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Non-medical: Hawaii Retirement Financial Thoughts


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For you long-term lurkers, I've commented half-heartedly/wishingly about retiring in the islands (Maui or Kauai in this order most likely) over the last several years.  Yes, housing is more expensive in total but when I compare to selling my N. Texas residence and moving into a new condo locally (they aren't as big a hit here compared to other areas of the country) the pricing isn't that different.  I'm getting close to wanting to give up the maintenance and space that is not being utilized in my home.

 

My wife and I are headed back in two weeks for a week visit and have already sent out feelers to realtors about policies, down payment requirements, and fee simple versus leasehold purchases (the latter I'm not interested in) for some sample properties that we would be interested in.  For example, if one purchases a condo in a complex that allows for rentals (most waterfront properties do) then down payments may require 30-35% upfront versus what we traditionally see on the mainland (~20%).

 

HOA fees are quite variable based upon what is included (some include the insurance and utilities for the unit while others only cover structure and landscaping costs).  These costs however are traditionally not posted at sites such as Realtor.com or Zillow.com.

 

At present time a non-taxable down payment of $115K is immediately available, which depending on the amount of down payment required gets us a property between $387K to 581K.  Realistically, if one is going to move there then it's to be near the water so we're looking at prices at about $520K for a 1 bed/bath and up for a 2 bed/bath unit (max at $600K).  HOA fees it would appear are probably going to be $500-$800/mo..  Assuming retirement in 2-3 years with the eventual sale of my residence (assuming a check for 92% of sale price to cover realtor fees/closing), and the post 59 1/2 y/o mark where Roth IRA earnings are non-taxable, I'm now looking at available cash at ~$570K> in today's dollars (includes down payment).  In essence, a property of that value could be paid off in full at that time less mortgage payments made in the interim.  My wife and I would live off our pensions and SSI as well as lesser retirement accounts which combined would provide about a year's worth of income on it's own.  At that point, the only housing expenses would be the HOA fee and property taxes.  Compare these to property taxes that I would continue to pay on my current residence and monthly utilities.  Estimated retirement income in today's dollars would be over $90K combined and my budget, including Medicare and supplemental coverage, still leaves over $20K in reserves each year.  It also allows for a new car payment monthly of $400 though that certainly wouldn't always be the case.

 

The bottom line question is do you swing now or wait out the next 2-3 years and then go all in?  What would we do with the property in the interim?  We would not rent it contrary to what most others do, and would utilize it for our own vacation trips and allow other family members to take advantage of it.  We could keep tabs on it with video monitoring via the web and also utilize a local management company to clean and keep an eye on it as well until we were there full-time.  My thought is I don't see the market crashing (unless N. Korea launches a nuke its way) and I don't see another viable option here in the continental US that strikes my fancy.  Caribbean such as St. Thomas?  Possibly, but while prices are cheaper there and the water is beautiful it still isn't a US state (though some are US territories).  One would think that St. Thomas for example would be more accessible but based on airline schedules it actually takes the same amount of travel time leaving out of DFW to get to Hawaii non-stop.

 

I'd love to hear from those of us who reside/work there, or have worked there in the recent past; or have made similar decisions in the past.  Remember, I won't be working and in fact I may make a lei out of my Littmann and leave it on a rock there as the tradition goes when you leave your lei behind.  Let's discuss...

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A couple of thoughts from someone that wants to do something similar once we are close to retirement, I am only 40 though and have at least 10 more years so we have decided to hold off on buying any properties for now as our needs may change and keeping it as a rental for that long was not a desirable situation for us.

 

I also spent 3 years living in Hawaii, various places on Oahu.

Upsides of Island living is nobody really cares what type of car you have and you will spend very minimal on gas, although it is expensive.

I found it to be much less materialistic there, no need to feel dressed up, have nice puses, etc...I still don't care about these type of things, but you can really get by very cheaply with clothes and material possessions there, I loved it!

Food is more expensive, at least when I was there, but for two people should not be that big of a deal.  

For families the schools are not great, having a single family home, not a condo is extremely expensive.  You seem happy with the thought of a condo so no worries there, I could never get my husband to be happy in a condo, sigh....

 

 

 

I think as far as finances go you have it pretty much figured out either way.   The only downside I can see is having to pay a mortgage on something for 2-3 years that you are not living in.  You may save a bit if property values go up, but it just depends if that is going to be a financial burden or not.  I would consider renting it out to family/friends/ people referred to you that you would trust.  This would offset your costs and it is easy to get a cleaning service after each rental.  My parents recently bought a condo by the beach and are doing this, when they are not there they try to rent it out and they have a property manager doing this for them.  It offsets alot of their costs.  

 

A couple other things we thought about when looking at properties:

Have you taken into account property taxes and insurance?  I know you plan on paying it all off, but definately look at what you tax bill and insurance will be.

How often do you plan to travel back to the mainland and have you budgeted for that?  

Have you taken an extended vacation or leave and actually sort of lived on the islands?  

Have you taken into account that any trip you make you will need to fly?  That kind of bothered me in my 20s, I don't forsee that being an issue now as I have come to hate driving, the Island we are looking at on the east coast is connected by bridge and only 4 hours from family.  Those were big deals for us, and we will probably still keep our home in North Carolina and go back and forth once we are completely retired.  That is not really an option with Hawaii, you kind of have to go all in.

 

 

I think if everything falls into place I would just go for it, hard to say if home prices will be even higher in 2-3 years, I loved living there, it is an amazing place!

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Might want to reconsider Air BnB-ing your condo until you move there. You will have to pay a cleaning company but this can be figured into rental prices. You should have NO problems renting it out on a weekly basis for much of the year, at least enough to pay your mortgage. Block out times when you know you will visit.  You can make certain rules---no small kids, no pets, etc.

 

Leaving it 'sit' while you pay the mortgage is a total waste of money. Make vacationers pay it for you.

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We learned several years ago that for these flights FC is the only way to go. Checked coach prices yesterday and they are as much RT as we paid for FC. Property taxes will be less there than what I pay now. While Texas doesn't have a state income tax they do make up for it in property taxes. Insurance will be same or less since I'm not insuring the complete structure unlike a lot home. Longest duration stay over the years has been nine days and we were discussing last night trying a month's visit first. Another option is a high end Airstream parked at a quality location (translation: no maintenance) and just travel to multiple locations. Once you buy in to the islands or somewhere in the Caribbean then you've pretty much chosen your location. We do need to maintain some type of accessibility for our single adult daughter as well. I really appreciate the insights. I really wish I could talk my employer into letting me do a school year work schedule and let our NP cover the twelve month needs.

 

After spending hours in the yard this morning replacing some sprinkler heads im all for an HOA for outside maintenance. We actually considered a resort/condo combination in Kapaa on Kauai along the east shore (alas, no sunsets).

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  • 2 weeks later...

Well, departure tomorrow, I've been in touch with realtors (yes, plural), all ready to look at properties, and BLAM!  My wife hits me up two days ago with another one of my favorite topics, dental care expenses.  A single implant should be survivable, correct?  Maybe a grand or so out-of-pocket.  Uhhhhh, no.  Bite is off, this is wrong, that is wrong, and you'd think she'd look like a buck toothed beaver.  Total cost?  Close to $10K.  Insurance will cover up to about $1500.

So being the "rich, well off" individuals that we are (kidding of course) this should be no problem.  Weeeeell, it becomes a problem when you find out that Hawaiian mortgages are as noted in the original post and as a result of taking just this $10K out of a potential down payment hoses one on what they can qualify for we're back to square one for this year.  I did the numbers and found that we could make 18 trips RT first class, stay for three weeks per trip semi-annually, and still break even on what we'd spend to live there full-time.  When one takes into consideration that the primary incentive is to get out from under home maintenance in a house that even at 2200 sq. ft. is too big for the two of us, the condominium comes into play, which is what we were solely looking at.

Now I'm starting to wonder if I can have the best of both worlds.  Sell my suburban home, pay cash for an upscale condo in Uptown Dallas, take advantage of the amenities, and still have money left over for maybe 15 trips instead of 18.  Of those 15 trips I'm not isolated to Hawaii only and could substitute cruises or trips to the Caribbean as well (assuming that we don't become a crime statistic as well).  Shhh, don't tell my wife but this could be a blessing in disguise.

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Have you considered the Cayman Islands? Specifically Grand Cayman? Beautiful beaches and water. My dad and step-mom are looking to purchase something there and I think they've been shocked by how affordable some of the properties are. Of course... some aren't. If you choose to do some poking around, just remember that they do use the Cayman Island Dollar so you might have to convert some of the prices. 

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