Do you own a house or condo in Maui that you intended to sell but just haven’t gotten around to it yet? Each day that passes while you own the property is costing you money. Don’t let anymore time go by. But if you do plan to hold it for any longer please read this article and consider how it might effect you. It might be time to sell your Maui property, and you might be very glad you did. How much does keeping a house cost on Maui? Find out below.
House flippers will always agree on one thing, and that is that the faster they can complete and sell the flip, the more profitable that deal is. Obviously owning a house costs money. Sometimes people hold on to a property for sentimental reasons or because they might use or decide they want to keep it someday, but they are just throwing money out the window. The property you own should be working for you right away. It can be your primary residence, generating a monthly income as a rental, or be used for business or vacation – like as an office or a vacation rental (depending on where it’s located, Hawaii has very strict rules about this – and that’s a good thing because we need housing for our residents). If your Maui house doesn’t fall into any of these categories then it’s probably time you consider selling it.
What It Costs To Holding A Property On Maui
Property taxes in Hawaii are some of the lowest in the country, but they’re still not cheap! And they can be higher now than ever before after the changes to the tax code. And most notably, they are no longer tax deductible! Anyone that is one title or listed as one of the owners of a house is generally liable for paying property taxes. If you sell the house quickly you can put an immediate stop to the accumulating tax bill it results in. In Hawaii property taxes are pro-rated as of the closing date; so you will be responsible for the taxes up until the day of closing, but not a day longer. The new owner will be liable for paying all property taxes, late fees, interest and penalties as of the day the sale closes.
If you’re behind on your property taxes and decide to sell your house to Maui Home Buyers, we can structure a sale where we just deduct the amount owed from our offer, that way you don’t have to do the math for the daily tax cost and to try and figure out how much it’s going to end up being as of the closing date – we do that all the time, and we’re happy to take on the calculations if it makes your life easier!
The cost of utilities have a way of sneaking up on us.. after all it’s common for water and electric combined to only cost around $500-1,000/mo for an average house in Hawaii. But if you were to add up the amount you’ve spent on electricity, water, gas, garbage/refuse, internet, GE taxes, etc. etc. etc., you’d probably be surprised how much it really comes out to each month, and even more shocked if you add up what you spent in a year on those things. Even if you aren’t residing in the home while selling it, you will still need to keep the lights and the water on for the people who come to see your house. Or even if you don’t have a realtor showing it to retail buyers, you should keep the utilities on in case of an emergency, and so that the county doesn’t disconnect your utilities. Especially for homes in upcountry (Makawao, Pukalani, Haiku, Kula, etc.) Maui, HI, the Maui county department of water supply (DWS) will remove your water meter if it’s not used or carries a balance at a certain point, and if this happens it will likely take years to get a replacement meter and cost between $13,000-30,000+ just to get your meter back! On top of that, people that would have potentially bought the house will just move on to other options that already have a Maui county water meter. There’s a house in pukalani for sale right now that lost it’s water meter and they’ve been trying to sell it for a very long time, they’ve even accepted offers from multiple buyers, but those sales all fell apart as soon as the buyer found out how much time and money it would take to get the water meter back. The seller will most likely need to reduce their price by hundreds of thousands of dollars in order to find a buyer that is willing to buy and pay for the house in Pukalani now, but wait years before anyone can actually live in it. Another factor to consider is that if your house is older, like most houses on Maui, it’s probably much less energy efficient and costing you significantly more in utility bills.
Maintenance & Repairs
An easy calculation to get a ballpark idea of how much a house might need in regular maintenance expenses is the 1% rule. It essentially means that you can plan on the yearly maintenance costs to be about 1% of the total purchase price. So let’s say a house on Maui sold for $700,000, you can plan to spend about $7,000 maintenance and repairs per year. This is a very general calculation and these numbers can vary greatly but it’s common for investors to use this calculation to estimate how much they need to set aside for maintenance. Hawaii is an expensive market, so generally our maintenance costs should fall slightly below the 1% mark, especially for an owner that is handy and can fix many things themselves. But our labor, construction, tradesmen, and handyman costs are nearly double the cost of what those things run in most mainland markets, so it’s still more expensive to own a home in Hawaii than most other places.
The cost for homeowners insurance varies based on the house and its location. But most single family houses in Hawaii cost over $2,000/yr for your average Maui home. Then there is flood insurance, which on it’s own can be more than double the cost of the standard home insurance cost! Since so many houses on Maui are in high risk flood zones, chances are your house will require flood insurance. We have a house in Kihei that is in a medium risk flood zone and the flood insurance policy on that house is $350 every month! So the total annual insurance costs us over $6,000! And we’ve never used it, but we are required to have it since we took a mortgage out on the house, the bank adds the insurance cost to the mortgage so we are forced to pay for it, which protects the bank from losing their money.
Paying the mortgage every month for a property you don’t actually live in, or may not really want to own can be frustrating. Most people spend over $3,000/mo for their mortgages in Hawaii. Many of us struggle to pay those thousands of dollars each month and often they would be much better off selling the property and investing the cash into something that makes them a return. This is true now more than ever, since home prices have increased significantly over the last decade, and since interest rates have skyrocketed in 2022 most economist agree that home prices have to calm back down. This means that right now could be the best time to sell, since you can still take advantage of all of the equity you have earned recently, and let the new owner take the risk to find out if prices are going to drop this year, and by how much.
We started to hint at this idea in the last section.. Think about what else you could be doing with the money you have stuck in your home. Maybe you are missing out on owning a better house that fits your needs, or maybe an investment opportunity. Even putting that money into the stock market/mutual funds/ETFs/index funds/etc. could prove to be extremely profitable, especially right now since the stock market has dropped 20-30% at the time of writing this article, meaning that it is most likely the best opportunity in recent years to put money into the stock market. Sure, the market might drop a little more, but as long as you don’t sell your stocks until they come back up, you can still do much better than most people would have done if they had invested at any other time in the last few years. Take a little time to check out the options that you are comfortable with and decide if you really are happy with the way you have things set up now. Many people think that investing in stocks is complicated, or that you have to be rich to buy stocks, or that you have to really understand the companies/stocks, but that’s not true, especially with all the free services and tools available today; it can be as simple as grocery shopping! We are not experts in investing in stocks, but we have some experience and we’d be more than happy to point you in the right direction if you don’t know where to start. If your property is not your primary residence and is making money for you, it might be time to find something new!
So selling your house now instead of later could help you walk away with more money in your pocket. Each day you own it the expenses will continue to add up. Run your own numbers and make the best decision for your needs!