Batten Down the Hatches…

May 25, 2012 by Michael Borger

Storms’ a Blowin’!

Or are they? The news the other day is that this will be a calmer hurricane season for Hawaii in 2012 than average. While that may not be much fun for the daredevils and storm chasers out there, I think most people will welcome riding out the remainder of the year with fewer causes for concern. Of course, predicting hurricanes — like any natural disasters — is subject to margins of error, but Hawaii is no stranger to tsunamis, earthquakes and the like.

That being said, let’s hope the nice folks at the Central Pacific Hurricane Center didn’t get their storm charts crossed (ok, ok, I know they really use GIS, remote sensing and other high-tech tools). But whenever I see news like this, it makes me think of the precarious nature of Hawaii’s ‘settled presence’ on our islands — namely, where we’ve decided to build homes and infrastructure. The ‘human layer’ on top of the existing physical island.

Hawaii Flood Hazard Assessment Tool - Kailua and Lanikai Flood Zones

Last weekend, my girlfriend and I took a drive up the windward side to Kaaawa Beach Park. We were looking at all the places where the water comes right up to Kam Highway, at all the homes that are sitting right on the edge. And whether you believe in global warming or not, there’s too much evidence of global sea level rise to not be concerned if one of those homes is yours! (someday we’ll have to make a hard decision on just what we’re going to do when Kam Highway gets flooded over just one too many times for our comfort)

Of course, this example is just from Oahu because that’s where I live. But I’ve been to Kauai, Big Island, Molokai and Maui enough to know that the same situation exists throughout the state. We now have shoreline setbacks to help prevent future construction in these dangerous areas (some islands adhering to stricter setbacks than others), but the annual hurricane season prediction is a good time to reflect, from a Hawaii housing perspective, on some basic ideas for living safer in the coastal zone:

1. Learn about the shoreline setbacks that exist in your island/county. Is it 40ft? Or 50ft plus an erosion multiplier?

2. Check up on your hazard and flood insurance — don’t skimp if you don’t have to

3. If you’re building any additions to your home, pay special attention to new building ideas that allow high winds to pass by with minimal damage

4. Don’t build any erosion control structures without TONS of due diligence. This means seawalls, revetments, groynes, piers and more. It’s the State policy to discourage such efforts of shoreline hardening (armoring).

5. If you’re in the market for a new home, think very hard about whether you want beachfront or not. Understand how the beach ‘behaves’ by the home you’re considering. Is it accreting or eroding? Is it subject to massive sand depletion and replenishment throughout the year? Know your beach before buying your home. In the long run, you may be safer and more at ease looking at the ocean from a bit further back.

Leave your comments below!

Hawaii Student Housing (Part 2) – 5 Tips for Renting to Students

August 2, 2011 by Michael Borger

In last week’s article, Part 1 on Student Housing in Hawaii, I mentioned how many cash flow investors overlook student housing because of misplaced ideas of crazy students running around and damaging their property. In today’s Part 2, I want to dispel that idea and give you some basic rules on capitalizing on this great renter pool right in your own Hawaii backyard.

5 Tips for Renting to College Students

College students are, for the most part, responsible and growing adults. Treat them as such and you will be rewarded with happy tenants who will not want to be forced into finding somewhere else to live.
Do NOT visit the house everyday, every other day or even every week. They have parents — they don’t need you. You are their landlord and nothing more. As such, they have a right of privacy. My terrible landladies (see Part 1) would visit all the time, completely unannounced. I don’t know what made their home so bad they had to hang out at ours, but it made all of us feel uneasy, unwelcome and a bit like lab rats. Respect your tenants’ privacy.
If you are renting out a house, decide upfront if you will rent the entire house as one unit or if you’ll rent individual bedrooms. If you’re more of the hands-off landlord, then opt for the former.
Allow overnight guests. This is another trick my former evil landlady threw at me at the last minute as we were signing the lease (and I had decided against a previous room elsewhere). Want your tenants to feel unwelcome from the start? Want to let them know right away that you don’t trust them? Then don’t allow overnight guests. However, if you accept the fact that people tend to do things like date and have relationships (I know, completely ridiculous, right?) and the occasional visitor from the mainland, then just let it happen. It’s OK to be clear that you don’t expect it to be abused and that you’ll be monitoring the utility bills, but don’t ban it outright or you’ll be looking for new tenants. See Point #1.
Lastly, check the latest laws on renting to students under 21. Don’t risk getting in trouble over alcohol. If you’re renting to undergrads, then you might have a mix of under and over 21-year olds. Just be careful. If your tenants are graduate students, then you won’t have any concerns.

For more information on Hawaii’s laws regarding landlord and tenant responsibilities, visit:

Hawaii DCCA Landlord – Tenant Information — Download the PDF Handbook!

What tips do you have? Any experience in this matter? Leave your comments below!

Ugly Houses in Your Neighborhood – What To Do?

July 4, 2011 by Michael Borger

Aloha! I hope everyone has enjoyed a fun and safe Independence Day Weekend here in our beautiful Hawaii. As I sit here in a street cafe writing this post in Kapahulu, the afternoon sun is out, the winds are blowing through the trees and you can tell everyone’s having a great time. Sounds good to me! But while the the setting sun and fireworks may be a beautiful sight to see, there’s something in our midst that is anything but beautiful — ugly houses!

I’m sure you’ve seen them about, maybe even in your own neighborhood. Possibly even your next door neighbor! You know what I’m talking about — high grass, weeds, mail piling up, peeling paint, junked cars, rusted mailbox, etc. So what’s really going on behind the scenes of these ugly houses? Maybe the owners still live there, maybe there are bad tenants or maybe it’s been abandoned altogether.

While on the exterior it’s obvious there’s some form of distress — whether personal, family, medical, financial — the cause of this distress might be any of the following:

Owners cannot keep up with the mortgage payments, possibly facing foreclosure, and abandoned the property
Owners cannot afford to maintain the property
Owners have some other type of family or personal distress that’s keeping them away from maintaining the house
Bad tenants are neglecting to keep the house in proper condition
Owners live outside of Hawaii and are not aware of the deteriorating condition of the house
Owners have passed away and the surviving heirs are tasked with the maintenance
Anything else where the payments or maintenance of the house are not given proper priority or attention

So what can you do if you have one of these ugly houses in your neighborhood?

Do you have to just take it and allow it to drag down your own property value? Not necessarily. There is some action you can take to figure out what the underlying situation is and to help fix the problem. Here are just a few choices:

If you have a cordial relationship, ask if they need the name of a good handyman or general contractor. This is much more tactful than saying “What’s up with your head-high lawn?” They might respond with the true story of why the house is in poor shape.
Talk to the next door neighbors. They might know more than you do.
Talk with a local Hawaii real estate investor (such as myself!) who may be able to locate and speak with the owner, purchase the property outright (while helping the owner at the same time) and fix it up, thereby helping keep your neighborhood looking beautiful and keeping your property value from dropping unnecessarily. This can be as simple as calling them, giving them the address and letting them do what they do!
If the owners can’t be found or are uncooperative in addressing their property’s effect on the neighborhood, then call the Honolulu County Department of Planning and Permitting’s Residential Code Enforcement Branch at (808) 768-8127.

Even the best neighborhoods in Hawaii have that one house that’s an eyesore, that makes all the other responsible homeowners wince every time they drive by. You don’t have to sit around hoping it will resolve itself. Somewhere there’s a problem that needs a solution, a situation that needs to be resolved, a homeowner that needs help. You can help by reaching out or anonymously speaking with an investor or the local authorities.

Hawaii Near the Top?

June 18, 2011 by Michael Borger

I’ll admit it – I’m a geek. I like tech stuff and I like numbers. I loved stats class in those wintry days on Penn State campus (I lived around the corner from Joe Paterno). So when I see a website publish a list or ranking of real estate or whatever that applies to some facet of my daily life, I usually sit up and take notice. David Letterman’s no fool — Top Ten lists pull people in. Not only do we like these because they’re quick summaries (and free us from doing the grunt work to generate the rankings themselves), but Top Ten lists let us COMPARE things rather easily (and sound smart to the other folks at Starbucks). Even if there are enough Swiss cheese holes in the logic behind the lists’ methodologies, we still like the snapshot delivery of what’s likely going on.

So yesterday I got an email from InmanNews. Like GeekEstate, another one of my favorites, InmanNews analyzes real estate across the country with a focus on the tech (“geek”) component. Here’s the story. If you check out that link, you’ll see that no Hawaii real estate market was in the Top Ten or Bottom Ten for average listing price between September 2010 and March 2011. This might surprise some folks, especially with people having trouble getting a mortgage around here. But others may point to the foreclosure mess that’s troubled our state (ranked #11th nationally last year) and say it makes sense.

Now, ever the skeptic and devil’s advocate, I’ll point out some major points that need to be accepted when viewing such rankings:

Listing price does not equal VALUE (or sold price). However, for quick and dirty rankings, it’s a reasonable facsimile here.
If you look at the top ten, six of them are in California. So it’s not a state ranking but a metro market ranking. Don’t confuse them by falsely concluding that Hawaii’s average listing price is not in the top ten nationwide – whether it is or not is determined by calculating just that. Nowhere on that page do they rank by STATE, but markets WITHIN states.
If you look at the third box, you’ll see eight markets that are more expensive than Honolulu. Again, this does not mean Honolulu is the 9th most expensive market in the nation (the first box already displays this), only that it ranks 9th in most expensive metro market per state. Meaningless? Yeah, probably!
The ranking of Honolulu is assumably for the entire metro area, blending condos in Kalihi with homes in Manoa and Diamond Head. Does this skew the data? You bet it does! Does this same grain of salt hold true for all other cities listed? I would say yes. Does that render the point moot? Not necessarily because markets in other states may have a greater or smaller disparity between higher and lower-end neighborhoods (“the spread of data” or variance).

What I do find interesting is the disparity between Honolulu and Waianae – $478,042. For those of us that live here, it’s not a surprise. Everyone basically knows where the higher and lower neighborhoods are for each of the Hawaiian Islands. But if you bust out your calculator and look at the disparities in other states, you’ll see that we’re not so different from the norm. That was a bit of an eye-opener for me as I always just assumed we had a bigger spread between the high and low here than most of the other states.

The biggest laugh on the page? Look at the LEAST expensive market in the nation – Niagara Falls! Hey, I like Niagara Falls! A natural wonder! My family used to drive to Toronto from Philly most years growing up to see my grandparents. I remember going to the falls and having a blast! So why the down market? I can think of three possible reasons:

Everyone’s tired of the tourist stampede year after year and wants to skip town.
The falls are growing and people are worried their house is going to fall in and end up floating down the Niagara River.
The buzz from the scene in Superman II has FINALLY wore off after 30 years.

Ok, I kid, I kid. Just thought that was interesting. Anyway, are you a stats junkie? What do you make of those numbers? Agree, disagree, have a different spin? Be heard below!
Mike