Email us Call us

What You Need to Know About the Long-Term Value of Luxury Real Estate

If you’ve been checking your stock market portfolio each day with trepidation and watching the disheartening trends in our wavering economy, no doubt you’ve begun to wonder if there is not a better way to invest your hard-earned dollars and gain the peace of mind that comes from stable investing.

Real estate is a great way to diversify your investment portfolio, especially in a tropical paradise like Maui.

What exactly sets apart a property as luxury real estate? Luxury real estate is “unique, exclusive, and perceived as superior.” These properties possess distinctive architectural features, unique designs, gracious and elegant details, top-of-the-line features, and ultramodern technology.

Location is key

When considering an investment property, the location is of primary importance. Wailuku, tucked into the eastern shores of West Maui Mountain, is a tropical paradise. From the sparkling Pacific waters and up the rising hillsides toward the mountain’s peak, breathtaking views and perfect temperatures make any time of year an excellent time to visit Wailuku. Numerous premium golf courses are nearby, as are beautiful beaches, watersports opportunities, and ample inland outdoor adventures. The town boasts charming local businesses and restaurants with a long local history, and newer developments are bringing boutique shopping and fine dining to the area.

On an island, buildable land is limited, and with strenuous conservation efforts to keep Maui the beautiful place visitors and residents love, new construction is severely limited. At the same time, the demand for homes continues to increase. These two factors provide promising investment security, as the value of Wailuku real estate can only increase.

Before taking the investment plunge, take some time to get to know the local housing market. The luxury specialists of Ohana Real Estate Team know the demand for high-end rental properties. They can help you explore your options and determine the profitability of purchasing a Wailuku home for sale. High-end real estate typically does not make its way onto the MLS, for it is not marketed to the general public. This makes it vital that you establish a strong working relationship with true luxury experts.

The Wailuku real estate market experienced the same dramatic 2022 that most communities in Maui had. Record-setting and unsustainably high prices followed the awakening of the housing market post-Covid. The frenzy settled down in the fall of last year due in part to increasing interest rates and inflation, but now homes are listing for an average of $729,000. This is consistent with the higher range of “normal” pricing pre-Covid.

Profile of a luxury home buyer

Luxury buyers have the wherewithal to explore global real estate options, and a truly exquisite home will appeal to the discriminating taste of those who seek the best in everything life offers. Money isn’t a limiting factor for luxury clients, and they are willing to pay top dollar for premium real estate. They are looking for beautiful views, access to the finest lifestyle, privacy and security, and one-of-a-kind home features constructed from top-grade materials and master craftsmanship.

Tax considerations

The taxes for which you will be held liable will vary widely depending on how you utilize your Wailuku real estate. When it comes to property taxes, Hawaii has the most favorable rate in America at 0.27% for owner-occupied properties.

The status of your property will matter when it comes time to sell. If you live in this home as your primary residence for two years or longer before selling it, you will be exempt from paying taxes for the first $250,000 of capital gains or $500,000 if you are married and utilize joint filing.

If you are looking to purchase a home with immediate-return investment goals, such as flipping the house, then you will be hit with substantial short-term capital gains taxes, which can be as high as 37% if your profits are high enough. This sort of cost greatly reduces the profitability of the investment and encourages most investors to choose longer-term investment approaches.

If you are considering a longer-term investment, you may be able to generate a steady source of income by renting out the property. Again, there will be taxes to pay on the income generated, but you may also deduct expenses as they pertain to property management services and maintenance/upkeep of the property. Tax rates vary depending on exactly how time at the property is divided between the owner and tenants, so review IRS Publication 527 to know exactly what is expected from you.

Before taking the plunge

Investing in high-end real estate may be a great opportunity, but pay attention to complete due diligence. Give careful consideration to your needs, investment goals, and stage of life, and honestly assess whether this is the right time and investment for you.

Because of the size, scope, and expectations of maintaining luxury properties, there is more to manage than with more mainstream properties. If Maui is far from your primary home, consider the travel logistics necessary to visit your Wailuku real estate or the necessity of a skilled property manager and groundskeeping staff if you rent the property out.

Consider also your current financial situation. Often luxury properties are purchased with cash. If, instead, you prefer a mortgage, do you have enough financial liquidity to make a substantial down payment, excellent credit, and adequate proof of finances to qualify for the loan you will need? If your home will be used for a rental property, do you have ample income to pay the mortgage if the home does not have tenants for a period of time? This is a worst-case scenario to consider, but as we saw in 2020, factors outside our control can suddenly and dramatically impact tourism and travel.

To make a fully-informed decision and to explore the potential benefits in greater depth, get in touch with the luxury experts of the ‘Ohana Real Estate Team. They will gladly answer your questions, walk you through potential scenarios, and introduce you to some of the finest investment properties in Maui. Give them a call today.

Work With Us

We pride ourselves in being able to provide a high level of service to all types of sellers and buyers. We are here to help you achieve all your real estate goals here in Hawaii.