Realtor Lee Potts Discusses Condo BuyingNikki Schenfeld · August 21, 2017, 1:33 PM HST (Updated August 21, 2017, 1:33 PM) · 0 Comments
Maui Now sat down with realtor Lee Potts of Aloha Group Maui and KW Island Living to discuss condo buying on Maui. Lee talks about the difference between fee simple and leasehold, and other factors buyers can look into before purchasing. Below is a brief summary of the video.
Maui Now: What should people consider before buying a condo on Maui?
Lee Potts: Before buying a condo on Maui, the first thing you need to consider is how are you going to use it. Is it going to be a full time residence or is this going to be a second home or are you going to use this as a vacation rental investment property?
We have two large groups of condos that you can divide the properties into two large groups. One being those that allow short term rental and the other being those that do not allow short term rentals, primarily residences. So if you’re looking at a condo at a place that is designed for long term use and you’re thinking I can rent it out part time or use it for a vacation rental. If the association rules don’t allow that then you’re not going to be able to do that.
MN: Do all condos allow pets?
LP: Not all condos allow pets, if it’s one of those that doesn’t want a short term rental there’s probably more of those that will allow pets then the ones that are for vacation rentals so you wan to take that into consideration. A knowledgeable agent will know which complexes allow plants, how many, how much a dog can weigh etc.
MN: What are some other factors people can look into before settling and buying?
LP: What do you know about your neighbors before you move in? And the neighbors can change so all of these things are things you can’t control. So you want to look at the things you can control. Which direction does the building face? Are you going to have a lot of sun? Do you want a lot of sun? Are you going to get the tradewinds? Do you want the tradewinds? Is there A/C, do you want A/C? Do you have upstairs neighbors, do you mind upstairs neighbors? Do you want to be on a corner unit so you only have a neighbor on one side? What amenities are on the property and how often will you use the amenities? Where is it located in proximity to the beach? Those are things I would consider for a long term as my primary residence.
If I’m looking at a vacation rental property I’m going to be looking at all different things, I’m going to be looking at the income side of the equation vs. the expense side of the equation and I’m going to be digging deep and have my agent digging deep into all the factors around the condominium complex.
Leasehold vs. Fee Simple
LP: For folks on the mainland, probably everything you own is Fee Simple. What that means is that you own the building or the improvement and you own the land it’s sitting on.
Leasehold means you own the building, you’re responsible for the building, but you do not own the land that it sits on. And so, someone else owns that land and every month you have to pay that land owner rent. So you have to pay rent for the privilege of having your building sit on the land.
Most of the condos we have on Maui are fee simple now, but there are still some leasehold and leasehold makes sense for the right person. So you’re looking at how you’re going to use the property, how long you’re going to use it, kind of what’s your end game for the property.
For others, especially those trying to get in at a low price, will see low prices on some condos and really the cost of ownership is not so low. I had a call yesterday from a lady on the mainland who had found a listing on Maui through one of those services so she called for details. Even though the price was low and attractive, when we looked at the monthly maintenance fee which was over $1,000, the monthly lease rent which was also over $1,000 and the property taxes which were around $400, before she can even get a mortgage shes into it for $2,400 a month. So, you have to look at all the cost factors and what its going to cost you a month before you just take that as being a better value. And your agent can help you do all that.