What are the Costs to Consider When Buying a Maui Condo?
Associated Costs When Buying a Maui Condo
Buying a condo in Hawaii can be a fun, worry-free experience if you know what the costs may be.
Many people come to Maui on vacation and stay in a beautiful oceanfront condo and dream of owning one. They think, “I’m paying over $350/night. Owning a Maui condo could be a gold mine!” There are many factors to consider and having the the funds to purchase is just the tip of the iceberg. Here, we’ll give you a simple list of the costs you need to understand before making any financial decisions.
Monthly or Periodic Fees
Condo Maintenance Fees
Every condo complex or resort is different in what is included in the monthly maintenance fees. Fees can range from $200 to $4800 per month. The average is $955 with the median being around $446. Vacation Rental condos fees are usually higher due to having pools, elevators and beautiful lush tropical landscaping. Here are the items that are typically included:
- Management of AOAO (Association of Apartment Owners). All owners are voting members. Usually a board made up of owners.
- Exterior Building Maintenance (roofs, elevators, paint and general infrastructure)
- Maintenance of common areas (pools, recreation areas, BBQ’s, etc).
- Water & Sewer
- Garbage / Recycling
- Exterior / common area insurance
- Pest Management
The things that are variable condo to condo (if they are not included, this will be additional costs to you)
- Cable TV (many have basic service)
- Internet Service
- Electricity (older condos tend to not have individual meters)
Property Management Fees
Some condos have an exclusive property manager. The large resorts tend to have a full service property manager and they charge for it. Every time I think I know about the “rental pools” and various scenarios, I hear about a new one! Most complexes will allow you to choose your own property manager or manage it yourself. You must have an on-island representative to handle emergencies.
Prices range generally from 20-50% of rental income. Some have a good program where they allow you to do your own marketing and reservations but they will assist with keys management, on-site emergencies, cleaning and unit maintenance. Some will include all services for a single price while others will charge ala carte for services. You will usually receive a monthly statement from your property manager.
Here are the typical services a Property Manager will do for you:
- Marketing – posting to Expedia, VRBO.com, and many others!
- Making and maintaining reservations
- Collection of guest/tenant $$ including taxes
- Charge for Credit card fees
- Process Travel agent fees
- Disburse funds to the owners
- Keys Disbursement or Electronic access management for guests
- Cleaning (sometimes passed on to guests)
- Maintenance and Supplies – they will pass on costs to you but they manage (i.e. refrigerator not working –> call repairman/replace).
About 5% of our Maui condos are leasehold properties where someone owns the land and condo owners pay a monthly lease fee to the landholder. These fees vary significantly but are typically long term 50 or 100 year leases with price adjustments every 10 to 20 years. Your REALTOR can tell you what current lease fees are. As part of the purchase, you will get all the documentation regarding the lease and renegotiation dates.
The biggest risk is that when lease expires, the landowner may take the land back. For this reason, many buyers don’t want leasehold properties.
The truth is that many leasehold properties are undergoing conversion to fee simple (a form of freehold ownership). But that has it’s own issues as owners are often expected to come up with $ to buy out the lease. It is usually the AOAO who is negotiating leases and purchase.
Property Taxes – based on zoning but can be determined on each property; subject to changes each year. Assessed values (AV) change each year and are not directly related to the sales price. Most condos are either Apartment zoned ($6.40 per $1000 AV) or Hotel/Resort Zoned ($9.40 per $1000 AV). Currently assessed values are slightly less than market value (they are typically 1-2 years behind the market). If you get a loan, your property taxes will be in a Mortgage escrow account. Property taxes are paid 2 times per year – in February and August.
General Excise Tax (GET) – 4.167% of all rental income. This is usually passed on to vacation renters. But you have to file reports periodically and pay the tax to the State of Hawaii. Some property managers will do this for you.
Transient Accommodations Tax (TAT/tourist tax) – 9.25% of all rental income in Maui. This is usually passed on to the vacation renters. But you have to file reports periodically and pay, just like GET taxes.
Insurance can varies based on requirements of AOAO, location and the ability to add to your own homeowner’s policy. Typically you only insure the interior of your unit and furnishings. If you have a mortgage this costs will be included in a Mortgage escrow account. It is wise to check if properties are in Flood/Tsunami zones as this can increase both insurance and property management fees; it also increases the renter appeal to the property (close to or on the beach).
Costs When Buying a Maui Condo
- Any loan points and appraisal fees
- Recording fees, except to clear Seller’s title
- Buyer Notary fees
- Condo Transfer fees (ranges from $100-$500 usually)
- 50% of Escrow Fee
- Cost of any buyer required inspections (General inspection, mold inspections)
- 40% of Standard Title Insurance
- 100% of Title insurance required by lender (ALTA)
Costs When Selling a Maui Condo
- REALTOR Commission
- Cost of conveyance documents
- 60% of standard Title Insurance Premium
- 50% of escrow fees
- Sellers’ Notary Fees
- AOAO Documents costs (for buyer review prior to purchase)
- Termite Inspection/remediation costs
- Conveyance Taxes
When you sell, unless you are using a 1031 exchange, you will need to pay Capital Gains taxes. At the time of sale, escrow will withhold money to ensure payment. This can get complex and could be a blog post itself. If you owe less than this it will be refunded when you file your taxes.
FIRPTA – imposed on all non-US citizens. Currently 10-15% of sales price.
HARPTA – imposed on all non-HI residents. Currently 5% of sales price.
In closing, consult with your favorite REALTOR to understand all the costs associated with owning a Maui condo. While it can seem like a lot to understand, your agent can guide you through the process and keep you on track and within budget.