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The Grass-Shack Money Machine - By John Rabi - Typically Tropical Properties

For most of us our homes represent the biggest chunk of our personal wealth. It is our biggest chance to increase equity. That equity gives us options that we wouldn’t otherwise have, such as taking out a second mortgage to send the kids to college or help them with a down payment or take the money and run. We live on an island where land is scarce; development rationed by the government and outside investment almost a constant. If you take a snapshot of any moment in the real estate market, there’s always good news and bad news. When you look back, you see a cavalcade of bad news, or at least what appeared to be a bad news at the time. The bad news at the end of the World War II was there was no housing to buy. The remedy: Development all over Hawaii. Which turned into bad news, because there was a fear that Islands were being overdeveloped. The remedy: Limiting development. Which turned into bad news, because home prices soared. The remedy: Affordable housing. Which turned into bad news when the Japanese stopped buying and all housing got more affordable, meaning everybody’s property values started to stag. In retrospect, of course, there was good news along with the bad. Hawai’i’s burgeoning real estate market enriched two generations of home owners. Even at the height of the Japanese boom, there must have been someone who went home and said, “Honey, break out the good Scotch. We just sold the house for a million five and we’re retiring in style.” If you view your home as a longterm investment, it will always pay off. The long term history of Hawaiian real estate has shown that it’s better to start than not to start at all, because that’s how you build wealth.

The Magic! - By John Rabi - Typically Tropical Properties

You walk into the darkened conference room of a real estate office and see a crystal ball on the table. The agent’s hands pass over the sphere. Like magic, it lights up and there, in plain sight, is the home of your dreams! Time for a reality check! There is no magic to finding your next home. It takes lots of work and time by a dedicated agent to locate just the right home. Begin by pouring out your hearth, sharing every aspect of the home you want – location, style, size, price, and more. This helps the agent begin a comprehensive search among the many available homes, eliminating those that don’t match your needs. The result is a great selection from which to choose. Wait, there’s more – it’s called feedback. As you look at homes, share your impressions with the agent so that the process elimination begins. Continue to narrow the search by making a decision as you visit each home. Compare it with the one just before it, and choose one. When you visit the next home, compare it with your previous choice. This way, you are comparing only two homes at a time. When you have seen them all, your choice should be clear. There is no magic involved, just a sincere effort by the agent to turn your dreams into reality!

Where to Buy That Second Home - By John Rabi - Typically Tropical Properties

For most people, buying a second home – regarded as a respite from the real world – used to be an emotional decision. Today, the decision often is financially driven. As the real estate values have soared, surveys from the National Association of Realtors show that more people are buying for investment purposes, thanks in part to demand from aging baby boomers. Now, as interest rates rise, prices will drop on vacation properties, making it a good time to get in the market. But it pays to be cautious, because even though the underlying demographics for second homes are strong overall, certain markets maybe overvalued and some geographic offer better values.

Second Home Boom! - By John Rabi - Typically Tropical Properties

H ot market or cold, in ten years, owning a second home will be as common as owning a third car. By 2015, twenty percent of American households will own two or more homes. Two factors drive the 2nd home boom: 1. Demographics (householders aged 55 to 64 are the fastest-growing segment of the U.S. population); 2. And wealth – both inherited, and made in the 90s economic boom. What motivates 2nd home buyers? So what motivates those who do want to own and maintain more than one home? One is the desire for a place to entertain family and friends and most 2nd home buyers have plenty. They have extended, close families, and want to spend time with them. A growing number of the more affluent 2nd home buyers want a place primarily to entertain associates and clients. Some people just want to divide their time seasonally between two climates. It’s very common now for people at the stage in life where they are not tied to a certain place, to sell their expensive city or suburban home and buy two properties to replace it. Since 2001, a powerful, often hidden motive has taken a big role in the 2nd home boom: safety. Safety and security rank high on any list of amenities and Hawaii has a historically low crime rate. Recreation is a big factor too, there are a multiplicity of recreational-type reasons for having second homes – boating, fishing, hiking, golf, tennis, etc., but among the millions of 2nd homes in the U.S., relatively small segments are dedicated to specialized recreation, like golf homes or skiing. Americans own about 6.5 million 2nd homes now and in just five years, that number will balloon 50% to 10 million according to the industry forecasts. The fastest growing age group is 55-64 as mentioned earlier, and they are more affluent than ever. Aging baby boomers are driving this phenomenon, and they are now 41- 59 years old. Four million of them will turn 55 each year – for at least the next 10 years and they have an almost infinite ability to make and spend money. The boomers are not going anywhere – their numbers will keep growing for the next 10 years, and the baby boomers want to have a warm place to go to. So, there will be a continued strong demand for 2nd homes and properties in Hawaii. The number of households that can afford a 2nd home is growing at two to three times the rate of all households. When commenting about the so-called real estate bubble (bursting), and whether the market is slowing down, whether prices have leveled off, there is still a strong market. The overall real estate market is softening, but not uniformly. Quality and unique areas like Hawaii will continue to prosper. We are still having a consistent sale activity, with many properties having multiple offers. People have realized that the stock market is not as good as real estate, and that 2nd home purchase is a good investment. In addition, real estate drives all markets, including construction, financial, and anything else involving home ownership. Interest rates also are keeping the market active, but even if interest rates increase it will not ruin the 2nd home market, just like it didn’t ruin the market and didn’t affect the prices in the ‘80’s. How does this translate to areas like Hawaii? Hawaii is a resort destination and although prices are at an all time high, we are still much lowers than many similar resort areas. Hawaii has the amenities that are drawing people to its environment, high demand for lifestyle real estate purchases, a small market area in a very desirable location and the baby boomer demand curve are all reasons that this market will continue growing. While the price factor is often mentioned with Hawaii, the educated buyers will find the locations where the properties are actually undervalued in comparison to similar areas. There are still brand new homes available in many of Hawaii’s unspoiled areas for $300,000 and there are many desirable locations where vacant land is available in a very affordable price range. A very good example of the hidden gems is Discovery Harbour, a Trent Jones Sr.-designed golf-course subdivision with all the amenities, about 60 miles from Kailua-Kona, with lot prices starting in the high $90,000’s. Another hidden gem is Leilani Estates on the East side of the island where one acre lots are priced from $70,000; and Hawaiian Paradise Park (“HPP”) about 20 minutes from Hilo, with lot prices from $60,000. These kinds of prices have only one way to go and that is up, making the smart real estate investors smile!

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