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What to Know About Buying a Waterfront Property

Waterfront properties are among the most luxurious investments you can make and are increasing in popularity as the Great Resignation and remote work options inspire buyers to move to their dream homes. With a rich culture and beautiful beaches, Hawaii has seen a sharp increase in property sales and costs. Lahaina real estate has consistently been in high demand, making for competitive housing industry. That doesn’t mean that buying the house of your dreams is out of reach, though. Here is what you need to know to purchase the best Lahaina waterfront home for your needs.

The Lahaina real estate market is competitive

When going into your search, you will first need to understand Hawaii is a seller’s market, meaning that there are more interested buyers than Lahaina waterfront homes. This makes for a pricey and competitive housing market. As is the case across the United States, properties for both rent and purchase are increasing in price. Over the last year, the cost of a single-family house in Hawaii increased by about 18%, while condominium prices increased by 53%. And while the average property once stayed listed on the market for 30 days, it now stays listed for only nine. Being as prepared as possible is critical, and remember that as prices increase, so does your property’s value.

Get pre-approved

Before you begin your search, you will need to collect your documents to get pre-approved for a mortgage. Be prepared to provide proof of assets and income, credit score, employment, and other forms and papers that your lender may request. Getting pre-approved will help you and your lender negotiate loans, so this step is essential in helping you decide how much money you are comfortable with spending on your property.

Cost isn’t a concern? Pre-approval can still be helpful when it comes time to start making offers. Many sellers prefer to sell to pre-approved buyers since they are more reliable. Waiting to get approved can be the difference between closing on your Lahaina waterfront home and having to begin the search process over again.

Also, most of Hawaii’s realtors favor buyers who use a local lender. This is because local lenders are equipped to navigate Hawaii’s unique closing process and specific environmental concerns, including—but not limited to—water catchments, agriculture zones, and lava zones.

Know the difference between beachfront and waterfront

Before you dive into your search, you should know what kind of property you are looking for. ‘Beachfront’ and ‘Waterfront’ are two terms that you should expect during your Lahaina real estate search. Understand that beachfront properties allow immediate beach access, while a waterfront property may require a little more movement or might not even neighbor a sandy beach.

Flexibility will help circumvent the high demand for Lahaina real estate, but it is still a good idea to ask yourself what will truly make you happy in your investment. Are you looking for a Lahaina waterfront home to walk out the front door and into the water, or are you in it for the view? And on that note, do your due diligence to ensure that you are just as in love with the water as you are with the house that comes with it. For some, the scenery is more important than the property itself.

Understand the costs

There are various costs associated with Lahaina real estate and further expenses related to life in Hawaii which you should be aware of. For instance, the high demand for properties means you might have to make a higher offer on a home. Sellers often opt for the highest bidder and won’t wait for you to adjust your request. Consult your realtor to ensure that you are making a strategic offer right off the bat. You should be prepared to put 5-10% down in cash for a conventional mortgage, which is valid for many properties throughout the United States and will need additional money for closing costs. These costs can include the escrow fee, title insurance, lender title insurance, appraisal, closing reserve, taxes, and HOA transfer fees.

When purchasing property in Lahaina, it’s also important to remember that many waterfront properties here are vacation rental condos. These condos require higher down payments, typically between 25 to 35%.

Be aware that almost everything is a little bit more expensive in Hawaii. In 2019, Hawaii was estimated to be the most expensive state to live in—generally about 30% more than living in the contiguous United States. You also need to consider the needs unique to waterfront living, such as flood and storm insurance and be prepared to invest in durable storm shutters. You will likely pay more HOA than you are accustomed to, with fees ranging between $350 and $1000 per month. And, if and when it comes time to sell your property, non-Hawaiians are subjected to a 7.25% tax with an additional 15% for non-US citizens.

All of that being said, Hawaii’s properties have lower property tax and higher value than homes even in New York and California. If Lahaina waterfront real estate continues to boom as expected, your property will significantly appreciate with time.

Perks of living by the water

There is a reason that upwards of 50,000 buyers invest in Lahaina real estate every year. And on top of that, the islands receive about nine million tourists annually, with over ten million visitors in 2019. While COVID-19 put a brief standstill on tourism, numbers are back on the rise.

Whether your Lahaina waterfront home will serve as your vacation getaway or your full-time residence, you are sure to enjoy the scenery and wildlife that Hawaii’s beaches have to offer. Enjoy exploring eight different islands, observing over 100 waterfalls, and hiking up ten volcanoes. Lahaina is beautifully positioned between the West Maui mountains and the coast and has served as Hawaii’s capital for 25 years.

The bountiful outdoor activities, Hula performances, impeccable dining, and unique shopping opportunities keep residents and tourists content. It is entirely possible to live full-time in Lahaina with its countless activities and excellent school system. However, some families find Lahaina better as a getaway spot than a primary home. Do your research and talk with anyone who will be moving with you to ensure you make the best decision for your needs. And once you’ve settled in your new waterfront property, don’t forget to soak up the gorgeous view!

Competitive housing markets can be intimidating, but they shouldn’t be. By doing your research and taking preparatory steps, you’ll be all set to buy your dream Lahaina waterfront property and will be glad that you took the time and effort. Contact one of the trusted Lahaina waterfront real estate agents on the 'Ohana Real Estate Team to get started!

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