One of the most popular questions that people ask when moving to Maui is: “Should I choose a condo or a house?” There is no clear answer except to look at the different options available and the related costs. Often after a first look, I’ll hear “I don’t want to pay the high maintenance fees for a condo” or “I’m on a fixed income so I don’t want maintenance fees that can continue to go up“. Well let’s look at the things that go in to the overall cost of owning and buying property on Maui. Please remember that each unit, condo complex or neighborhood is unique and you have to look at all the items to assess what’s the best financial and lifestyle fit for you. Whether you are buying a condo or home, there are associated costs that will continue to go up. In a home you have a little more control over when things are done, but the costs can be significant. Just as an example, I just paid about $8000 to paint my 2-story house! I’m hoping it will last a long time!
First let’s define the different types of condos:
- Residential Condo — these often look just like a house but there is a condo association. The neighborhood may have nice amenities like gated entrance, pools, gyms, party rooms and front yard maintenance.
- Condo-tels — Yes this is derived from 2 words – Condo and Hotel. These are condos where vacation rentals are permitted, there is a front desk and the majority of owners are using the property as a vacation rental.
- Regular Condo — The rest of the condos are usually long-term tenant or or owner occupied. Some may allow vacation rentals but typically don’t have a front desk where people can check in.
Now let’s look at the costs associated with actually purchasing the property:
- Sales price — this one is pretty straightforward but a huge portion of your investment. At the entry level, while you can find a nice “regular” condo for $150,000, most houses start at $350,000. Vacation rental condos start about $200,000 but don’t expect oceanfront or even a peek of view at that price.
- Mortgage rate and terms — This is variable but typically you will pay more for any non-owner occupied property and definitely more for a condo-tel. Ask your favorite mortgage professional. Remember, that a good mortgage program can save you thousands or allow you to live in a much better house. It is as important as the sales price!
- Down payment — There are still a lot of low percentage down opportunities for owner occupants buying property for their own use. For the best and lowest interest rates you can plan on putting 20% down to avoid paying PMI. Condo-tels usually require at least 35% down. Foreign nationals purchasing from U.S. banks will usually require a higher down payment.
- At the time of purchase, any standard payments ( taxes, association fees, maintenance payments) are prorated based on the date of the sale. The exception to this is on an REO property where the new buyer may be required to pay maintenance payments in arrears (up to 12 months) to condo associations. Also note that your tax bracket for intended use may be different than the previous owner. You need to file information with the county and the change will take place in the following tax year. This can significantly increase or decrease your tax payments.
Finally, let’s look at maintenance costs. In each condo, maintenance fees will be different and the items covered will be different. During the purchase of a condo, you have the opportunity to review the “condo-docs” which will tell you much of this information. You can exit your contract if something is unsatisfactory. This list is intended to give you points to ask about and to compare when you’re looking at Maui properties.
- Insurance — Condo associations will have insurance to cover damage to the exterior of the buildings and common areas as well as liability insurance. You are still responsible for ensuring the interior, its contents and liability. Condos with pools, elevators and additional amenities will have higher insurance rates. Just like a house, a condo in the flood plane (or tsunami zone) will have higher insurance premiums.
- Water and Sewer — Condo associations usually cover the costs of water and sewer but check on residential condos. As a quick comparison a classic water bill for a home on a landscaped 7000 square-foot lot will average about $250 every two months. Obviously long showers or a swimming pool can increase that!
- Landscaping — Some landscaping is usually covered by condo associations of all types. Those lush beautiful tropical views come at a price! Of course in a home you can do this maintenance yourself or hire a gardener for about $75 every two weeks. Don’t forget to budget for tree pruning which can be extensive in our tropical climates. If you have large trees in your yard budget for about $1000 a year.
- Exterior maintenance is usually covered by condo associations although many don’t have enough reserves and may hit owners up for additional costs. Costly items include painting, re-roofing, elevator repair, road/parking area maintenance and swimming pool resurfacing so you want to check reserves for these items. These costs may also apply to your home and should be budgeted accordingly.
- Pest Control is a critical part of Hawaii lifestyle and is something that nearly every condo association covers, usually on a quarterly basis. You can also get pest service at your home for about $70 monthly or $200 quarterly. This is something a homeowner can do themselves and save some money.
- Front Desk and Security — Many condo associations and some homeowners associations have security patrol. Ask about the hours, services and policies. If it is a condo-tel or resort, ask and understand use of the vacation rental manager (usually a different organization than the condo association) and what cleaning and maintenance services they provide.
- Garbage — Condo associations generally cover the pickup of garbage and provide central places for depositing. Garbage pickup at homes by the county costs $108 every six months.
- Recycling Service — Many condos have some recycling capability but make sure to ask. Most homeowners still need to take their recyclable items to city recycling centers; a few homeowners associations cover pickup of recyclables.
- Electricity — Some condo associations, especially the older buildings include electricity as part of the maintenance fee. Most have separately metered units. Each unit is different but electricity on a two bedroom, two bath condo will average $80-$200 a month. A single family home will typically run $200-$600 per month. The highest use occurs during the summer when everybody has their air conditioners going. Homes with solar hot water heaters or photovoltaic systems have significant electricity savings. Sellers are required to provide buyers with a copy of their electric bill showing the last 6 months of use. If a property has a detached ohana (cottage), ask if the unit is separately metered; if it is you can pass the cost on to tenants.
- Cable/Internet/Telephone Service — Some condo associations will cover everything including having Wi-Fi service for guests. But this is one area that varies widely so be sure to ask. Homeowners need to decide what they need and what is available in the their area. Costs can vary from $50 a month to several hundred and the different services can add up fast!
In closing, let’s not just think about costs! Put yourself in your dream Maui home. Do you have a beloved furry friend? Only some condos will allow them? Do you want to be spending time landscaping, painting, killing bugs or do you need to have the flexibility to leave for a few months and know that everything will be taken care of? Are you getting older and experience pain every work day? I say this from experience; I’d rather be at the school garden than mowing my weeds. I’d rather be at the beach than worried about the swarm of ants in my kitchen! But on the other hand, I don’t want to run to group barbeque to grill my fish! It’s about designing the Maui lifestyle that is best for you! I often advise people to rent for awhile to understand what they want.
I’m sure I forgot something and I’m not a mortgage professional, insurance agent, accountant, property manager or lawyer. The estimates are just that and are likely to change. Buying property may take all of these! A great real estate agent is your best resource to help you sort through it all. Call Kathy or leave a comment below if you have any additional questions or think it’s time to take the next step to own a piece of Maui.