Deep Bargains in Paradise: Hawaii Super Luxury @ Half Off

[BargainValueHunter]

http://finance.yahoo.com/real-estate/article/113579/hawaiian-paradise-ghost-town-kukuiula-marketwatch

 

Supon said she currently has eight listings from clients trying to unload their property. One customer who bought during the initial sales phase for $1 million just sold his piece of land for about $550,000.

[prunes]

Honestly, as a potential buyer I would be worried about the common areas falling into disrepair. I imagine it takes a lot of money to maintain them and if the lots aren't sold, the developer has to continue to dig into its own pocket to fund the difference.

[BargainValueHunter]

Honestly, as a potential buyer I would be worried about the common areas falling into disrepair. I imagine it takes a lot of money to maintain them and if the lots aren't sold, the developer has to continue to dig into its own pocket to fund the difference.

 

I hear you but I would think that maintenance would factor into the purchase price.

 

I would think that a buyer would consider the annual return on the property and discount the cash flows to reach a desired price...then offer at least 20% below that.

[prunes]

I'm thinking from the perspective of an end buyer. The end buyer is going to be wary about buying a home in a complex where the home owner's association is being propped up by the developer, and where the potential exists that the developer might stop funding maintenance. Hence, a 50% haircut might actually be a fair discount.

[onyx1]

Honestly, as a potential buyer I would be worried about the common areas falling into disrepair. I imagine it takes a lot of money to maintain them and if the lots aren't sold, the developer has to continue to dig into its own pocket to fund the difference.

 

Developments like these typically have annual dues and maintenance fees of $5,000 to $25,000 as well as a mandatory upfront fee for the golf club.  In a downturn the fees can be so burdonsome that property values hit floor.  I have seen lots in some of these golf communities originally sold for $200k offered for $1.

[prunes]

Right, and because most of these lots haven't been sold and the facilities aren't being used, these fees currently are falling square on the shoulders of the developer.

[ubuy2wron]

I am pretty familiar with Hawaii real estate and very familiar with the developer AXB. I bought shares at 16.00 in 2009. This development will take twenty plus years to build out but it will eventually build out. They have been developing a similar project in Maui for more than 20 years called Wailea. The hawaii mkt takes huge swings both up and down and it is a VERY difficult mkt to develop in. AXB acquired most of their land over 100 years ago at paid less than 100 acre and still carrying it on the books at that price. I do not think that AXB is any great deal at this juncture in spite of what Ackman says. I do believe however that there are lots of good deals on individual properties in hawaii right now.