Maui Real Estate Blog
Maui Condo Buying 101
(Updated December 2015).
If you are interested in buying a Vacation Rental Condo in Maui, here is some great information to get you started.
- There are two types of ownership on Maui (and all of Hawaii for that matter). Fee Simple and LeaseHold. Fee Simple ownership is the type that people are most familiar with. You own a portion of your condominium (your unit) and piece of the entire complex including the common area in the grounds. It is just like the home you may own on the mainland. LeaseHold is a type of ownership where you own the condominium but you are on long term or ground lease for the land beneath it. These lease terms run anywhere from 50 to 99 years. LeaseHold Condominiums are about 20 to 80% less expensive than Fee Simple condominiums due to uncertainty at the end of the lease, the duration of the lease and different financing considerations. For the sake of simplicity I am only going discuss Fee Simple condominiums from this point on.
- In general, the prices for vacation rental condos in Maui will begin at about $300,000 and run all the way up to $12,500,000.
- Prices generally reflect the following features.
Complex / Facility Amenities
Quality of the Individual Units.
Rental history (if available)
- Most lenders consider condominiums that vacation rent Condotels. Lenders used to be fairly flexible with respect to loans for Condotels. Unfortunately, the mortgage crisis has produced substantially more restrictive lending terms and most lenders now require at least a 35% down payment these days. We have a stable of local lenders that we work with. We can provide you with a list if you like. Local lenders tend to manage the transactions better than out of state lenders. They understand how every thing works a little better.
- Hawaii is an escrow state, which means that our transactions are facilitated by escrow / title companies. Escrow / Title companies serve as neutral intermediaries who hold all of the funds until closing and help facilitate the transaction. Generally purchases take between 30 and 60 days to close. Some times people will close their cash purchases more quickly than that. We are very accustomed to working with people from the mainland and even other countries so it is very easy for us to facilitate transactions from a distance. I have sold properties to people I never met until after closing.
- Monthly maintenance fees for the condominiums which usually cover insurance, water, sewer, common area maintenance, garbage and basic cable run from about $250 per month up to $1,000. Sometimes the maintenance fees include electricity.
- There are many ways to rent a condo while you are not on island. Some folks opt to rent them out on their own or using a vacation rental by owner site (VRBO or AirBnB) on the Internet. Others use local management companies. Management fees run anywhere from 15% all the way up to about 50% depending on what they include. We have relationships with many of them and can put you in touch with several of these companies if you like.
- As of the end of 2015 our market has recovered substantially from the Great Recession. The downturn of the Canadian dollar (the Loonie) has caused a little bit of softness in the condo market, but we continue strong activity from The Baby Boomers, Maui’s status as the best island destination in the world, and the increased presence of international buyers. Most people who are purchasing condominiums continue to purchase for quality of life (or love of Maui) and anticipation of future appreciation. It is difficult to find a condominium that will pay the mortgage with rentals without a substantial down payment. But if you are looking for a long term, lifestyle property with the possibility of strong appreciation, Maui Condos are a pretty good option!
If you have more specific questions or would like us to help you find a condo on Maui, Contact the Maui Real Estate Team today.