Kona Kohala Blog

Hawaii county government owned a bulldozer that in 2000 was declared surplus.  Now this particular bulldozer could be bought through various companies on line for $125,000 to $150,000, the county of Hawaii decided to sell it to their good friends at C&H Ishii Construction for $60,000.  Okay, that's stupid and we all have come to expect that from our politicians and their good ole boy friends, it's how they entertain us.

Last week, it came to light through an article in West Hawaii Today, our local newspaper that's commonly known as West Hawaii Yesterday, that the county has been leasing back that very same bulldozer since 2000 for $15,000 per month.  Not only are they leasing it, they're paying for any modifications needed and all maintenance costs.  One figure has the cost of the bulldozer at over $1.4 million so far.

Now, for the really amazing part, no one is doing anything about it.  Calls have been made to the mayor aka "good ol boy #1, the county prosecutor and a number of department heads all of whom have not returned calls.  I'm wondering just how far you can push people before they begin to push back?

I have a client, two actually, who are looking at this buyer's market through true investor eyes.  In my last newsletter, I commented on two condo complexes in South Kohala, one in Waikoloa Beach Resort and one in Mauna Lani Resort, that had both experienced large price declines in the past couple of years.  I believe there are great bargains to be had in each of the complexes and that there will be huge appreciation in the next 5 to 7 years.  One, they are in great locations and two, they are newer, very well built condos with all the amenities.

My clients currently own a condo in the Waikoloa Beach Resort that's a cut or two below the ones I recommended but still a very nice unit.  After reading the newsletter, they drove over to look at one of the complexes since they are now on island.

They said the developers agents couldn't offer enough to get them to buy.  They had just dropped the prices again, they were offered a huge amount of money to cover all their closing costs and the developer would rent back the unit for a year as a model at a very competitive price . . . wow!

We could look at the fact that they paid top dollar for their current unit and they'd be taking a $200K+ loss or we could be realistic, which they are.  We look at their Schedule E since they have been using this as a rental property since they bought it.  This tells what their annual bottom line is.  They didn't buy all cash, they put a small percentage down.  Then we look at the principal they paid and other monthly costs that weren't tax deductions because it was a business. 

Then we look at their rental income, which has been pretty good for them.  When we add up the costs and subtract the income we see that they really aren't losing anywhere near $200K+, in fact, it's a very small fraction of that number.

Now we look at how discounted the price on the new property is compared to where it was a year ago.  We look at the cost of getting in and the potential for income as a rental unit.  What we have come to realize is that if you're moving up in this market it is a great time to buy.  You may take a small loss on your current holding but you may realize a huge savings and appreciation on your new purchase.  It is time to think, realistically, about moving up if you have investment property in Hawaii.

Contact me and let's go through the numbers. aloha.