Kohala (here are some examples) and some houses listed below replacement cost (call or email me for suggestions in your price range).
A hui hou,
Beth
Beth Thoma Robinson R(S)
Cell: 808.443.4588 Email: beth@hawaiipalmproperties.com
Thought for the day: April showers bring May flowers...
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