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600K Inheritance: Hawaii vacation condo vs rental property

Home Personal Finance and Budgeting 600K Inheritance: Hawaii vacation condo vs rental property

  • Avatar OldSoul 
    Participant
    Status: Physician
    Posts: 15
    Joined: 07/19/2018
    My wife and I spend a fair amount of time in Hawaii each year, and also dream of owning a condo there. This past year, while staying in a condo, I noticed a few were for sale So I decided to look into a few. One thing a lot of people do not realize is the expense of the HOA fees. They vary a lot but most of the nice places were $1200-$2000 per month. In retirement, that’s an extra $14,400-$24,000 per year to account for, just for HOA fees

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    I was estimating about $800/month in HOA fees, but could very well get sticker shock if we ever got serious about finding a condo in Hawaii.

    #245420 Reply
    Zzyzx Zzyzx 
    Participant
    Status: Physician
    Posts: 198
    Joined: 09/24/2018
    My wife and I spend a fair amount of time in Hawaii each year, and also dream of owning a condo there. This past year, while staying in a condo, I noticed a few were for sale So I decided to look into a few. One thing a lot of people do not realize is the expense of the HOA fees. They vary a lot but most of the nice places were $1200-$2000 per month. In retirement, that’s an extra $14,400-$24,000 per year to account for, just for HOA fees 

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    I was estimating about $800/month in HOA fees, but could very well get sticker shock if we ever got serious about finding a condo in Hawaii.

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    location dependent – newish condo will be at least 1k

    It’s psychosomatic. You need a lobotomy. I’ll get a saw.

    #245421 Reply
    Avatar OldSoul 
    Participant
    Status: Physician
    Posts: 15
    Joined: 07/19/2018
    So, why not just give it to you now? Bet they’d really enjoy seeing you make good use of it. Or have the money directed to your children, their grandchildren: 200k a piece on their late teens/early 20s could be very beneficial head start on their prudent financial lives…paid for house/car from the get go.

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    Thanks for the suggestion. They’re waiting for the step up in basis. The parents have designated which of their So Cal rental properties will go to each heir, but gifting them now results in a huge tax liability, since each of the properties have had significant capital appreciation over the decades. As much as the parents love to discuss inheritance, they also love to discuss step up in basis. Plus, their grandchildren are all doing OK.

    #245425 Reply
    Avatar StarTrekDoc 
    Participant
    Status: Physician
    Posts: 2040
    Joined: 01/15/2017

    gestion. They’re waiting for the step up in basis. The parents have designated which of their So Cal rental properties will go to each heir, but gifting them now results in a huge tax liability, since each of the properties have had significant capital appreciation over the decades. As much as the parents love to discuss inheritance, they also love to discuss step up in basis. Plus, their grandchildren are all doing OK.

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    First world problems.   This is the beauty of passing property to generations–step up.   One option you can suggest to have your cake now.

    1031 exchange into a Hawaii property.

    #245427 Reply
    Liked by ZZZ
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 697
    Joined: 06/18/2018

    “They’re waiting for the step up in basis”

    Well they’re you go. As mentioned above, 1031 exchange the one earmarked for you. They, and you, can enjoy that Hawaii property now and can still discuss the joys of basis step up.

    #245491 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3030
    Joined: 09/18/2018

    All it would take would be one sentence in the tax code.
    Limit step-up in basis to only one’s spouse.

    The technique seems to be no issue in both the House and the Senate. Throw in a restriction for only spouse on the 1031’s and a “wonderful creative funding source “ is created. Just thinking outside the box of ways to get money in the “right hands of those who need it most”.
    Any objections?

    #245519 Reply
    Avatar Jack_Sparrow 
    Participant
    Status: Physician
    Posts: 72
    Joined: 01/09/2019

    I would not buy a new property 5 years before semi retirement for the following reasons…

    1) A lot changes in 5 years. What if your health declines and you instead would rather move into luxury of retirement community or stay at a resort when in Hawaii?

    2) I don’t see an upside to buying now versus buying in 5 years. I personally think it will be cheaper.

    3) If your buying a “flip” no time to work on it or do the necessary modifications without cutting into work/fun time.

    4) Who knows how grandchildren will impact your decision 5 years from now.

    5) Crazy outside the box things, like Volcano goes off in Hawaii, Hurricanes, NK nuclear bomb, etc.

    The return on your investment might be rewarding, but it seems like you could just pay off your mortgage and get that savings. Then maybe you retire a year earlier. Maybe that extra year off might be worth it to you over a bigger/better House in Hawaii.

    Your in good shape though so do as you wish. Just my thoughts.

    #245527 Reply
    Avatar OldSoul 
    Participant
    Status: Physician
    Posts: 15
    Joined: 07/19/2018
    5) Crazy outside the box things, like Volcano goes off in Hawaii, Hurricanes, NK nuclear bomb, etc.

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    Thank you to all for your critiques and suggestions! This discussion has tempered my enthusiasm for the Hawaii vacation condo, in favor of a longer term rental, which I know is the correct financial course of action.

    As a side note, there have been two contributors who mentioned North Korea. That reminded me of the Hawaii false ballistic missile scare that happened in 2018, and the two sub-Reddit posts:

    1. Everyone in Hawaii is mad about the malfunction of the early warning system. Those fools.

    Hawaii IS the early warning system.

    and…

    2. https://www.reddit.com/r/ProgrammerHumor/comments/7qrej8/real_screenshot_from_hawaii_warning_system_actual/

    #245582 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3030
    Joined: 09/18/2018

    “That reminded me of the Hawaii false ballistic missile scare that happened in 2018”

    With the time zone difference, I sent a text to a friend in Honolulu as soon as I saw the news break.

    The response was:
    Parking at airport . Tokyo.

    Made it out! Come to find out later it was a vacation trip planned. I assumed he had an evacuation plan. One thing he related later. There were zero traffic rules. People simply stepped on the gas and literally took the fastest path with the least resistance. Fender bender? CYA, gtg.

    #245692 Reply
    Avatar fasteddie911 
    Participant
    Status: Physician
    Posts: 304
    Joined: 05/31/2016
    Earnest refinancing bonus

    I’d be more concerned about the impacts of weather and warming temperatures in the years to come.

    #245805 Reply
    Avatar Eye3md 
    Participant
    Status: Physician
    Posts: 69
    Joined: 12/01/2017
    5) Crazy outside the box things, like Volcano goes off in Hawaii, Hurricanes, NK nuclear bomb, etc. 

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    Thank you to all for your critiques and suggestions! This discussion has tempered my enthusiasm for the Hawaii vacation condo, in favor of a longer term rental, which I know is the correct financial course of action.

    As a side note, there have been two contributors who mentioned North Korea. That reminded me of the Hawaii false ballistic missile scare that happened in 2018, and the two sub-Reddit posts:

    1. Everyone in Hawaii is mad about the malfunction of the early warning system. Those fools.

    Hawaii IS the early warning system.

    and…

    2. https://www.reddit.com/r/ProgrammerHumor/comments/7qrej8/real_screenshot_from_hawaii_warning_system_actual/

    Click to expand…

    Reading about this misleading alert had me worried about the competence of Hawaii’s government officials. The employee, who sent out the alert, apparently had a history of not fully understanding how to tell when an alert was a test vs real. Also, during the investigation of this alert, this employee refused to cooperate with the FCC. I was in Hawaii a month or so after the alert. Reading the news of this event sounded like  Three Stooges event

    #245877 Reply

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