So you want a home in Hawaii. Should you build a house or buy one already built?
People ask me this question once a week or so. With the median price of homes in Oahu at $625k at the beginning of August, it seems like you could find some land and build for less couldn't you? Unfortunately, in Hawaii the answer is very complicated.
First of all, good for you for thinking a little outside the box, but there are many issues to consider before you make your decision. Will you buy land or tear down a house? What area will you buy in? Hawaii Kai? Kahala? Kailua? Aiea? How much home will you build? What is your budget for building? What type of house will you build? Custom or pre-drawn up plans? Will you hire a general contractor or do it yourself? What does the zoning allow? How much time do you have? How far beyond your budget can you go (you WILL go beyond budget.)
Land of course is the primary question. You want to build on some nice real estate in Hawaii, but where will you find land? The truth is that there are usually several pieces of land for sale all around Oahu, but most of the best land has already been built on. Since only about 5% of the land in Hawaii can be built on, it's not going to be easy to find a nice piece of vacant land. Right now there are a couple lots remaining in Na Pali Haweo, a ridge of homes in Hawaii Kai, but other than that, vacant lots are going to be spread out very sporadically.
It may take years to find the right lot. In fact, you may find yourself contacting owners of vacant lots to see if they will sell them to you. And that of course, puts them in the driver's seat when it comes to negotiating.
Now what about tearing down an old house? Well there are probably ten times as many tear down houses as there are vacant lots. What will surprise you is that most of these tear down houses have people living in them. You might pass by a house that looks like a single match would ignite the whole place in seconds, but find that an entire family has been living there for years and has no intention of ever moving or renovating. Right now there's a house a few streets down from me that I would love to tear down and rebuild, but the little old lady there has no plans to move until she dies.
So after looking through all the currently available vacant lots and knocking on the door of houses that are being held up with duct tape, let's say you find the right lot after a few months or a year, and it happens to be zoned so you can do what you want to.
By this time you've probably already started talking with an architect about your house. If you can find a non custom plan for your home in, let's say Kailua, you're going to save some money, but then you may not get the exact house you want. Actually, you may not get it even if you do make custom plans. A friend of mine drew up his own plans for his dream home and when it was all done he realized that his plans were only good on paper. The house was really annoying to live in because of the odd twists and turns, and in particular, the size and shape of the kitchen.
So after you've spent hours and hours going over your plans, drawing up your dream home in Kailua, it's time to talk to some builders, contractors, or developers. Yes there is a difference. You should interview several, get quotes, and most importantly, get references. Talk to their past clients and go visit their work. Go see a house built by a company and ask the owner how their experience was.
Finding a good contractor or builder in Oahu can make or break the deal. Or maybe not. Maybe you think you can build a house yourself. You're pretty handy, right? First of all, there are certain things you should probably not try doing yourself. Most of the electrical work, plumbing, and other high skill jobs. It's going to be hard to get your permits signed off if the work isn't done correctly. Speaking of permits in Hawaii…
Once you've drawn up your plans and chosen a builder/contractor, it's time to get permits. The Department of Planning and Permitting is where we get our permits to build Hawaii real estate. It's a state run office that is employed by people who seem to care very little if any permits ever get issued or not. I think their motto goes something like, "We don't care, so go away."
A good friend of mine filed for permits to add on to his house in Hawaii Kai, and after several weeks, went back to get the approval and they said they lost his application. By the way, he had to drive all the way to Kapolei, which is almost all the way across Oahu. He got so frustrated that he started looking around their pigpen of an office and found his application sitting in a trash pile in the corner. I am not joking!
Ok, so now it's been 3-4 months and you've got plans, a builder, permits, and no house. Let's say by some miracle you break ground 3 months after you buy your lot. That would definitely be a miracle in Hawaii. Now you have to deal with all the crazy issues that come with building a house. Will your materials come on time? Will they come at all? Will they be the right materials? Will your labor show up? What if the surf is really good? They will probably be sick that day (serious.) In Hawaii, when the surf is really good, you never know what's going to happen.
What about cost? How much does it cost to build a house in Hawaii? You're going to find that it costs about $250 a foot to build a nice home in Hawaii if you hire it out. If you do a lot of the work yourself, you might be able to get the cost down to about $150/ft. Now $250/foot would include fairly nice materials, but not top of the line. So if you build a 2000sqft house in Oahu, you are going to spend about $500k on the construction. If your lot cost $500k, which it will for a normal lot in a nice area, you've just spent a million dollars. Was it worth it?
Maybe. A nice new house in Oahu can vary greatly in price. In Hawaii Kai, it could be as much as $1.5million if the lot is really good, and even more if it's in Portlock or has a view. Of course, the lot is going to cost a lot more here in Hawaii Kai.
In Aiea, the same house might be $1million, and the lot will be less to buy. In Ewa, well in Ewa you're not going to be able to pull it off because all the empty land has been spoken for by big builders.
But here is what will amaze you. There are plenty of lots in Hawaii that will cost you over $5million. They are beachfront in Kailua or Kahala. You'll spend $2million building a house and maybe if you're lucky you might sell it for a profit. But buckle up, the ride will be rough to build a house like that.
So will you build or buy? O wait, one last thing I forgot. It's going to take you 18 months. Yes, 18 months. And you're going to be $100k over budget.