I posted a simple comment on my Facebook wall that went something like this:
“I’m curious, what if I told you that you could own a tiny house in Maui and 1.5 acres of farm land, plus a rental tiny house that generates $700/month income, all for about $400,000… Would you be interested?”
24 hours, 107 likes and 52 comments later I’m here writing this blog post. People are starving for alternatives to the ridiculously overpriced “traditional” real estate offerings that they’re willing to give up on previously unheard of things like municipal water, flushing toilets and 24/7 utilities just to escape the fucking rat race! That’s where I come in. I’ve been exploring alternatives for all my life. Alternatives to the status quo and the economic profit funnels that we take for granted every day. So I’m going to write a series of blog posts to share solutions in the form of current avenues to escape the economic pitfalls of modern America. But not just how to save money being frugal, more about the big picture; housing, land, and alternative lifestyles. I’m not going to candy-coat this shit, and I’m also not going to edit my language to protect anyone’s sensitivities. Just solutions that might fit into someone’s reality. Not everybody’s, but some possible avenues for a few to find their own situation that’s better than what the culturally conditioned American Dream is selling you. Let’s get started. You only need two things to get away from the traditional housing racket: a dwelling (home) and a place to put the dwelling (land). The hard part is affording the land. The easier part is the dwelling to put on that land because that’s where we can find the most options for your specific needs.
It’s the thing you’re standing on. It’s not cheap, well at least not everywhere. And despite what you’re told, you can buy land if you can figure out a way to save 50% of the full price. For most people that’s simply not possible. You can also rent land from someone. Typically they don’t even understand that concept; but we’ll explore that later. As far as having the ability to buy land, some people have a mortgage and are building equity that can be used later to invest in land, but most don’t have this option either. If you think creatively, you might discover a way to get a small slice of property where you are or where you want to be. Specific to the County of Maui, there are a few things to understand first. According to a few of the real estate professionals that I have spoke with, there are officially only two sources of financing a land purchase: First Hawaiian Bank and Wailuku Credit Union. Ultimately, you’re going to need a bank’s blessing unless you have cash. You’re going to need 25-50% down payment at a minimum. The banks will tell you that you’ll need at least 25% down if the property has “full utilities to the site”. If the property has an HOA, CC&Rs or a private road, you’ll need at minimum 35% down. Anything else is probably going to be at least 50% down. You might want to explore Google for “USDA Farm Loans” which usually require a minimum of 2 acres and must be zoned AG. Here’s the bad news. Land financing is typically 1, 2 or 3 year terms, 4-6% interest and a balloon payment due after 24 to 36 months (that can be ugly) and at least a 60 day escrow for land purchases. So quite obviously this is not for everyone. A cash deal is best of course. We’re going to look at a specific property as an example below.
Land price $329,000.00 (2.66 acres on Maui)
Down payment amount 50%
Total amount financed $164,500
Payment amount $4,930
Balloon payment $0.00
Total payments $177,487
Interest rate 5%
Total interest $12,987
Your monthly payment amount will be $4,930.21
Wow!, that’s ridiculously expensive. This is why I recommend you find another way to accomplish your land purchase, such as, finding more affordable properties and pay with cash, owner financing, etc. Here’s the actual property listing: http://maui.paragonrels.com/publink/default.aspx?GUID=34f92425-7ff4-4c4d-9d6c-53e91e39289a&Report=Yes
If you are somehow able to buy land, you’ve got the most difficult part behind you! The next step is the dwelling. Most of you know I’ve been a tiny house advocate for years now, and now a tiny house builder. So I’m 110% biased towards you buying a tiny house for your land and of course buying it from me. But you have many other options such as container homes, yurts, and traditional structures. Whichever way you go you’ll have to contend with the myriad of obstacles that have been purposely put in front of you to prevent you from escaping the traditional housing route. In some cases you will not be able to avoid zoning or building codes because of county or HOA rules. In Maui County they’ve been particularly friendly towards tiny houses done right. Tiny Houses are small minimalist dwellings built upon a wheeled trailer that typically have about a 160 sqft footprint on average. Seems small, but when you are trying to live smarter, more affordably and with less impact on the environment, then tiny houses are a win-win. And as the saying goes, they’re not for everybody. Tiny houses can be purchased or you can do it yourself (DIY) build them.The prices for tiny houses range from the low $25,000’s to incredible road-mansions for $300,000 (which I am not a fan of). If you’re downsizing, there’s no reason to go big and spend a lot. Think simple and practical rather than fancy and palatial. If you want huge, then go the traditional McMansion route. The average tiny house, whether you build it or buy it, is going to cost you around $30,000 to $50,000. Most tiny house situations are offgrid with water catchment, solar power and composting toilets (again, not for everybody).
If you put the land and the home together in this case, you’re spending less than $369,000. This gives you the opportunity to purchase another tiny house for say $40,000 and rent it out (if you could afford it). Depending on the amenities you might be able to offer to that renter, you might be able to rent that second tiny house for around $600/month. More if you supplied water, power and wifi. This means that $410,000 cash nets you $7,200/year income minus property taxes, but you will be paying zero rent and no mortgage unless you financed the land purchase.
Here’s another property for sale that’s just $320,000 for 1.5 acres:
Is it possible to retire in Hawaii on social security for less than $410,000 — I guess so! Is it common, hell no it’s not. You’ve got to look for these kinds of deals and it’s not going to be easy to make them happen. In fact, most land in Hawaii is way overpriced and unreachable for most people. But you never know what you might find until you actually look.
I’ll be sharing more available properties and situations as I find them in this series of articles entitled, “Escaping the American Dream: how to avoid the Joneses altogether” (book title coming soon). Each article will have it’s own title of course, but I’ll be focusing on opportunities to avoid buying a $650,000 shack in a bad neighborhood and going into debt for the rest of your life, and how to free yourself from the never-ending rental housing cycle that is more like throwing the majority of your income in the trash.
The properties mentioned and linked to in this article are of course temporary. The links probably will not function after they've been sold. Here they are currently: * Land Parcel #1 is 2.66 acres in the area of Wailuku Link - http://maui.paragonrels.com/publink/default.aspx?GUID=34f92425-7ff4-4c4d-9d6c-53e91e39289a&Report=Yes * Land Parcel #2 is 1.54 acres in Wailuku http://maui.paragonrels.com/publink/default.aspx?GUID=e4895f46-7e91-479a-92ca-a6d7d3481eab&Report=Yes * Tiny Houses are available anywhere, but here's a link to my Maui-based tiny house building company - http://www.simpletinyhouses.com/ But wait... this article isn't for everybody. Many people can't afford to buy any real estate. You still have options. I'll address some of those in future articles.
Note: I'm no attorney or real estate professional. You can look this shit up yourself via Google. For the financial calculation use this site: Amortization calculator. Or contact a professional. In fact, DO contact a professional because I'm no expert!