Buying To Build – Halawa Heights
Fifteenth in a series
Buyers in the market for a “piece of paradise” are often surprised to find that vacant land – even very large “pieces” – is available and at prices that look like a bargain in comparison to what similar offerings would command elsewhere. In this “Buying to Build” series, Realtors will comment on listings ranging from multi-acre parcels in the country and on the coast to small lots in city neighborhoods…what they will have in common is that all will offer development potential.
When East Oahu Realty Realtor Patsy Vasquez listed a 9,805 square foot vacant lot in Halawa Heights, the response from interested buyers was immediate. “I had barely planted my for sale sign when people driving by started calling and showing up. It’s a great piece of view property in a desirable neighborhood, but I really didn’t expect multiple offers at the listed price of $650,000 so quickly,” Vasquez said.
“I believe the response is symptomatic of the shortage of single family homes and lots in well located neighborhoods and a growing interest in building your own custom home. There are buyers out there looking for tear-downs in desirable neighborhoods close to commercial centers, and if they can find what they want they are willing to make the extra investment in demolishing an existing home and clearing the property. A vacant, cleared lot in a neighborhood like Halawa Heights is a rare find.”
Vasquez’s listing, the site of a home that was destroyed by fire, is mostly level with utilities in place. After the owners cleared the lot, they found that they were not in a position to develop it and put it on the market.
She noted that one of the major impediments a buyer faces when purchasing a vacant lot is obtaining a land loan, typically a short term, high rate loan with a large down payment required, and subsequently the construction loan. This type of financing is not readily available from all lenders, who view it as risky.
One lender currently specializing in land loans and construction financing is CU Network Services. Company president Miles KimHan said the response to the introduction of their owner/builder construction loan in early 2012 was overwhelming. “When we started offering this loan, we had immediate inquiries from borrowers and to date have funded over $15 million in land loans. With the CU Network Services program, you can secure your lot while you save reserve cash at the credit union and earn dividends for your project.
“When you are ready to begin building, you can convert the remaining balance of your land loan into a construction loan. These loans are typically short-term and offer the option of interest-only payments during the construction process. Each construction loan is customized to fit the specific project with varying amounts of funding being disbursed during each phase of construction.”
KimHan pointed out that for an individual or a family buying vacant land to build their first home, this type of financing can be the best solution. In some cases, a buyer may use funds from the sale of a previous home to cover the down payment. In another scenario, the sale of a previous property could generate sufficient funds to buy the land outright, but the owner/builder might still need to finance the construction.
“A custom home builder can be a valuable source of guidance when ‘buying to build,'” Vasquez said. “Often buyers shopping for a vacant lot will show up at the property with a builder or architect or even a set of plans. An experienced general contractor will be able assess the condition of the property and its potential for development, or even its feasibility as a site for the kind of custom home the client has in mind.”