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Owning A Rental Property

What to Know When Owning a Rental Property

Many people dream of living in Hawaii, so a rental property may prove a great investment. However, there’s always the possibility owning a rental property can become a giant headache. Avoid the latter by assessing whether you are cut out to be a landlord and by following property rental best practices.

Rental Property Considerations

When buying a rental property, keep in mind that mortgage insurance doesn’t apply to investment properties. That means you must plan on making at least a 20 percent down payment.
How will you handle repairs? If you’re handy and can do all but the most major repairs yourself, that’s a plus, but many landlords don’t live near their rental properties. You may want to hire a property management firm to take care of necessary repairs and other business. The fee you pay the property management firm does cut into your income – the average fee is 10 percent of the rent – but it’s generally your best solution if you aren’t handy or are primarily an absentee landlord.
If the property is a fixer-upper, you will need either serious handyman skills or deep pockets. If you’re just starting out as a landlord, it’s wise to go with a property requiring only minor repairs and get some experience under your belt. You’ll then have a more realistic idea about taking on a bigger project down the road.

Tenant Screening

Careful tenant screening makes the difference between a successful and disastrous rental experience, so it’s absolutely critical. Perform a thorough background check on every applicant. One plus: In Hawaii, landlords can charge potential tenants a non-refundable application fee, with no limit on the amount.
One way to separate the tenant wheat from the chaff while protecting yourself is requiring tenants to carry rental insurance. Such insurance isn’t expensive, and can possibly keep you out of court if something happens to the tenant’s property. Tenants might assume the landlord’s insurance covers their personal items, but that’s not the case. If there’s an issue and the tenant suffers a loss, they might try to sue you if they don’t have rental insurance. Mandatory rental issues protects both parties, and if a tenant can’t afford another $20 a month for premiums, making rent payments on time may also become a problem.

Do Your Homework

Hawaii must abide by the federal Fair Housing Act, but there are also state laws relating to landlord/tenant issues. Familiarize yourself with these laws before becoming a landlord.
Before buying a property, figure out how much you can expect in annual income, your approximate annual expenses and possible risks. Such risks include vacancies, above-average repair costs, non-payment of rent and legal fees if you must proceed with an eviction.
Speak with an accountant familiar with rental properties and have them go over the numbers with you. It’s money well-spent.

Contact Us

If you’re looking to buy or sell a home or find a rental property, you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

 

January 12, 2018

Strategies for Younger Buyers

Strategies for Younger Buyers Purchasing a Home

As millennials head into their initial home-buying years, the real estate market is ready for this huge demographic influx. Many young people think they can’t afford to buy a home, but they may not know about the tools available to help make home ownership a reality.

Loan Options and Saving for the Down Payment

Hawaiian real estate is expensive, but the 20 percent down payment found in cheaper areas is not the rule here. Many first-time buyers put down 5 percent, which for an average $600K home means saving at least $30K and financing the remaining $570K. Assiduous budgeting and saving can get you to that $30K figure within a few years, but there is another avenue – which does not involve gifts from relatives. That’s using money from your retirement savings account to help finance a first-home purchase. If you take the money from a 401(k), you will have to pay a 10 percent penalty. Take the money from an Individual Retirement Account (IRA) for that first home purchase, however, and there is no penalty. There is a lifetime limit of $10K, but for a couple who each take that amount from their IRAs, they are 2/3 of the way toward that 30K down payment.

If a millennial is a veteran, he or she may qualify for a VA loan, which may not require any down payment. VA loans also do not require private mortgage insurance.
This is a generation who, due to the Great Recession and unprecedented student debt, tended to live with their parents longer than the Baby Boomers. If living with the parents for a while can help millennials save money for a down payment on their own house, it’s a worthwhile tradeoff.

Millennials may consider a Federal Housing Administration (FHA) loan, which does not require as large a down payment – perhaps as small as 3.5 percent of the dwelling’s price. Since an FHA loan is guaranteed by the government, qualifying is easier than with conventional mortgage loans. FHA loans are available for those with lower credit scores. However, loan amounts are not as large, and you will have to pay a mortgage insurance premium. These premiums can cost substantially more than the private mortgage insurance needed for some standard loans.

The Right Realtor

Working with the right realtor can help millennials make their home ownership dreams come true. A real estate agent who specializes in marketing to millennials is not only technologically savvy – an absolute must for this generation – but can guide clients toward affordable homes, appropriate mortgage choices and assist in answering any questions regarding the home purchase process. Since most millennials are extremely cost-conscious, the right realtor helps save them money in ways large and small. Many millennials simply lack the financial knowledge needed to make homebuying and mortgage decisions, and the right realtor can act as instructor.

Contact Us

If you’re looking to buy or sell a home you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

 

December 19, 2017

Renting vs. Buying: Pros and Cons

Renting vs. Buying: Pros and Cons of Each

Should you rent a home or are you better off buying? The answer depends on your individual circumstances, preferences and your stage of life. The right answer to the question may prove different when you’re 25 as opposed to a decade later, and your financial status at any given time.

Renting

Pro: In terms of upfront costs, renting is less expensive. While you are responsible for the required security deposit and monthly rental fee, you don’t have to worry about saving up a substantial down payment, as occurs when purchasing property. Pro: If you want flexibility, you can simply move elsewhere at the end of your lease, rather than go through the often time-consuming and stressful process of selling your house.
Pro: Budgeting is simpler, since rent is a fixed amount.
Pro: The landlord takes care of any necessary property repairs, and in most cases, it won’t cost you a dime. There are exceptions, depending on the language of your lease and the nature of the repairs.
Con: The lease spells out restrictions on your use of the rental unit. Failure to abide by them can cost you the tenancy. Those restrictions may include having another person live with you if their name is not on the lease. If you bring a pet into a rental dwelling where animals aren’t allowed, you will probably have to rehome it if your landlord discovers you are breaking the lease.
Con: Rent increases at the end of a lease are often steep.

Buying

Pro: When you rent, that money is gone at the end of every month. When you buy, you build equity in your home with each mortgage payment. At some point, you may have enough equity to borrow against it in the form of a home-equity loan to pay for college, a car or some other pricey necessity. You can also make extra principal payments to own your home outright sooner. When you sell, you do not have to pay taxes on capital gains above a certain amount.
Pro: When you own your home, you aren’t subject to a landlord’s rules on pets, redecorating, remodels or other strictures that are an owner’s prerogative.
Con: You must make repairs yourself or call the appropriate professional when something goes wrong, and it is all on your dime unless there is a warranty on the item in question. Repairs and other house-related expenses can also blow a hole in your budget.
Con: While renters can get away with relatively cheap renter’s insurance to protect their belongings, homeowners must pay for home insurance, property taxes, water and sewer service and possibly flood insurance, depending on the area.

The Wild Card

One wild card in the decision to rent or buy involves the Republican Congress’ tax overhaul. States with high state and local property taxes, as well as high home prices – such as Hawaii – will suffer if property tax and mortgage interest deductions are limited. Buyers will have to factor in extra costs, while landlords will likely pass those additional costs onto renters.

Contact Us

If you’re looking to buy, sell or rent a home, you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

Buying and Selling During the Holidays

Things to Know Before Buying or Selling a Home During the Holidays

Given their druthers, most people prefer not to buy or sell a home during the holidays. It’s such a busy season in other aspects of life, but there are certain advantages to holidays showings and sales: People in the market to buy or sell at this time of year are motivated. Unlike other parts of the country, foul weather isn’t an issue in Hawaii. In fact, you may find “snowbirds” who want to move to a warm climate as soon as possible, and have the time to look for a new residence over the holidays.

Minimal Decorations

If you’re a seller, keep the holiday decorations to a minimum. Your home should feel welcoming to people of all faith traditions. Many holiday decorations overwhelm or clutter rooms, and that’s not conducive to selling your home.

Less Competition for Buyers

Buyers face less competition for available homes during the holiday season. Holiday buyers are more committed to purchasing a home rather than just browsing through open houses. A plus for buyers may prove a negative for sellers, as they’re more likely to receive lowball offers. The downside for buyers is that, with less inventory available, they may not find a home suiting their needs.

Closing Delays

An offer on a house made in early to mid-December is unlikely to go anywhere until after the start of the new year. Everyone involved in the closing – including lenders, appraisers and home inspectors – is more likely to travel or work fewer hours during this time. Keep that in mind if you want to close on the home by the end of the year for tax purposes. A buyer with children who wants their kids in a new school system after the holiday break should realize the process may take longer than they anticipated. The same holds true for relocation buyers starting a job in the beginning of the year.

House Showing Inconveniences

If you’re extra busy during the holidays, house showing becomes an inconvenience. You want your house to look neat and clean, but that’s often difficult when you have gifts and wrapping paraphernalia scattered around or are involved in serious holiday cooking and baking projects. Add shopping, parties and other holiday happenings, and you may not simply have time to keep your house looking up to par.

Whether buying or listing a house for sale, waiting until January generally makes more sense for both parties. However, if you can deal with the inherent inconveniences of house shopping during the holidays, go ahead and seek your new home or list your current one. It could end up a savvy decision.

Contact Us

If you’re looking to buy or sell a home you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

November 13, 2017

Think About These Before You Buy!

Top 5 Things Buyers Miss When Looking at a Home Prior to Purchasing

You’ll fallen in love with a house, and an inspector has given it an OK. Does that mean the house has no issues? Since there’s no such thing as a perfect house, even in new construction. There’s always a possibility you missed something that may prove a deal breaker or major disappointment simply because it didn’t cross your mind. Rather than rue your purchase, make sure these conditions aren’t an issue with your intended home.

Check Out the Nightlife

It’s likely you paid visits to the home during the day. Prior to purchase, check out the neighborhood at night. It’s possible you’ll find it’s not as peaceful and quiet as you hoped. Perhaps that bar/restaurant down the block attracts a rowdy crowd, or there are neighbors whose dogs bark incessantly.

Look at Zoning

You’re buying a house in what looks like a nice, residential neighborhood. Don’t assume that the neighborhood’s use can’t change – check out the zoning regulations. Also look at the history of the particular home. If the house doesn’t conform to current zoning, such as setbacks, it’s likely grandfathered in. Those regulations, however, can prevent you from making certain changes, including additions.

Is Everything Legal?

Homeowners don’t always follow the law when making renovations. For example, it’s not unusual for someone to turn the wet bar in their lanai – a legal use – into a “full” kitchen with the addition of a stove. That one appliance makes the setup illegal. If two “kitchens” were a factor in your buying the house, you’re out of luck when the appraiser or inspector discover the illegal use.
If the house sports a new kitchen, bathroom or addition, check with the municipality to ensure everything was done to code. Once you purchase the house, you’re responsible for ensuring the property is up to code. Not only is that potentially very costly, you could end up having to tear down illegal work and start from scratch.

The HOA

If you’re buying a house subject to a homeowner’s association (HOA) rules, you must know exactly what the HOA regulations entail. Decide whether or not you can live with any of the restrictions. For example, you don’t want to move in and find out that Fido is over the weight limit for dogs allowed in the development.

Think About Resale Value

Perhaps you got a great deal on the house because of some element that doesn’t appeal to many buyers, such as location on a busy road. It’s not an issue if you can deal with it and indeed to stay put for decades. However, we never know what the future brings, and you don’t want to commit to a house you will have a hard time selling or may have to take a loss on. With real estate, you always have to think with your head instead of just your heart.

Contact Us

If you’re looking to buy or sell a home you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

Curb Appeal

Curb Appeal

You only get one chance to make a first impression, and that axiom applies to your house when potential buyers arrive. Curb appeal can mean the difference between love at first sight or the decision to bypass the house altogether. Enhancing curb appeal might mean a much faster sale, and possible multiple bids. Pretend you’re viewing your house for the first time and take a long, objective look at it. What do you see, and what do you want buyers to see?

Fresh and Clean

To appeal to buyers, your home must appear fresh and clean. If the house needs painting, invest the money and have it done. Power washing will rid your driveway and walkways of accumulated grunge. Get rid of any clutter on your porch or in your yard. Wash your windows and make them shine – they are the mirrors to the soul of your home. Repair or replace anything detracting from your house and yard, whether it is sagging gutters, broken fencing or cracked pavement.

Landscaping

In the tropics, landscaping easily becomes overgrown. Prune back excess growth, or remove some of the out-of-control bushes and replace them with flowering annuals. Put in fresh mulch, and add a border to clearly delineate the garden from the lawn.
The lawn should always look green and immaculate, not just trimmed but carefully edged. If your lawn needs work, contact a professional for advice ahead of time so your grass flourishes when the house is on the market.

Up on the Roof

The roof’s condition makes a major statement about the home’s overall shape. Put your roof in order prior to sale by replacing any missing or damaged shingles. Hire a professional to clean the roof so that it looks as well-maintained as the rest of the house.

The Mailbox

A run-of-the-mill mailbox doesn’t reflect well on your house. If you don’t want to install an upscale mailbox, make your current one stand out by planting flowers around it and giving it a coat of paint. Brass or architectural address numbers add a nice touch to your mailbox or house.

Driveway Enhancement

If your driveway is boring, give it a border for a more sophisticated look. In an upscale neighborhood, Belgian block is the top choice, but cement pavers along the edge complement any driveway.

Update Exterior Lights

Many buyers will likely visit your house after work, and the right exterior lighting can help make the sale. If your exterior lights need an update, replace them with fixtures and bulbs that accentuate your house’s best features. You also want to ensure that the entrance way, walkway and driveway are well-lit for safety purposes.

Welcome Home

Good curb appeal means your house welcomes visitors. Give the front door a fresh coat of paint and perhaps some new hardware, add some blooms in pots and put out an attractive new welcome mat. With the right curb appeal, a new owner will call your current house “home” in short order.

Contact Us

Your realtor can help you decide how to increase your home’s curb appeal. If you’re looking to buy or sell a home, contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

October 13, 2017

The Cost of Living in Hawaii

The Cost of Living in Hawaii

Paradise does not come cheap. If you already live in Hawaii, you know that, but those moving here from the mainland or other parts of the world may experience some sticker shock. Keep in mind that virtually everything other than sunshine and lovely vistas requires shipping over long distances, so that adds to the cost of living in Hawaii. It is the most expensive place to live in the United States, but there are variables. It’s slightly cheaper to live in Honolulu than in New York City. While Hawaii celebrates its connection to the natural world, there’s little of that left in Manhattan outside of Central Park. Hawaii also attracts residents who move from places with even higher costs of living and less resemblance to paradise, such as Tokyo, Singapore and Sydney.

Hawaiian Real Estate

Will Rogers famously advised, “Buy land. They ain’t making any more of the stuff.” Hawaii’s high real estate prices derive from several factors, but there simply isn’t much buildable land available. The lack of supply drives up demand. As of 2017, the average single family home in Hawaii is $730K, and the average price for a condo is $390K. In many parts of the country, $390K will buy a nice single family home. That’s not the case here. Hawaiian rents are comparably high. However, careful environmental regulation means Hawaiians enjoy clean air and water and strict, safe zoning.

The Necessities

Expect to pay about 30 percent more for the necessities of life once you move to Hawaii – again, the most expensive in the U.S. Four rolls of toilet paper will set you back about $6, and filling up your gas tank costs more than anywhere else in the country. Electricity is pricey, and second only to Alaska. The majority of grocery products come from the mainland, which is why you might spend $7.50 for a gallon of milk or $5 for a loaf of bread. On the plus side, the luscious tropical fruits aren’t imported, and much of the coffee available is also grown in the state.

Low Unemployment

There’s an upside to this high prices. Hawaii’s unemployment rate is less than 3 percent, which means there are lots of jobs available. Because of the high cost of living, it’s not unusual for Hawaiians to work part-time in addition to their full-time jobs.

Free Beaches and Parks

Yes, you’ll pay more for restaurant meals and a night at the movies in Hawaii, but there’s also plenty of free entertainment, especially of the outdoor variety. There are lots of things to do without spending much money if you enjoy surfing, swimming, hiking and the other outdoor activities which draw people to the islands. Look at it this way. Hawaii is expensive, but its quality of life is unbeatable. It’s a premium people are willing to pay.

Contact Us
If you’re looking to buy or sell a home, contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

September 15, 2017

How to Host a Successful Open House

How to Host a Successful Open House

An open house provides great exposure to buyers looking for a home in your neighborhood. Yes, you’ll have your share of curious neighbors or people whose Sunday rituals include visiting open houses, but there’s a good chance your dwelling’s next new owner will discover it in an open house. Your real estate agent handles the open house itself, but you’re still the host, even if behind the scenes or off the premises. You’re the one whose taste and décor is on display, even if you’ve made some changes for open house visitors.

Neat and Clean, But so Much More

Of course, your house must sparkle, but you want to create an entire ambience. Evoke a warm, homey feeling by baking cookies and letting the aroma linger. Place some lovely, fragrant plants strategically around the house. Put away the family photos – potential buyers want to imagine themselves living here, not the current occupants. Stage your home with that idea in mind. Anything controversial, whether it concerns political views or art not everyone appreciates, should go into temporary storage.

Closets and Drawers

Clean your closets and organize your drawers prior to your open house. Buyers will look in there to gauge space, and don’t want to come into contact with junk piled in there to make the rest of the home appear less cluttered. If you have to take half of your clothes and shoes out and put them in storage, that’s better than having them kill a possible sale.

Advertise Online and on Social Media

Gone are the days when potential homebuyers perused the Sunday papers to seek out open houses. Today, you want to showcase your open house via social media – with tons of photos and/or video – as well as appropriate internet listings. Yes, there’s an app for local open houses, so make sure your home is included.

Signs and More Signs

Your real estate agent will place appropriate signs around the neighborhood advertising your open house. Attach balloons to the sign in front of your house to let visitors know they’ve arrived at the right site.

Offer Food

People love free food. You don’t have to go overboard. Those freshly baked cookies along with coffee and tea and perhaps a cheese and veggie platter are sufficient. You want a home that says, “Welcome,” and nothing says welcome like snacks.

Make Yourself Scarce

This is often the toughest aspect of an open house for sellers, but it’s really a good idea. An open house usually doesn’t last more than a couple of hours, so go to the movies, enjoy a late brunch or spend time elsewhere with family and friends. If the owner is home, a potential buyer is reluctant to make any critical comments, and your real estate agent can answer most questions the person has. Fido and Fluffy should also go out for the afternoon, whether it’s a long walk for the former or staying with a friend or at a boarding spot for the latter.
The most successful open house results in an acceptable offer. Even if that doesn’t happen at your initial open house, word-of-mouth from an impressed visitor could send a buyer to your door.

Contact Us

If you’re looking to buy or sell a home, contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

Things That Can Go Wrong When Buying and Selling a House

In A Midsummer Night’s Dream, Shakespeare wrote, “The course of true love never did run smooth.” The course of buying and selling a house isn’t exactly in the same league, but there are plenty of things that can go wrong in the process once the purchase offer is accepted. While an issue may affect a buyer or seller, the end result affects both parties. Until there is an actual signed closing, there’s always the potential for something to go awry.

Low Appraisal
Say the buyer makes an offer at the asking price, and the seller agrees. That’s a deal, right? Not so fast – unless the buyer is paying cash, the lender has a say. That means the house requires a professional appraisal. If the appraisal comes in below the asking price, the lender will not approve the mortgage. The parties have a few options here. The seller can agree to sell at the appraised price, or the buyer may agree to make up more of the difference between the original price and the appraisal in cash. The seller may also challenge the appraisal. In a hot market, recent comparable sale prices, or comps, may not reflect the very latest sales. The house may have unique characteristics that make finding true comps difficult.

Problem Inspection
This is the ticking time bomb. The seller may think the house is in good shape, and it appears that way to the average observer. The home inspection, however, turns up serious issues, such as foundation issues, termites or mold. A seller may want to spring for a home inspection prior to putting the house on the market, so the odds of unwelcome surprises are lower.
Buyers must also know what is and isn’t a dealbreaker when it comes to a home inspection. Sellers should agree to make minor repairs or reduce the selling price by the few thousand dollars needed to make them, but buyers shouldn’t expect major price reductions for relatively basic fixes.

The Deal Falling Through
A buyer’s offer made in good faith on a home may not work out that way. It’s possible they can’t come up with deposit money, or the amount of money they expected to borrow for the mortgage isn’t approved. Job loss, health concerns, divorce and a host of other life circumstances can change the buyer or seller’s status overnight, and these aren’t items either party can foresee.

Contingency Clauses
If the contract contains a contingency clause stating that the buyer must sell their house before buying the new property, a deal falling through on their end means the deal falls through on the seller’s end as well. It’s a domino effect if the seller had a similar clause in the contract of a home they planned to purchase.

Paperwork Problems
Buying and selling real estate involves tons of paperwork. Any documentation error can set the process back. A title company may discover liens on the property or cloudy title conditions. These situations are usually repairable, but can delay closings and subsequent move-in dates.

Your real estate agent can help you avoid many of these pitfalls. They know the things that can go wrong when buying and selling a house, and whether you are the buyer or seller, aim to have the course of the sale run as smoothly as possible. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com

August 23, 2017

Real Estate Terms You Should Know When Buying and Selling

Buying or selling a house is both an exciting and stressful time. Learning the terminology and how the process works is daunting, especially for first-time buyers. Here’s a list of must-know real estate terms that can help you navigate your home buying or selling journey:

Appraisal – the lender needs to know the value of a dwelling before approving a mortgage. A lender is certainly not going to lend a buyer more money than a home is worth. A professional appraiser looks at the overall condition of the home and checks recently sold comparable properties – “comps” – to come up with a number. Sellers don’t like low appraisals either, but often the buyer and seller can work out a deal if the appraisal price isn’t too far off the agreed upon sale price. For example, if the original price was $600K but the appraisal came in at $575K, the seller may agree to sell for the appraised price.

Closing costs – Hawaii has some of the highest closing costs in the country. At closing, the buyer should expect to pay between 3 to 5 percent of a dwelling’s value in closing costs, not including attorney fees. These closing costs include the appraisal, settlement, home and pest inspection, loan origination fees, title insurance and possibly survey fees.

Contingency clauses – these clauses are standard in every real estate contract. They include loan, inspection, title and appraisal contingencies. If any of these items fail to pass, the buyer is released from the contract. A non-standard contingency clause includes the sale of the buyer’s current home prior to closing on the new property. There is no advantage to this clause for the seller, and sellers should avoid this contingency if possible.

Disclosure – Most Hawaiian real estate transactions require disclosure statements from the seller to the purchaser. Exceptions include sales to family members and foreclosures. The disclosure must reveal any material condition that could affect the property’s value. Material condition may refer to prior flooding or any number of situations involving the property. The disclosure form does not have to reveal anything that does not affect the physical property, such as a crime scene site.

Pre-approved vs. pre-qualified – these terms sound so much alike, some buyers may think they’re interchangeable. Pre-qualifying is the first step toward obtaining a mortgage, and a lender can give you a ballpark figure based on the basic information provided. However, it doesn’t involve analysis of your credit report – and that makes all the difference. Pre-approval requires filing out a mortgage application, and with all of your financial documentation and credit report information, the lender gives you an actual amount for which you are approved.

Title Insurance – this type of insurance guarantees that the seller has the right to sell the property, and that title to the property is “clear,” – there are no liens or similar encumbrances on the site. The title insurance company searches all public records to make its determination. If there are issues with the title, it is usually possible to fix them before the sale. For instance, the owner may owe some back taxes on the property, with a resulting tax lien. Once the lien is paid, the sale can go forward.

Whether buying or selling your home, choosing the right real estate agent is crucial. We guide you through the entire procedure, and ensure you understand what is happening every step of the way. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com