Stocks vs. Real Estate is a never-ending debate. Both are great financial vehicles and you should probably own both.
There are two unique things about owning real estate. First, it is the use of leverage. Many people think you need at least 20% down for a conventional loan. That is not true. I have helped numerous buyers who had sub 20% down.
For example, let's say you were buying a $350,000 condo. a 10% down payment would equal $35,000. You would need the $35,000 liquid plus your closing costs (lender fees and escrow and title fees). Every time you make a mortgage payment, you pay down your principal and interest; this gives you more equity.
The second benefit of owning real estate is the power of equity. If you are old school, chances are you will never take out a Home Equity Line Of Credit (HELOC). I do not blame you. My Great Grandma was classic local Chinese women. She was against all forms of debt. However, using a HELOC can be a powerful tool.
Many savvy real estate owners will use a HELOC for:
Remodel. I recently helped a client who bought a home. Although the home was livable, he wanted to do some renovations before he moved home. Since my client worked with a local bank, he was able to get approved for a HELOC as soon as we closed the transaction.
Buy Another Property. If you have friends who own multiple homes, chances are they use a HELOC. A few months ago, I helped a client purchase a fixer-upper in Honolulu. Due to the condition of the house, we were not sure if a conventional loan would work. Since my client owns multiple investment properties, she always has HELOCs available. This allowed her to submit an above asking price cash offer.
Pay Down Debt. Debt is debt. However, high interest debt is worse than low interest debt. I know some people who use their HELOC to payoff high interest debt like credit cards.
Access To Cash. The beauty of a HELOC is it allows you to access the value of your home without ever being obligated to do so.
The next time you make your next mortgage payment, you should check how much equity you have in your home. Maybe it is time to have a HELOC?
Greg, Robin, and I recently closed on an single-family home in Kailua. The property is located in Mauanawili. The views of the mountains are amazing! Plus, Maunawili is conveniently located near Castle Hospital and Kaneohe; you are not deep into Kailua.
Pulling housing data from the Honolulu Board of Realtors, the median single-family home price in Kailua was $1,692,500 in July 2021. This is a near 36% increase from the same time last year! In addition, in Kailua, 42 single-family homes were sold in July 2021. This is one less home compared July 2020.
If you are looking to buy, you might want to do it sooner than later. COVID-19 has done some wonky things to Oahu's housing market. Who would have thought rates would be low and prices would increase during a pandemic? Many thought there would be countless deals.
A few weeks ago, while eating dinner, I could smell smoke. I went on my lanai and I could see flames! Thankfully, no one was injured.
Do not be lazy. Make sure you:
Test your smoke detectors monthly.
Change out any dead batteries.
Replace any broken smoke detectors.
Install carbon monoxide detectors.
Make sure you update your home evacuation plan.
Most importantly, home fires can be preventable. My family and I live in a condo. Our association recently tested the fire alarm system. In addition, our resident manager met with the Honolulu Fire Department (HFD). HFD does an annual inspection to make sure our condo is following the laws/rules. Thankfully, both went smoothly.
Land Use Ordinance
The Department of Planning and Permitting are proposing a bill for short-term rentals on Oahu. If you own an investment property, especially a condo-hotel, this could affect you.
Did you know that this bill would prevent owners from living in condo-hotel units? Also, bill would require that the hotel manage the unit. More so, the hotel operator will be able to set the room rate. If your family or friend wanted to stay in the unit, your family member or friend would have to pay the rack rate. There goes the "Free 99" discount.
Per the Hawaii Association of Realtors: The Supreme Court issued a ruling that ended the Centers for Disease Control and Prevention (CDC) eviction moratorium that was in place through October 3, 2021. You will be able to begin the eviction process if the tenant is not protected under Act 57. Under Act 57, a tenant may not be evicted if the amount of back rent does not exceed the following thresholds on the following dates:
August 7, 2021: four or more months behind on rent.
September 6, 2021: three or more months behind on rent.
November 6, 2021: two or more months behind on rent.
January 6, 2022: one or more months behind on rent.
August 7, 2022: Act 57 and the back rent thresholds expire.
Civil Beat recently reported that Honolulu City Council rejected an affordable housing subdivision on the North Shore.
In other news, Kamehameha Schools would like to convert Kalama Village into affordable elderly housing. Many residents were concerned about this.
It seems like people know we need more affordable housing on Oahu. However, many people do not want it in their own neighborhood.
Stay safe and healthy,