If you've been eyeing a piece of raw land on the Big Island of Hawaii but find yourself short on the funds to make the entire purchase outright, you've come to the right place. This guide will help you better understand the ins and outs of land financing. Challenges of Financing Raw Land Purchasing raw land is a unique financial endeavor, one that differs significantly from securing a traditional mortgage. The hard truth is that raw land doesn't provide the same level of collateral as a house, making it a less secure investment for lenders. This translates to fewer financing options and usually involves higher down payments and interest rates, often coupled with shorter loan terms. High Down Payments and Interest RatesLenders typically demand at least a 30 to 40 percent down payment of the purchase price. Due to the perceived high risk involved in land loans, interest rates are also generally higher. Short Loan TermsWith land loans, expect terms of just two to three years, featuring interest-only payments. At the term's end, options include paying off the loan or refinancing it with a construction loan if building plans are in your future. Credit and Zoning RequirementsStrong credit is a must, with lenders expecting scores around 720 or higher, plus proof of stable income. Additionally, Hawaii's unique zoning laws, such as agricultural zoning, can further complicate financing efforts. Potential Financing Options Despite the challenges, several viable financing options exist for raw land purchases on the Big Island. Local Credit Unions and Banks Institutions like Big Island Federal Credit Union and First Hawaiian Bank may offer vacant land loans up to 90% of appraised value, often with interest-only payments. These loans can sometimes convert into construction loans, offering future flexibility. Agricultural Loans If purchasing agricultural property, consider lenders like American Ag Credit. They provide loans with terms reminiscent of typical mortgages but require the land to be used for actual farming activities. Construction Loans Planning to build right away? A construction loan might suit your needs. These loans involve interest-only payments during construction and eventually convert into traditional mortgages upon project completion. However, detailed plans, permits, and a licensed contractor are necessary, adding complexity.  Seller Financing Occasionally, sellers offer to finance the purchase themselves. While this can be an option, expect substantial down payments, higher interest rates, and shorter loan terms. Creative Financing My special term, "creative financing," includes options like a home equity line of credit from property you already own, borrowing from friends or family, or drawing from retirement accounts to become a cash buyer. Conclusion Before diving into the financing process, consider your future plans for the land, whether immediate construction, future development, or another purpose. It's crucial to choose a financing method that aligns with your overall goals. While securing land in Hawaii presents unique challenges, it's certainly achievable with preparation and professional guidance. Whether you're opting for a local credit union loan, a construction loan, or exploring creative financing avenues, a suitable solution can likely be found. Remember, always conduct thorough research and consult with licensed professionals before making major financial decisions. If you have any questions about financing raw land on the Big Island of Hawaii, feel free to reach out to our team. Aloha!

Aloha folks! If you've been eyeing a piece of land to buy on the Big Island, you may have come across an unfamiliar term: SSPP, or Special Subdivision Project Provision. We will break down what SSPP is, why it matters, and how it could impact your property purchase. Let's dive in. What is SSPP? The SSPP program is managed by HELCO, the Hawaiian Electric Light Company. This program shares the cost of extending electrical infrastructure to new subdivisions. When HELCO extends power lines to areas without electricity—and there are a lot of really remote areas on this island—these costs are divided among the properties that benefit from the extension. Each property owner pays a fee known as an SSPP charge to help cover these expenses. Why Are SSPP Charges Important? Understanding SSPP charges is crucial when buying vacant land because these fees can significantly impact your budget. Before purchasing a property, you need to check if it falls under an SSPP area and, if so, how much the charge is. These charges are typically assigned when the subdivision is created and remain with the property until paid off, regardless of any ownership changes. Factors Affecting SSPP Charges: SSPP charges can vary widely depending on several factors: The complexity of the property. The cost of the project. The number of lots that are served. The distance from the lot to the power source. On the Big Island, particularly in areas like the Puna District on the east side, SSPP fees can range from $2,000 up to $8,000 or even $10,000 or more. Planning for SSPP Costs: It's essential to account for these costs early because you want to avoid any surprises down the line. To determine if a property has SSPP charges, you'll need the property's tax map key number or TMK number. With this information, you can contact HELCO or check through your local REALTOR. HELCO provides an online form to request power availability and SSPP information. Financing Options for SSPP Charges: HELCO even offers some financing options for these charges. If the total amount is under $2,000, it usually just needs to be paid in a lump sum. But for higher amounts, you can often arrange a payment plan, making it more manageable for you to cover these costs over time. Conclusion: When buying land on the Big Island, always inquire about SSPP charges. This due diligence ensures you understand all the costs involved and helps you make an informed decision. As always, working with a knowledgeable local agent will make navigating all these details a whole heck of a lot smoother. If you have any questions about SSPP, or buying on Big Island, reach out to our team. CONTACT US

Today, we’re diving deep into a crucial topic that every non-resident buyer and seller of property in Hawaii should know about: HARPTA. Understanding the Hawaii Real Property Tax Act (HARPTA) can save you from surprises at closing, so let’s break it down and make the process a breeze!       What is HARPTA? HARPTA, or the Hawaii Real Property Tax Act, isn’t a tax itself but a withholding requirement. Specifically, if you’re a non-resident selling property in Hawaii, the state requires that 7.25% of the sales price be withheld at closing. The purpose? To ensure that any capital gains taxes are paid before you leave with the proceeds. How Does HARPTA Impact Sellers? If you're selling your property and you’re not a Hawaii resident, HARPTA will affect you. It’s essential to note that the withholding is based on the sales price, not just your profit. So, for example, if your property sells for $800,000, $58,000 will be withheld, regardless of how much profit you’ve made. However, the good news is that this withheld amount isn’t gone forever. If your actual capital gains tax is less than the withheld amount, you can apply for a refund! Can You Reduce or Eliminate HARPTA Withholding? Yes, there are ways to reduce or eliminate the withholding before you even file your taxes. Here’s how: Form N-288C: Filing this form can help you get a refund of the withheld amount before you file your tax return. This is particularly useful if the amount withheld exceeds your actual tax liability. Form N-289: If you meet certain conditions, such as having used the property as your primary residence for at least two years before the sale, you may be able to apply for an exemption from HARPTA. What Buyers Need to Know About HARPTA As a buyer, you’re not off the hook! HARPTA directly involves you because you’re responsible for ensuring the withholding is done and sent to the state. This might sound overwhelming, but don’t worry—your title and escrow company typically handles the process for you. However, it’s essential to be aware of HARPTA’s implications, especially if you’re buying from a non-resident seller. If you don’t ensure the withholding happens, you could potentially be on the hook for unpaid taxes. Also, consider the future: If you’re a non-resident buyer now but might become a non-resident seller down the line, HARPTA will come into play when you sell the property. Why Does Hawaii Have HARPTA? HARPTA ensures that the state of Hawaii collects its due taxes from non-residents selling property within the state. It prevents non-resident sellers from avoiding their tax obligations and ensures that the proper amount of capital gains tax is paid to the state. In some cases, this may result in over-withholding, but again, the seller can apply for a refund if the withholding exceeds their tax liability. Final Thoughts on HARPTA: What You Need to Remember HARPTA may seem complex, but with a little knowledge and the right forms, it’s manageable. Whether you're buying or selling in Hawaii, understanding HARPTA is crucial to ensuring that the real estate process goes smoothly and there are no surprises at closing. Take Action: Simplify Your Hawaii Real Estate Experience Whether you’re a non-resident seller looking to understand HARPTA or a buyer navigating the beautiful Big Island real estate market, we're here to help! Contact us today for expert guidance on buying or selling property in Hawaii. We’ll walk you through HARPTA, help you prepare the right forms, and make your real estate journey as smooth as the island breezes. If you have any questions about HARPTA or Hawaii real estate, don’t hesitate to reach out! Leave a comment below, or click here to schedule a consultation with our team. Aloha!