You’ve made the decision, and it’s time to build the home of your dreams! Or, maybe you’re building for an investment opportunity. Either way, the first step is finding the right piece of land to build on. This plot of land will be the foundation for your home and the beginning step in the building process. But is buying vacant land a good investment? It can be!
HFS FCU offers the resources you need to decide if buying land in Hawaii is the right decision for you. In this guide, we will cover a wide range of topics, including SSPP fees and zoning considerations specific to Hawaii. Can you buy land in Hawaii? Here’s everything you need to know to do so.
Why Consider Buying Vacant Land in Hawaii?
Why buy land in Hawaii? Purchasing vacant land in Hawaii opens the door for a wide range of opportunities. Various Hawaiian regions offer unique opportunities, from rental to resort opportunities. From the steady growth on the Big Island to the tourism-driven growth in areas of Maui and Oahu, there are numerous reasons to buy here.
The key reason for buying a vacant lot is to build a custom home. Buying existing properties is an option. Yet, for those who want to build a dream home, purchasing quality vacant land and then building a custom home tends to be ideal.
However, land is limited in Hawaii especially in some key areas. That makes your search a bit more competitive. It also means that, over time, land prices and demand are likely to grow for the property you purchased. There’s much to know about buying vacant land.
10 Essential Factors to Consider When Buying Vacant Land in Hawaii
1. Location and Accessibility
The location is an important factor to consider. In fact, it’s one of the first steps to buying vacant land you want to think about. Land can be used for more than one purpose, and different areas are better suited (or allowed) for specific uses. You might be buying vacant land for investment or residential purposes. A good rule of thumb is to purchase land in areas with high population density since this will typically mean more demand in the future.
If the vacant land lot has road access, it’s important to know if there are any easements on the property. Easements allow for the private use of public roads and rights of way. You also need to consider the proximity to amenities, towns, and essential services you’ll need. Local Hawaii real estate agents can help you navigate these issues and provide insights on community growth plans.
Looking for resources? Try LandWatch, a free online source to search for land and rural properties on the market.
2. Understanding Hawaiian Land Designations
Hawaii has several unique land designations that could be a bit more complex than what some property owners recognize from mainland purchases. First, consider fee simple land, which means that you own both the land and the building on it. This arrangement provides for full land ownership and indefinite use. Some properties are also leasehold, which means you own the building but the land is leased for a specific amount of time.
Hawaiian land use classifications are also a factor to think about when buying property.
- Urban: These areas are city-like. They have a higher concentration of people and structures.
- Rural: Rural areas have limited people and structures with low density residential lots. Most have a size of at least ½ an acre.
- Agricultural: These properties are specific for agricultural use with limited residential living.
- Conservation: A conservation district protects watersheds, coastal zones, water sources, and sensitive ecological areas.
As you think about vacant property in Hawaii to purchase, consider Hawaiian home land, which is land held in a trust for Native Hawaiians by the state.
Looking for resources? Google Maps and Google Earth can show you land elevation details. Soil can be tested with a basic soil test you can order online.
3. Zoning Restrictions and Building Requirements
Note that you will need permits throughout the construction process. These may include:
- A building permit
- Utility permits and engineering plans for infrastructure like water, sewer, and electricity
- Zoning approval (e.g. a variance, conditional use permit, or planned unit development)
Before purchasing your vacant lot, it’s important to determine whether or not you’ll be dealing with any zoning restrictions.
Many states limit what you can build on your lot based on current zoning classifications (i.e. commercial or residential). For example, suppose the land is zoned for residential use only, and someone tries to build a retail store there. in that case, they may face fines or penalties from local authorities because they’re essentially breaking local laws.
You will need to learn what specific permit requirements exist for the specific island and county you buy on, as these differ widely. This includes factors such as setback (location of the property from the roadway), height restrictions, and building limitations in terms of code laws. Your local construction company could offer some guidance in these areas.
4. Lava Zones and Natural Hazards
Hawaii has areas where there are higher risks for hazards, including lava zones and natural hazard areas. Hawaii’s lava zone classifications range from 1 to 9, and the higher the risk area is, the more expensive insurance costs may be.
Consider flood zones, tsunami evacuation areas, and hurricane considerations. Also, a factor some property owners may not consider initially is erosion concerns especially along coastal properties.
Although being a flood zone will not affect the actual purchase when buying vacant land, it will come into play later when you need to build and will require flood insurance. So, before purchasing the land, check to see if this could affect you. If so, it’s smart to look into the cost of flood insurance before deciding to buy and build.
Looking for resources? You can check the FEMA Flood Map Service Center to determine if a property is in a high-risk zone. Don’t have a physical address yet? No worries – you can use map coordinates!
5. Water Access and Rights
Access to water for vacant lands is a crucial consideration for buyers. Buying a vacant lot will require access to water systems. Catchment systems and county water systems are present in different areas of the state. Some areas are serviced by well water, which requires buyers to test the water quality to ensure safety. Wells have different maintenance considerations for property owners. Buying land in Hawaii without water rights can limit its value and access.
6. Utility Access and SSPP Fees
Running utilities to your site can be costly if public utilities aren’t available nearby. You should hire an electrician to run the power lines. Running water pipes from an existing municipal water main is another cost to be prepared for. Don’t forget about paying someone to hook everything up correctly!
For Hawaii residents, SSPP stands for Special Subdivision Power Provision, which means that HELCO has outlined an area in which a cost-share charge applies for each parcel in that subdivision in order to help cover the costs of power poles and establishing electricity to each parcel in that area. If the owner of the vacant lot decides to participate, they pay that charge at the time. If not, the charge is not assessed until the owner of the land looks to establish a power connection.
For example, this fee for lots in Hawaiian Paradise Park can range from $2,000-$3,000 or more. This SSPP fee will be especially prevalent when looking at lots in Puna. When interested in a property, work with your realtor to find out if an SSPP exists and if there are fees needing to be paid for that lot. If so, you may even be able to request to have the amount of the fee decreased from the purchase price of the lot. This is something you would discuss with your realtor to see if that is a viable option.
Typical costs for bringing utilities to underdeveloped Hawaiian properties is an important consideration. Location, access, and limitations are factors – note that those considering off-grid living opportunities, using solar and water catchment are options to mitigate some of those costs.
Looking for resources? Get more information on SSPP.
7. Conducting Proper Due Diligence
As you learn how to purchase vacant land, consider the numerous considerations for conducting property due diligence. You’ll need to complete land surveys to verify boundaries and features, test soil for building suitability and limitations, and complete title searches.
Unless you’ve already found a completely cleared parcel that’s ready to build on, chances are you’ll need to remove overgrown trees and other foliage. The danger with this is that you don’t know what kind of terrain is underneath. Although it may not be as easy, it’s important to see as much as you can on the lot. This can mean making your way through trees and brush to better understand what you’re dealing with. The last thing you want is a surprise that could threaten your plans to build. You should also check elevation details and changes, test soil, and make sure a survey shows precise boundaries of the property.
You may want to obtain an estimate for land clearing before purchasing so you know what to expect if you move forward.”
A survey – this identifies the property’s boundaries and location of any easements, rights-of-way, and other encumbrances. The survey will also reveal if any zoning regulations might affect plans for your structure. Surveys are typically done by licensed land surveyors who will provide you with a certified plat map showing the results of their work. The cost can vary depending on where you live, but it typically runs between $500 – $1,000 per acre surveyed.
8. Understanding Easements in Hawaii
Easements are another factor that will impact if you can buy vacant property. Easements are a type of restriction that you must know about beforehand.
There are two types of easements: Incorporated and unincorporated. If your property doesn’t have a legal subdivision or plat map, you most likely have an unincorporated easement on any nearby streets or roads that cross your property. To ensure your property has road access, you might need an easement from your neighbor to build an access road connecting it with public roads outside of your property if there aren’t already connections.
9. Property Tax Considerations
When looking at how to buy vacant land lots, one of your first concerns should be the property taxes that will be charged on the property. Any home or other structure built on the land will add to the property tax bill. You can find out how much these taxes are by contacting your local government offices or searching online for information.
Hawaii’s property tax structure for vacant land differs for each area. Vacant agricultural dedications will have a very different value than property meant for residential development.
Looking for resources? Find out how to calculate taxes or visit your local tax assessor’s office.
10. Financing Your Hawaiian Land Purchase
You may think that since there’s no home on the property, your lender will just use the tax-assessed value of the land. But funding for a vacant land purchase still involves an appraisal, and that means an appraisal fee as well.
Other fees and costs to note might include: Title insurance, Utility permits and engineering plans for infrastructure like water, sewer, and electricity.
HFS FCU is the ideal financing partner for vacant land purchases in the region. With a wide range of vacant land loan options available at competitive pricing and low down payment requirements, those ready to build their home will find ample versatility. By working with a local Hawaiian credit union, you’ll have access to teams that understand the unique elements of buying vacant land here and who have the resources you need to support the process.
Special Considerations for Non-Hawaii Residents
It’s important to note that as a non-Hawaiian resident, restrictions and costs are applicable. Mainland and international buyers, such as those utilizing remote property management companies, will likely pay a higher rate of cost. The Hawaii Real Property Tax Law applies a 7.25% withholding tax for non-residents selling property. Additionally, non-US citizens may face a 15% federal tax through the Foreign Investment in Real Property Tax Act.
Working with local officials is critical for such situations. Discuss your needs with our team before you make any decisions about buying vacant land.
Step-by-Step Process for Buying Vacant Land in Hawaii
Let’s bring it all together. Here’s how to buy vacant land in Hawaii:
- Determine your financing and expected borrowing power. That’s something our credit union can help you with right away.
- Determine where you want to live. Carefully consider locations (we have some resources listed below to help you navigate this process).
- Once you narrow down the area, start looking for individual properties. Take special care of zoning and permitting, requirements, road access, and environmental factors that limit your use of the property.
- Consider the cost to building in that area including looking at the cost to insure the property due to flood and other risks, building costs, utility access and updating, and HELCO SSPP fees as applicable.
By working with our team, you’ll have access to a wide range of tools to facilitate an efficient process overall.
The buying process for vacant land isn’t that different from the buying process for a home. You’ll need to do your due diligence, take care of legal requirements, and pay the necessary fees to complete your purchase. You should research before making any investment so you don’t end up paying more than expected or regretting your decision later on down the road.
Turn Your Hawaiian Land Dream Into Reality
Despite it being a somewhat complex process, these tips for buying vacant land can help. You may need to jump through some hoops with zoning and permits and there are other cost considerations to be aware of, but you can look at vacant land as a potentially great investment opportunity. Just be mindful of the pitfalls – this guide will help!
If you’re looking into your options for financing if you’re buying vacant land, check out our web page – Vacant Land Loans. To learn more, give us a call at (808) 930-1400 to make an appointment with a loan officer today. We’d love to help you make your dream a reality!
FAQs About Buying Land in Hawaii
Can non-residents buy land in Hawaii?
Yes, including foreign buyers, but there are tax implications and fees.
What is an SSPP fee, and when do I need to pay it?
The SSPP fee is a type of cost-sharing fee levied by HELCO for properties in some subdivisions to cover the cost of extending electrical lines to develop new properties. You will need to pay it if you are developing vacant land.
How much land can I buy in Hawaii with $100,000?
This is very region-specific. A small to moderately sized property is likely in that range, though the island will play a role in that decision.
What’s the difference between fee simple and leasehold land in Hawaii?
A fee simple property is one where you buy the land and the building and own it long term. Leasehold means you’ll buy the building but lease the land for a set number of years.
Do I need to visit Hawaii in person to purchase land?
You don’t need to do so, but there is extensive work that needs to be done. Visiting in person can be critically important.
How do lava zones affect insurance and financing for vacant land?
Yes, it can impact insurance rates because this is a hazard much like flooding in other areas.
What are the most affordable areas to buy vacant land in Hawaii?
You’ll find a lot of variance in this area, but look for those properties on the Big Island, including in the Puna and Kau districts, for some of the most affordable opportunities.
How long does the land buying process typically take in Hawaii?
After completing all the work, you can expect the process to take a few weeks to several months, depending on the size, location, and the amount of updates required.
Can I build on agricultural zoned land in Hawaii?
It is possible to build a house on agricultural land, but there are restrictions specific to the area. You will likely need to maintain the property for agricultural use and obtain permits.
What are the closing costs for buying vacant land in Hawaii?
The closing costs are typically 2% to 5% of the purchase price. This can vary based on location, escrow, fees, and more.
