Are you a Canadian national dreaming of owning a property in sunny Maui? Not only has Maui become a top destination for Canadians for their Hawaiian Holidays. Many have succumbed to the many charms of Maui and ended up purchasing a slice of Maui paradise to call their own.
In 2021 alone, Canadians purchased 85 Million Dollars worth of homes and condos on the South and West sides of Maui. These two areas are where most condominium units for short-term rent are located on the island.
The ownership of short-term rental condos on the island of Maui benefits Canadian owners in two ways - for their comfortable stay and enjoyment and the revenues generated when the units are rented out while they are away.
Maui Property has helped many Canadian clients realize their dream of owning Maui properties. We have shown them the path to property ownership on this side of Hawaii.
Here are the important things to consider for Canadians planning on purchasing properties in Maui.
Type of Ownership - Fee Simple vs. Leasehold
The two modes of property ownership in Maui are Fee Simple and Leasehold.
Fee Simple means ownership of land rights and structures. Fee Simple means full ownership of the property. The owner can do whatever he wants with the property, subject to local zoning requirements and community-specific usage restrictions.
On the other hand, leasehold means full rights to the structure, but you lease the land where the structure sits on. Leasehold is more common in Maui over Fee Simple, and Canadians may need to consider this.
It is also worth noting that unlike in Canada, where sellers must ensure that the property is fully compliant with codes and restrictions, in Maui, the prevailing practice is for the buyers to assume property "As Is."
"As Is" means that the seller will not make repairs and renovations for compliance. Keeping the property up to code is passed to the buyer/new owner.
Fees and Taxes
If you rent out your property
If you plan to rent your property out, securing a TIN (Taxpayer Identification Number) is highly advised. This way, you can avoid withholding 30% of rental income as a guarantee that you pay US taxes.
In addition, the owner needs to secure a business license for collecting - GET (General Excise Tax) and TAT (Transient Accommodations Tax).
If you sell
As a foreign investor in the US, you will be subject to FIRPTA (Foreign Investment in Real Property Tax Act). This means that 10-15% of the sales price will be withheld.
The need to open a local bank account
You will need to open a local bank account as a requirement for utility application and eventual payment.
Canadians should be mindful of the fact that there are no mainland banks in Hawaii like Wells Fargo or Bank of America.
Opening a local bank account serves another purpose - that it can be used for rental income to be deposited into.
Property Management
If you will not be residing in your Maui property full time, you will be mandated to hire the services of a licensed property manager to do it in your stead.
Long-term property management fees start at 10%, while short-term services start at 25%, depending on responsibilities.
Final Thoughts
Foreigners purchasing and owning properties in other countries could be a daunting experience. Different ways of doing things. Different ways of calling the same things. Different requirements and regulations.
In Maui, our dear Canadian friends can count on Maui Property to make every real estate transaction as trouble-free as possible.
We are locally owned and operated, so no one in the industry knows Maui more than we do.
Whether buying, selling, or investing, Maui Property's high-quality service and unmatched market insight will be at your service. We have the experience and the expertise to provide you with the dedication you deserve.
We put our clients first every single time. Reach out to us.