Tom Tezak – Maui Real Estate

Navigating Kihei Real Estate: Key Considerations for Foreign Buyers

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Kihei’s Sugar Beach

Kihei’s Sugar Beach

Kihei, nestled on the sun-soaked southwestern shores of Maui, is not just a tropical paradise but also a prime destination for real estate investment. Over the years, the allure of Kihei has captivated the attention of foreign nationals, many of whom seek to invest in real estate in this beautiful, laidback corner of Hawaii.

If you’ve been thinking about owning a home on Maui, Kihei might just be the spot for you. In this comprehensive guide, we will navigate through the key considerations for foreign buyers venturing into Kihei’s real estate market.

WHAT YOU NEED TO KNOW ABOUT KIHEI REAL ESTATE

Purchasing a tropical island home can be one of the most rewarding investments you can make. Whether you decide to sell it in the future or choose to live in Kihei for generations to come, the combination of the incredible location and the area’s continuous upward trend in property values means you’ll always enjoy an excellent return on your investment.

Understanding the Kihei real estate market

So what can you expect as a homeowner in Kihei?

Overview of Kihei and nearby neighborhoods

A classic Hawaiian beach town, Kihei is located within easy driving distance of Maui’s diverse communities, each of which offers a unique blend of amenities and lifestyle. Hugging the coastline along Maalaea Bay, it encompasses an area of roughly 12 square miles and features a sunny, mostly dry climate as well as six miles of wide sandy beaches.

With Maalaea Harbor on one end and Wailea-Makena on the other, you will find that Kihei makes for a great jump-off point for exploring the rest of the island. Nearby you will find:

Current Kihei real estate market trends

Staying ahead of market trends is crucial in making educated choices in long-term investments. Home values in Kihei have been trending upwards over the last five years. This, coupled with a sale-to-list price ratio in the high 90s, indicates steady demand. In short, you will find the market to be somewhat competitive so be prepared to be flexible.

Average housing costs in Kihei

Home prices in Kihei have risen significantly over the last few years. Compare the median sold price of $671,000 in March 2021 to February 2024’s $969,000, for one. And note that the median listing home price has had a year-over-year increase of 29.8%. This is all unsurprising considering the perennial appeal of living in Kihei.

On the upside for buyers, the market seems to have moved on from the frenzy of late 2021 to 2022, when homes would barely stay a month on the market. In January 2024, the median time homes spent on the market was a more normal 41 days.

Emerging trends in Kihei real estate

One significant trend further burnishing Kihei’s allure is the growing demand for eco-friendly homes. Buyers and investors increasingly seek properties with sustainable features, aligning with Hawaii’s commitment to environmental conservation. Kihei, with its emphasis on responsible development, stands as a beacon in this trend, attracting those who value both luxury and ecological mindfulness.

The tourism-driven rental market also continues to thrive, which highlights Kihei’s potential for investors. With the state’s tourism industry proving remarkably resilient, rental properties in Kihei enjoy consistent demand. Vacation rentals, in particular, have become a lucrative avenue for investors, offering the dual benefit of income generation and potential for property appreciation.

Then there’s the integration of smart home technologies, the demand for which is transforming Kihei’s real estate landscape. Modern amenities that enhance energy efficiency and provide a seamless living experience are increasingly sought after. Kihei’s real estate market is adapting to this trend, further enhancing the appeal of properties here.

Things to consider when owning a home in Kihei

Owning a home in Kihei offers a lifestyle surrounded by natural beauty and cultural richness. But potential buyers unfamiliar with island living will also want to do their due diligence.

What other factors should you consider before buying your Kihei home? The state, in general, is known for its higher cost of living, impacting housing prices, daily expenses, and overall affordability. Being in the Pacific, Kihei is also susceptible to coastal hazards. Homeowners need to factor in insurance and learn how to take precautions for such events.

Also, while tourism is beneficial for the economy, homeowners may find crowded beaches and increased traffic during peak tourist seasons in the general area. Though in this respect Kihei is fortunate that it’s not as overdeveloped as some areas. And Maui’s robust tourism industry can also be advantageous for homeowners interested in short-term rentals and potential income opportunities.

All in all, however, Kihei is definitely worth the move. It offers a slice of Hawaiian paradise with its stunning beaches, warm climate, and breathtaking landscapes, providing a unique setting for idyllic living. Kihei has a laid-back and welcoming community atmosphere, making it an ideal place for families, retirees, and those seeking to thrive in a close-knit neighborhood. Embracing the Aloha spirit, the beachside town hosts various events, festivals, and cultural activities, providing a rich and diverse cultural experience. Residents can indulge in a healthy and active outdoor lifestyle, enjoying water activities, hiking, and exploring the natural wonders that Maui has to offer.

THE HOMEBUYING PROCESS FOR FOREIGN BUYERS

Purchasing property in Kihei is not so different from purchasing property in other areas in the United States. There are currently no restrictions to foreign ownership of real estate in Hawaii. That said, there are certain considerations that you will want to keep in mind so you can enjoy a more seamless experience.

Financing options for foreigners

Many foreign buyers find it simplest to finance their real estate purchase using their own cash reserves. This also gives them an edge when competing with offers from other buyers. But if a cash purchase is not the ideal choice for you, we recommend working with a local lender to finance your Kihei real estate investment.

Working with local financial institutions

Building a relationship with local financial institutions is our recommended option, especially if you want to close fast on a Kihei property. This is because local lenders are familiar with the particular nuances of the real estate market in Hawaii and will know how to navigate around potential roadblocks. Many also have experience working with foreign nationals and can guide you as to your options on conventional loans, ITIN loans, and so on.

Kihei real estate property taxes

One of the first steps to investing in Hawaii real estate? Learning how property taxes work in the state. Understanding tax implications is crucial for financial planning. There’s two main tax acts to know before diving deeper into your Kihei home search: HARTPA and FIRPTA.

HARPTA is a state-level regulation specific to Hawaii designed to capture taxes owed by non-resident property sellers. When a property is sold, the buyer is required to withhold a percentage of the purchase price and remit it to the Hawaii Department of Taxation. This withholding acts as a safeguard, ensuring that the state receives the appropriate taxes from the seller, who may not have a permanent residence in Hawaii.

For buyers in Kihei, this means being prepared to withhold a percentage of the purchase price during the transaction. As of the last update in 2022, HARPTA withholding is set at 5% of the sales price for non-resident sellers. However, this rate is subject to change, and it’s crucial for buyers to check the latest regulations or consult with a tax professional during their transaction.

FIRPTA is a federal regulation that applies to foreign sellers of U.S. real estate. When a foreign individual sells U.S. property, the buyer is required to withhold a percentage of the sales price to cover potential taxes owed to the U.S. government. FIRPTA withholding is set at 15% of the sales price, and this amount is submitted to the Internal Revenue Service (IRS) unless an exemption applies.

For buyers looking to invest in Kihei real estate, understanding FIRPTA is crucial, especially when dealing with foreign sellers. The withholding is a security measure, ensuring that the IRS receives its share of taxes from the property sale. Like HARPTA, buyers should stay updated on any changes to FIRPTA regulations and seek professional advice for accurate compliance.

Kihei real estate permits and requirements

Owning real estate in Kihei, Hawaii involves adherence to specific permits and requirements. Here are key aspects for potential property owners to consider:

Negotiation strategies for foreign buyers

Having a comprehensive understanding of the homebuying process can help you in what may be the most challenging part: negotiating with the seller. We also recommend working with an experienced real estate professional to support you in these steps.

What can a Kihei real estate agent help you with?

WORKING WITH A KIHEI REAL ESTATE EXPERT

Investing in Kihei real estate is not just a transaction; it’s an immersion into Hawaiian culture. Kihei stands as a prime destination for those seeking not just a property, but a piece of paradise that promises both immediate and long-term returns on investment.

Get in touch with me, Tom Tezak, and the elite group of agents of the Lifestyle Maui Team. We can help you navigate Kihei’s many opportunities, while providing service that’s truly exceptional.

Call us today at 808.746.3347 or leave us a message through this page.

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