5 Steps to Finding the Perfect Oahu Home

You’ve finally decided to make the big move to Oahu… or maybe this is your first home purchase, here on the island? Maybe you are trading up or down, and it’s been years since you’ve purchased… What are the steps you should take in finding the perfect Oahu home? Where do you start? Watch our video for a summary, or read on, to find out more!

There are 5 basic steps to finding the perfect Oahu home.

1. Find a Great Full-time, Full-Service Realtor with Lots of Experience and Expertise

Experience is Necessary, with Both Buyers and Sellers

It’s important, first, to find an experienced realtor; someone with many years of helping buyers and sellers of Oahu real estate. Realtors should have experience with both buyers and sellers because it helps to know both what buyers want and need, and what sellers expect from buyers. This knowledge can help make your offers stronger and more competitive. It also enables your realtor to have a full understanding of the market conditions and various competing factors that will affect finding the perfect Oahu home.

Local and Island-Wide Expertise and Both Important

It’s also important that your realtor has experience in the geographical areas in which you are looking. The odd thing about Oahu real estate, however, is that many buyers start out looking in one area and end up buying in another area. Sometimes, this is because of unfamiliarity with the various areas and neighborhoods of Oahu. Other times, it is a result of affordability or not being able to find the right property in the first neighborhood you liked.

As a result, you might be best off with a realtor that knows all of Oahu and has experience in many areas of the island. It is great when your realtor can offer numerous ideas for places to live that would work for you. Having options is good and being prodded into searching in only one area may not always be the best solution. With an experienced realtor, you may discover a whole new neighborhood that you really love, and that meets your needs better than the place in which you originally thought you would purchase.

2. Find a Great Local Lender, So You Can Be Sure of What You Can Afford

The second step in your Oahu home search is finding a great, experienced local lender. Working with a local lender is not mandatory, but it can be a good idea. The reason local lenders are preferred is that they understand the local Oahu real estate market better than mainland lenders. It is safe to say that more Oahu deals close more quickly and easily with local lenders.

Hawaii Properties Can Be Complex

Often local lenders also have special programs and portfolio loans that will be less stringent as to property qualifications or provide benefits particular to Oahu borrowers. For example, a local lender might loan on a property which has an ADU and allows that income to be used to qualify. Another local lender might have less stringent requirements for improvements built without building permits. I had one client, once, that insisted on a mainland lender. That mainland lender refused to lend in a popular, desirable, and somewhat expensive neighborhood on Oahu because there was a sewage treatment plant in the vicinity.

Local lenders provide loans in this same area all day long! Delay and headache could have been easily avoided had my client initially used a local lender.

We are happy to provide referrals to local lenders with whom we have worked in the past and who provided us great service. Let us know if you need one.

You Need to Know What Properties Will Work and How Much You Can Afford

Talk to a local lender BEFORE you start looking at property. You need to know what type of loan you are getting and how much you can afford. Not all loans are appropriate for all properties. If you are limited to VA or USDA loans, you might approach your property search a bit differently. For example, if you are using a VA loan to purchase a condo, you need to make sure that the condo is on the VA approved list or that, at least, it is eligible for addition (another process) to this list.

You need to know how much you can afford, so that your heart is not broken when you find your dream home, only to learn that it is beyond your budget. Get pre-approved, know what properties work for your loan type, and be prepared and ready to go when that amazing home pops up. You will be so happy you were ready!

3. Narrow Down Your Location and/or Search Criteria

What Type of Property Do You Need?

The third step is to identify your needs and your wants. Think about what is most important to you. Identify the number of bedrooms and bathrooms. What view would you like? Pool or no pool? Do you want a rental or ADU type unit for potential extra rental income? Do you want a detached single family home or a condominium? What features are deal-breakers? Older homes in Hawaii tend to have smaller rooms than newer construction homes on the mainland. You may have to come to terms with the fact that your 12 person dining room table will not fit in any of the Oahu homes that you are looking to purchase.

What Location is Best?

You need to also identify your location constraints. How long of a commute to work is tolerable? How close do you need to be to hospitals and schools? Do you prefer easy access to the beach or stunning mountain views? The choices of geography are numerous on Oahu and will be influenced by both your lifestyle and your work and family situation. They will also be influenced by your budget. In general, the closer to the beach, the more expensive the property. They better the views, the more expensive the property. Properties easily accessible to downtown amenities and popular schools are also more expensive.

If you are from the mainland, especially, don’t be surprised if your desires and tolerances change once you starting looking for property. This is completely normal.

4. Have Your Realtor Set You Up With Searches from the Oahu MLS

All REALTORS on Oahu have a great tool to use, to help our clients to find the perfect Oahu home. This is the HiCentral/Matrix MLS Search Portal and it’s the fourth step to find the perfect Oahu home. Once you’ve identified your initial search criteria, your realtor can set up searches to match the criteria. This is the absolute best source available for finding properties that are available, as it has the most recent and up to date information. Zillow and Trulia do not have a direct feed from the MLS. The properties shown there are often unavailable or they are not picked up quickly.

You risk losing the property of your dreams if you rely on these resources. You can also be very frustrated as the property you want shows available there, when it is no longer available.

The HiCentral Matrix Portal is automated and can be set up to deliver new listings at the frequency you desire. The searches can be tailored to you and you can have more than one. You can also ask your realtor to stop or modify these at any time. The Portal allows you to discard homes that you definitely do not like into the “trash” and to mark the homes that you do love with a “heart.” This helps your realtor to identify the homes that will appeal to you the most and to schedule showings.

5. View Homes with Your Realtor

The fifth basic step to find the perfect Oahu home is to schedule showings with your realtor. These will generally be the homes that you identify in the Matrix Portal and/or that your realtor picks for you.

Open Houses

You can also attend open houses, if you wish, with or without your realtor. Open houses are sometimes good to go to because they may provide the first and only showing opportunity. However, this is not always the case. Many times, it is nicer to see a home in a private showing, where you are not rushed and where you have the opportunity to ask questions, without a crowd of people around. Usually, your realtor can find out for you if there will be showings before the first open house.

Often it is best to get in with a private showing first, before the open house, if it is a property likely to be in high demand. The early bird sometimes gets the worm.

It is a great idea to see homes with your realtor whenever possible. It allows your realtor to better understand your needs, wants, and to see your emotional reactions to properties. Your realtor can better identify properties for you, the better she understands your criteria. She can also provide valuable insights and advice at showings. Your realtor is here to help you find the best home available for your price and lifestyle needs.

Don’t Forget to Think Outside the Box

There are other ways to find a perfect home on Oahu, in addition to using the five steps above. I’ve helped my clients locate off-market properties, in several other ways. I’ve also known about properties coming to market, through my network, even before the properties have come on the market.

In a competitive market, sometimes, non-traditional methods should be used to supplement the usual ways. However, generally speaking, the five steps above are the ones to find the perfect Oahu home. At the very least, find yourself a great realtor who you can trust to guide your way in the direction best for you.

Good luck finding that perfect Oahu home! Aloha.

Oahu Rules for Short-Term Vacation Rental Properties

Since Oahu is a popular destination for travelers, owning a Short-Term Rental on Oahu, as an investment property, can be a great idea. But are vacation rentals illegal on Oahu? No, however, not ALL properties can be legally rented on a short-term basis. There are some strict limitations of short-term rentals on Oahu. Homeowners and investors should be aware of the current Oahu rules for short term rentals, to ensure that their Oahu vacation rental properties are operated legally.

Honolulu recently ranked #5 in "The Top 15 Best Cities in the United States" by Travel + Leisure magazine.

WHAT IS A SHORT TERM RENTAL ON OAHU?

On Oahu, a short-term rental (STR), also known as a vacation rental, is a home or condominium that provides guest accommodations for less than 30 consecutive days. But not all short term vacation rentals on Oahu are legal.

A short-term rental provides guest accommodations for less than 30 consecutive days.

Which Short-Term Rentals on Oahu Are Legal?

There are THREE Types of LEGAL short-term rentals on Oahu.

1. Properties with a Non-Conforming Use Certificate (NUC).

In the City and County of Honolulu, there are two types of properties that have NUCs. The first is Bed and Breakfast Homes (B&Bs). To maintain a B&B certificate, the homeowner or permanent resident must live on the property and be present during a guest's stay. Only up to two specifically-designated bedrooms in the home may be rented.

The second type of NUC is a Transient Vacation Unit (TVU). A TVU may be an entire house or condo, and the owner need not be present on the premises during rental.

For both types, there is a maximum of two adults per room rented and additional off-street parking, one space per room rented, must be provided. Other requirements, such as insurance and payment of GET and TAT (taxes), and restrictions apply. Properties with a NUC must be renewed annually to continue operating as a STR. New NUCs are not being issued.

The current list of Oahu properties with a NUC can be found here. Most of these NUC properties are in Waikiki condominium buildings, but others are single-family homes in residential-zoned areas. These are usually in popular Oahu neighborhoods, near beautiful beaches, such as Diamond Head, Kailua Beachside, Kailua Lanikai, and Waimanalo, and on Oahu's North Shore.

There are THREE types of LEGAL short-term rental properties on Oahu.

2. Properties in a Resort-Zoned Area

The second group of Legal Short Term Rentals on Oahu are the resort-zoned properties. These are allowed because of the zoning of the area in which they are located. Areas which are resort-zoned, or which include pockets of resort zoning, include Waikiki, Turtle Bay, and Ko’olina. Ask your realtor to verify three things when you are purchasing a home as a vacation rental:

• that a property is truly within a resort-zoned area or whether it has been grandfathered in
• that it is not within a period where it has been "dedicated for residential use," and also,
• that the particular resort-zoned building's AOAO allows STRs.

There are some buildings in resort-zoned areas that are eligible to operate as STRs, but their AOAO has decided not to operate as such and they have imposed minimum rental periods different that those authorized by the City and County of Honolulu. Also, in some cases, individual owners may have filed with the City to dedicated their unit for residential use for a 5-year period to obtain tax savings. If an owner wishes to change from residential to non-residential use during the applicable 5-year period, back taxes at the resort rate may be owned. Resort-zoned properties are taxed at a significantly higher rate than residential-zoned properties. See Oahu Property Tax Rates Here.

3. Condotel Properties Specifically Grandfathered in as Legal STRs

The last group of legal Short Term Rentals on Oahu has been grandfathered into compliance. These are certain properties which are near resort-zoned areas and which have been traditionally operated as a Condotel property (with hotel front desk, etc.), though they do not have resort zoning. Examples are the Waikiki Banyan and Waikiki Sunset condominiums, which are both in Waikiki and have historically been operated as a hotel properties, with vacation rentals, but are in residential zoning districts. 

Bills 89 and 41 have changed the short-term vacation rental inventory on Oahu and legal STRs have become more valuable.

RELEVANT STR LAWS

When considering whether to purchase or operate a vacation rental home, it is helpful to be aware of the short term rental laws on Oahu (City and County of Honolulu) and the history of vacation rentals on Oahu. Read on for more information. As always, laws are subject to change.

Bill 89 Passed

Bill 89 was adopted June 25, 2019. Bill 89 was opposed by short-term rental owner associations and promoted by the hotel industry, among others. Bill 89 added stricter penalties and enforcement provisions against Oahu property owners who illegally advertised their vacation rental properties for rental terms of less than 30 days. Another important feature of Bill 89 was that it would allow up to 1,699 new B&B permits, with restrictions, on a first-come-first-served basis or by lottery, starting October 2020. 

Interestingly, people often refer to Bill 89 as the "law which made vacation rentals illegal on Oahu." In fact, short-term rentals not falling into one of the three categories stated above, have been illegal on Oahu for decades. Bill 89 just ramped up enforcement of the existing laws and increased penalties against these illegal rentals in operation. Also, those interested in STRs should note that the new B&B registrations by lottery proposed by Bill 89 never occurred. Of course, the pandemic changed a lot of things and this is probably one of them. No new NUCs were issued in October 2022, and, to my knowledge, there are no plans for this to change.

Bill 41 Passed & Enjoined

Even after Bill 89 was passed, local opposition to vacation rentals on Oahu persisted, with particular ongoing support from the very powerful hotel industry. The pandemic also helped to create a real estate landscape which made home ownership less affordable and decreased the availability of rentals. This created more momentum from affordable housing proponents and neighborhood groups, and pushed local politicians to pass even stricter vacation rental regulations on Oahu. This is Bill 41.

Bill 41 was signed into law on April 26, 2022, and the wide-reaching provisions therein were set to affect almost every homeowner on Oahu. The most impactful and also, unpopular provision of Bill 41 was that it would change the minimum rental period for all single-family homes and condos that do not fall within one of the three legal short term rental groups above, from 30 to 90 days. This would impact not just the vacation rental industry, but also short-term (30-90 day) rentals for military service members, traveling nurses, movie industry professionals, local homeowners doing construction, and other people needing short term accommodations that are not on Oahu for vacation.

Prior to its effective date of October 24, 2022, on October 13, 2022, a federal judge issued a preliminary injunction on the section of Bill 41 that concerned changing the minimum rental term from 30 to 90 days. This means that the 30 day minimum rental period is still in effect. In an interview with Hawai'i Public Radio, Honolulu Mayor Blangiardi stated that the City and County of Honolulu will not appeal the judge’s injunction.

Notwithstanding the injunction, other provisions of Bill 41 went into effect, as planned, in October 2022. Bill 41 also requires all legal Short-Term Rentals on Oahu to be registered with the City and requires a registration fee and annual renewal fee for all STRs. Currently (November 2022), it is $1,000 for the registration fee and $500 for the annual renewal fee.  To check if a particular property is eligible for registration a legal short term rental, you can check the STR Eligibility Map for the City and County of Honolulu.

Also, the fines for illegally operating a STR have been raised. There is now a $5,000 fine just for advertising an illegal STR, and additional fines of up to $10,000 per day for non-compliance. If fines are not paid, the City may place a lien on the property illegally advertised.

RESOURCES:

The City and County of Honolulu has a website with more information on legal short term rentals and registration of your short term rental on Oahu. You can view it here.

Please note that the information above is not legal advice and it's subject to change. Please feel free also to reach out to me if you have questions about a particular property or if you are looking for an Oahu rental property, or to purchase a legal short-term rental or vacation home on Oahu.
Yvonne Jaramillo Ahearn
RB-20262 COMPASS OAHU
cell: 808.721.8088

Oahu Real Property Taxes for 2022-2023

Nothing much changed from last year, with respect to the Honolulu County (aka Oahu) Property Tax Rates charged to residential property owners. (See Resolution 22-45, adopted 6/1/2022 by the Honolulu County City Council). Particularly, one great thing that did not change is that Hawaii real property tax rates fare, overall, the lowest in the United States.

Home Exemption Stays Constant

The amounts of an owner-occupant Home Exemption also stayed constant. The general exemption remained at $100,000. In addition, the tax exemption for owner-occupant seniors, over age 65 remained steady at $140,000.

How The Owner-Occupant Home Exemption Works

To be eligible for a home exemption you and your property must meet the following criteria:

(1) You own and occupy the property as your principal home (the dwelling
where you live most of the year or more than 270 calendar days per
year);
(2) Ownership of the property is duly recorded at the Bureau of
Conveyances or duly filed in the office of the assistant registrar of
land court if the property is registered in land court pursuant to HRS
Ch. 501, on or before September 30th;
(3) In the case of a lease, the lease of the parcel has a term of five (5)
years or more, used for residential purposes as the lessee's principal
home, the lease and any extension, renewal, assignment or agreement
to assign the lease is duly recorded at the Bureau or duly filed in the
office of the assistant registrar of land court if the property is
registered in land court, the lessee agreed under the lease to pay all
real property taxes during the term of the lease, by September 30th; and
(4) You file a claim for home exemption with the Real Property
Assessment Division on or before September 30th preceding the tax
year for which you claim exemption.
** A separate exemption claim should be submitted for each owner occupant

If you are eligible for a home exemption, the amount of your exemption is deducted from the total assessed value of the land plus improvements. This leaves you with a figure called “net taxable value” upon which your Oahu real property taxes are calculated.

Stunning mountain view in Kaneohe, Oahu, Hawaii, to take your mind off Oahu Real Property Tax Rates

Oahu Real Property Tax Rates for 2022 and 2023 Fiscal Year

There no substantive changes to the real property tax rates, themselves, over those charged in the 2021-2022 FY.

Here are all of the categories and the applicable rates:

HONOLULU COUNTY OAHU PROPERTY TAX RATES
July 2022-June 2023
(Amount of Tax Per $1000 of Net Taxable Value)Residential (A)$3.50Hotel and Resort (B)$13.90Commercial (C)$12.40Industrial (D)$12.40Agricultural (E)$5.70Preservation (F)$5.70Public Service (G)$0.00Vacant Agricultural (H)$8.50Residential A – Tier 1 (I)
(Applied to the net taxable value of the property up to $1,000,000)$4.50Residential A – Tier 2
(Applied to the net taxable value of the property in excess of $1,000,000)$10.50Bed & Breakfast Home (J)$6.50

Calculating Oahu Property Tax Rates for RES-A Properties

Residential A properties use a tiered tax calculation. The first $1 million of net assessed value is calculated at one rate and the remainder at another. Here is how it works:

Honolulu Harry owns a Property A in Honolulu County (Oahu) with a net tax assessed value of $1,400,000, and rents Property A out to a long-term tenant. He lives in another home, Property B, on Oahu and takes a home exemption for that property. Since he resides in another home and rents Property A, he is not eligible for a home exemption on Property A.

Harry’s property is a Residential A property (see below). The Oahu property tax rate for the first $1,000,000 of net taxable value (Residential A – Tier 1) is $4.50 per $1,000, so the tax on that portion of Property A is $4,500. The Oahu property tax rate on the next $400,000 (Residential A -Tier 2) is $10.50 per $1,000, so the tax on the second portion of the value is $4,200. Adding those two figures together, the total annual property tax on this Residential A property would be $8,700.

However, If Honolulu Harry resided in Property A (and had applied for and received his owner exemption of $100,000), his total tax on Property A would be $3.50 per $1000 ($3.50 x $1,300,000 /$1,000), for a total annual property tax of $4,550.

Which Properties are Residential A (or RES-A)?

Residential A properties are certain properties on Oahu that are without an owner-occupant home exemption. These are:

1. Condominium units without home exemption.

2. Residential lots zoned R-3.5, R-5, R-7.5, R-10, R-20, with either one or two single family homes, without home exemption.

3. Residential vacant lots zoned R-3.5, R-5, R-7.5, R-10 and R-20.

As you can see from the Honolulu Harry example above, Oahu property tax rates for 2022-2023 are significantly higher for Residential A properties than they are for similarly valued owner-occupied properties.

If you have other questions regarding purchasing Oahu real estate, please contact Yvonne at 808.721.8088. ~ Aloha