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 Post subject: Invest in Hawaii?
PostPosted: Thu Aug 25, 2016 12:51 pm 
Malihini

Joined: Mon Mar 07, 2016 12:03 pm
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I just read an interview with Robert Kiyosaki and he said “I do not invest in Hawaii, California and New York because of the taxes. Real estate is really not about real estate. It’s about debt, taxes and laws. I go to the areas that are favorable to investors, to capitalists. I stay out of areas that are more socialist-inclined, like California.” I know he wrote a highly regarded book "Rich Dad Poor Dad" but do you agree with him about Hawaii?



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 Post subject: Re: Invest in Hawaii?
PostPosted: Thu Aug 25, 2016 6:30 pm 
Kona Kastoff
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I have owned numerous properties in Hawaii, but I didn't buy them for long term investment. I bought them because I saw an opportunity to make money. Obviously, as a real estate broker, I know of good deals before most others do, so I do have an advantage. With all that said, I don't own any properties in Hawaii anymore, and I don't think I ever will in the future either. It's not because of the tax though. The prices increased so much, they are just too fat for my taste. That doesn't mean there are no more good deals though.



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 Post subject: Re: Invest in Hawaii?
PostPosted: Thu Aug 25, 2016 10:10 pm 
Malihini
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More and more publications recommend against investing in real estate because there are better returns elsewhere, and because of the liquidity issues. I am not smart enough to invest in anything, but I think you should own the place where you live, at least so long as your adjusted mortgage payment is not much more than your rent would be. That will build you a decent savings by the time you retire, a savings you otherwise wouldn't have. (Lets face it, we are not very good with saving money.)



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 Post subject: Re: Invest in Hawaii?
PostPosted: Thu Sep 22, 2016 12:02 pm 
Keiki

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Hawaii county property tax rates seem reasonable (to me). http://www.hawaiipropertytax.com/tax_rates.html - looks like property tax is about 1% of property value per year and as low as 0.65% if you rent as "affordable housing" or live in the home. The rental market is quite tight and there is opportunity to generate income if you buy, rent the house out, and sell in the future when the market is more to your liking for the capital gains. Prices have come up in the last few years, but I'm not sure where we are in the 'cycle' overall.


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 Post subject: Re: Invest in Hawaii?
PostPosted: Thu Sep 22, 2016 1:33 pm 
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MikeReilly wrote:
Hawaii county property tax rates seem reasonable (to me). http://www.hawaiipropertytax.com/tax_rates.html" onclick="window.open(this.href);return false; - looks like property tax is about 1% of property value per year and as low as 0.65% if you rent as "affordable housing" or live in the home. The rental market is quite tight and there is opportunity to generate income if you buy, rent the house out, and sell in the future when the market is more to your liking for the capital gains. Prices have come up in the last few years, but I'm not sure where we are in the 'cycle' overall.

I own one rental property on the Big Island. I only have it because I intend to retire there in a few years. Otherwise I do make money on it but the rate of return is not as good as my other properties on the mainland. The reason is mostly due to taxes. First off is the property tax. As you stated this is the lowest rate in the country. But when you rent it out it becomes a nightmare. First of all you have to pay the GET tax on your rental unit. Which is 4% on the BI and 4.5% on Oahu. But if you rent it out as a short term rental (less than 180 days per person) it gets taxed at an additional 9.25%. And then you have to pay Hawaii State income tax on the income as well. Of course that amount depends on your tax bracket. I don't rent my place out as a short term rental. Which means I don't get the big rents one can get if they were to rent it out like that. But then there are very high management fees if you do. I would not invest in Hawaii as a rental investment. However, here on Oahu it could be a good investment if you were to live in the home for a few years.

Here is the Oahu historical market data:

http://www.hicentral.com/oahu-historical-data.php

Call me if you want to move here.



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 Post subject: Re: Invest in Hawaii?
PostPosted: Thu Sep 22, 2016 6:12 pm 
Malihini

Joined: Mon Mar 07, 2016 12:03 pm
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Kona Dave wrote:
MikeReilly wrote:
Hawaii county property tax rates seem reasonable (to me). http://www.hawaiipropertytax.com/tax_rates.html" onclick="window.open(this.href);return false;" onclick="window.open(this.href);return false; - looks like property tax is about 1% of property value per year and as low as 0.65% if you rent as "affordable housing" or live in the home. The rental market is quite tight and there is opportunity to generate income if you buy, rent the house out, and sell in the future when the market is more to your liking for the capital gains. Prices have come up in the last few years, but I'm not sure where we are in the 'cycle' overall.

I own one rental property on the Big Island. I only have it because I intend to retire there in a few years. Otherwise I do make money on it but the rate of return is not as good as my other properties on the mainland. The reason is mostly due to taxes. First off is the property tax. As you stated this is the lowest rate in the country. But when you rent it out it becomes a nightmare. First of all you have to pay the GET tax on your rental unit. Which is 4% on the BI and 4.5% on Oahu. But if you rent it out as a short term rental (less than 180 days per person) it gets taxed at an additional 9.25%. And then you have to pay Hawaii State income tax on the income as well. Of course that amount depends on your tax bracket. I don't rent my place out as a short term rental. Which means I don't get the big rents one can get if they were to rent it out like that. But then there are very high management fees if you do. I would not invest in Hawaii as a rental investment. However, here on Oahu it could be a good investment if you were to live in the home for a few years.

Here is the Oahu historical market data:

http://www.hicentral.com/oahu-historical-data.php" onclick="window.open(this.href);return false;

Call me if you want to move here.

It's actually 4.1666% on the Big Island, and Dave didn't mention the property tax. I have done lots of research on the tax issue since we are in a process of buying a property. It seems the property tax on land is a killer, and the only brake you can get is on residential properties, but only if you are an owner occupant, and you are above a certain age.



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 Post subject: Re: Invest in Hawaii?
PostPosted: Thu Sep 22, 2016 6:53 pm 
Kona Kastoff
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You can't really generalize the tax rate for properties on the Big Island, since there are nine different classifications. The current one is below.

Hawai’i County Tax Rates Fiscal Year Beginning July 1, 2016 to June 30, 2017 Tax Rate Per Tax Rate Per $1,000 Net $1,000 Net Taxable Building Taxable Land PROPERTY CLASS 0 Affordable Rental Housing $6.15 $6.15 1 Residential $10.05 $10.05 2 Apartment $10.85 $10.85 3 Commercial $10.05 $10.05 4 Industrial $10.05 $10.05 5 Agricultural and Native Forest $9.25 $9.25 6 Conservation $10.85 $10.85 7 Hotel/Resort $10.85 $10.85 9 Homeowner $6.15 $6.15

The affordable rental housing is misleading. I used to have a house in that program. The County sets the rental rate for those properties, and, obviously, they are different for every part of the island. It is changed every year, so you might qualify this year but might not qualify next year. In addition, the qualifying rent rate has to include the GET tax. In my case, it got to the point that it was not worth the savings, the going rent was so much higher, it was worth to charge the going rent + GET, and just pay more property tax. Regardless, all the different taxes (GET, TAT, federal and state tax, and lets not forget about HARPTA and FIRPTA) can sure take a bite out of your profit. Based on my experience of 24 years as a broker in real estate, forget profit, you are extremely lucky if you break even with your investment property in Hawaii.

Dave is correct, you can get a much better ROI in other parts of the USA. It seems the only good deals here are the tax sale properties, though the bidding there can get out of hand too.



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"THE NEXT LEVEL OF SERVICE"
Typically Tropical Properties
75-5737 Kuakini Highway
Suite 202
Kailua-Kona, HI 96740
888.819.9669
johnrabi.com


This is what I think of the Kona Board of Realtors: Click HERE
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 Post subject: Re: Invest in Hawaii?
PostPosted: Sun Oct 16, 2016 6:36 pm 
Malihini
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Posts: 179
Location: Bellingham WA / Kailua Kona
I agree Hawaii is not where I would have a long term investment. I bought there because like Dave I will be moving there in a few years and it is my home.

In Washington my taxes per $1000 of value are much lower than our Hawaii home. There are also no taxes on the rental other than property and federal income taxes. (no state Income taxes in Washington)

The only time I would consider investing in Hawaii is for short term gains but you better be good at it. I'm not.



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 Post subject: Re: Invest in Hawaii?
PostPosted: Mon Oct 17, 2016 7:16 pm 
Kona Kastoff
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Time4Family wrote:
The only time I would consider investing in Hawaii is for short term gains but you better be good at it. I'm not.
Very few people are. Most get slaughtered because they are pigs. There was a time when my family and I owned 17 properties in Hawaii. I own none now, and the family members who did not listen to my advise to sell when I was selling eventually lost money on their investments. The general public rarely get a chance to buy distressed properties, the real estate brokers and their close friends scoop up those before they hit the market.



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John S. Rabi
Principal Broker
"THE NEXT LEVEL OF SERVICE"
Typically Tropical Properties
75-5737 Kuakini Highway
Suite 202
Kailua-Kona, HI 96740
888.819.9669
johnrabi.com


This is what I think of the Kona Board of Realtors: Click HERE
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