Intro: The following is a paid program and does not necessarily reflect the opinions of the staff or management of visionary related entertainment. [music]

Clint Hansen: Aloha, Maui. It's 7:00 in the morning on a beautiful Monday. We're on the KAOI Radio Group broadcasting at 11:10 AM, 98.7 FM, 96.7 FM and of course on the left side, 96.5 FM. I have a wonderful guest with me today, Kellie Pali, from Creative Financial and if you ever want to listen to this - I almost forgot - you go to mauirealestateradio.com where we have all our past shows on there. Very good. You know people like to have the informative information everything regards to pet transfers to septic systems to pest management to economic updates to where to even buy on Maui. So definitely go to mauirealestateradio.com or if you want to search for property, mauirealestate.net which is our Hansen family, the Ohana, Maui Luxury Real estate. And we have over 50,000 unique visitors every single month that hit that website. So be ready for a good time to find property. This is Kellie Pali. Get in. Creative Financial.

Kellie Pali: Good morning.
Clint: Tell us a little bit about yourself and your company.
Kellie: Good morning Clint. Thanks for having me.
Clint: And thank you for coming.
Kellie: And I have had the luxury of watching as a professional the Hansen Ohana team and definitely, it really matters who you've got in your court. And I would say that any buyer or seller would be super lucky to have your family in their court.
Clint: Thank you so much.
Kellie: And so yeah, thanks for having me. Yeah, I own creative financial. I believe this October makes 20 years for me lending here on Maui. That makes me feel really old but moving on.
Clint: Hey, hey, I'm 38. And I've been having my license for 19 years now. So don't worry about them.
Kellie: Awesome. I'm weak. Yeah. All right, so--.
Clint: We just started when we were very young, right?
Kellie: We're like the new-- right? The older but the new younger, right? Yeah, so that makes me really actually proud that I could say that in my almost 20 years of lending, I've just worked for two full companies. I work for someone for five years, almost five.
Clint: And now, yourself.
Kellie: And now, I've been working for myself since and it's been very stable. And I think in mortgage, there's just a couple of things that you would like to maybe consider as you're taking your time to shop mortgage lenders and brokers or banks, you know, just working with someone that is stable, someone that's trustworthy, and that really is going to be transparent. And that's what we really worked for.
Clint: Get those numbers right up front. Know those fees, you know, before that comes down to the final disclosures and we don't want surprises.
Kellie: No, surprises sometimes can happen when maybe the buyers didn't know stuff so they didn't know to say it. And then if the banker didn't ask enough questions to sort of flesh that out in the beginning then sometimes, we'll have these what I call little hurdles or bumps. But having a professional that's flexible and that can work around it and we know, we don't want our buyers to feel beat up after the process.
Clint: No, well, you know, it's kind of hard especially for my Canadian buyers. You know they're so used to dealing with banks in the main or in Canada where you go in you know they know their history. They know their system. And they can read the Canadian financial statement. They can get money in a very short amount of time. So I-- the words I use for Canadian. I'm like it's a very invasive process. You know they're going to know and ask for additional paperwork and more additional paperwork and more additional paperwork because they need to really work hard towards verification. Look, you want to start with the Canadian buyers. I mean I know it's a really section of the market that second home buyers not really primary but you know it does make a portion of the market. So please tell us about that.
Kellie: And to even just piggyback on what you would tell them; I actually take it a little step further. I can be kind of--.
Clint: Just smack them with something and you'd be like, you like that? This is [crosstalk].
Kellie: Well, I actually tell them it's like they're going to take everything but your retinal scan and your blood samples.
Clint: It's true. That's correct.
Kellie: And so I really just try to impress upfront because again if you know what you're getting into on day one, it does make it a little easier during the process. We don't want people to feel like they were blindsided or they just had no idea how grueling it could be. So we just try to be very honest upfront to say hey this is the process but don't worry we're going to walk you through it. We're going to hold your hand and we already know what they're going to ask. So we go ahead and give you that really long laundry list [up] front but be grateful because if we get all that upfront then going through the process, there's less to chase down and so our motto is prefer to chase it upfront, know what the sort of the skeletons in the closets are upfront. So we can create solutions as we go through the process where some people, some professionals for whatever reason may not get all of that upfront and then they start to ask for additional things in the middle of the escrow. And then they see things or they learn things that maybe now, there may not be a way around and then you get into a trouble with the escrow or potentially a possible, maybe you have to back out because there were things that were now revealed that we weren't sure of. So kind of getting that other ways helpful.
Clint: When Canadians looking to purchase here typically there's only a couple of real sources of money that they can go through, right?
Kellie: Yeah, local banks and so Canadians which is really cool. There's three local banks. Sometimes a fourth one. But they weren't really heavy money down. Canadians need to know a couple of things: 1) they're used to going to their attorney dropping a couple docs and you get the loan.
Clint: That's it.
Kellie: And they're used to always usually short-term fixed. They go five years, seven years so when we say, "Oh, we can give you a 15-year fixed rate or a 30-year fixed-rate". They're like, what? Like that's cool. But that they're thinking we don't want to carry the loan that long because their culture, they don't have loans that long. So they typically are more inclined to doing the fixed shorter periods. We call them arms or adjustable-rate mortgages and they're more comfortable with that because the way they manage their finances again in their culture in Canada, they kind of are used to getting those loans paid off quick. And so a lot of them like the five year fixed rate it's amortized still over 30 but it's only fixed for five and it gives them the ability to pay down extra or at the end of the five take one more five, another ready to pay it off in a total of 10 years. The seven and the 10-year arms are also something that they like and it gives them a little bit longer time. I'm a little bit more conservative so depending on the difference of what the savings is of a five-year loan versus a 10-year loan. If it's only a quarter-point and rate, it might not be worth taking such a shorter term of five years because as you know with life and kids, five years kind of comes and goes pretty quick. And I want them to do responsible lending. And so for Canadians, we know what they're used to. We can kind of say, "Hey, I know what you're used to", "Here's what you might like but here's something you can consider that we offer here."
Clint: I think the biggest savings, of course, is saving on interest. Not really the monthly payments.
Kellie: That's right.
Clint: So you have--.
Kellie: Total interest.
Clint: a half a point less but the total interest over time is one of the things that's really, you know, surprising and it's one of the videos that I made earlier. You can kind of see how much you pay. It's almost over 30 years double the loan amount. So it's like, yeah--.
Kellie: It usually is double.
Clint: --you're getting the loan for, you know, 400,000 but really I'm going to be making payments of, you know toward that debt of about 800,000 over the course in time and of course, if you shorten that down, it dramatically reduces the interest but of course, it's all about your monthly budget and being able to make that.
Kellie: It's true. It's a balance.
Clint: Yeah, so--.
Kellie: But Canadians do understand the value of not paying interest so and shortening the terms. I like that. The other thing that Canadians should know is that you would need to validate your income through your own T4s and T1s. If you own a company, it's a T5. Their T4 is like our W-2 and their T1s are like our 1040s.
Clint: And do Canadians write off interest over? No, I don't think that's [true].
Kellie: Yeah, I don't know if their country allows them to have that as a deduction but as far as lending, we use income calculation. When they are self-employed like our own citizens are self-employed, we don't get to use the gross. If you're deducting all these liabilities against the company, we do have to use it to your average of your net and their tax laws are really strict. So I haven't really met too many Canadians, I have gone over there 250 mark because I guess their tax rate goes like almost 50% of their income when they go over. So--.
Clint: Yeah, there [crosstalk] different ways that they-- [crosstalk].
Kellie: They allow their income to be put in through like investments.
Clint: And I see a lot of LLCs [crosstalk] in their specific name. You know it's like, Hi, this is Clint Hansen LLC and this is actually Clint Hansen. You could see my personal income here and then my corporate income so that they can split that up so that they don't pay those astronomically higher rates and they can, you know, defer those costs and expenses on what have you usually--.
Kellie: For sure.
Clint: --the business.
Kellie: And then what a Canadian also needs to know is the down payment. I like to tell them that right up front because we do have an agreement that our country with theirs and there's some sort of shared benefits. The banking system still prefers a heavier down payment from Canadians. And so it's still pretty much as a standard 30% with all the local banks. There's a couple banks that will do Canadians but they want 35, 40%. There was a time where we could do 20% and 25% if they weren't buying those condo hotel vacation rentals but that sort of kind of, it seems like [crosstalk]--.
Clint: But that's almost what everybody's buying because they're trying to use the income.
Kellie: That's it
Clint: I mean, of course, with the transfer rate for Canadian dollar to the US. It was great when it was, you know, on par or better yet that it was 1.14 for every American dollar.
Kellie: It was awesome for them.
Clint: The Canadians were really happy and they were buying out here when our market was deflated. So I have lots of Canadian clients who are extremely happy that they went and pulled the trigger during that time and it was always surprising even when we were down at like in the 90s and they were still worried about making the choice and I'm like, it's still going down. You know typically, it's like 87 cents and we're right back to that typical historical 87.
Kellie: We are. Yeah.
Clint: So it makes more sense to borrow and you know, use the capital from the rental--.
Kellie: Leverage.
Clint: --to pay off some mortgage over time and you know have less US funds over here and it is, of course, a constant process to go through to make sure that they understand you know the taxation process and if they're going to be bringing the money back into Canada, they might be subject to double taxation you know--.
Kellie: Very important detail.
Clint: --and it's important that they really talk to their you know accountants back home. They're unaccounted here.
Kellie: When we tried to get him here with a local accountant as well. Because what is the state-- how does the state look at it. Then there's the federal and then their people and there is a lot of investigation but as you know Canadians still find it very beneficial to do this.
Clint: Much more than none. Yeah.
Kellie: That's right.
Clint: If they're going to be staying here for you know even a few weeks out of the year, it's a good investment to be making because you know they're getting their foot on hold in the market and then they're going to want to live here you know however [how many] months of the year. Legally, it's six months unless they own some sort of business or marry into the culture like my wife did.
Kellie: It's awesome.
Clint: We've been married 10 years now.
Kellie: 10 years. Wow, congratulations.
Clint: February will be 11 so it's kind of funny when we pick the date. We're like, Oh, February 14th. That's a good one and then it's like, of course, Valentine's day so--.
Kellie: But you can't really miss it because you have two reasons said to nail the date. Planned.
Clint: What, man. You got to plan ahead. I'll tell you what. Because when you look on the calendar.
Kellie: Oh, that's--.
Clint: And you're like, Oh, yeah, February 14th. And it's two weeks away. Good luck getting a reservation.
Kellie: Yeah, not on Maui. Yeah. So you know families have actually adjusted to doing like the 13th to the 15th. They're waiting for that Friday because--.
Clint: Oh, yeah, [datas].
Kellie: the restaurant-- sometimes the qualities may go down a little bit because they're just so--.
Clint: Overrun, yeah.
Kellie: --bursting at the seams. So yeah. So another couple other things for Canadians is once you have the proper documentation in line. You know it takes a mortgage banker, a broker about two days to get a Canadian credit report. Unlike the US, we get three trade lines that will give three different scores, will go with the mid score. We won't really average them. For Canadians, they just get one. It's Experian and they just offer one score.
Clint: And for-- you know one of the important things and one of the reasons I always have you as part of the recommended people is the fact that you have wonderful set a team that you work with. I mean it's not just--.
Kellie: Thank you.
Clint: --a one-person show. You know a lot of people are like--.
Kellie: We're four of us now.
Clint: Yeah, yeah.
Kellie: Two full-time processors.
Clint: And they're really good. They understand you know the documents associated with Canadian and more important, you are Creative Financial. I mean there's a whole--.
Kellie: We try.
Clint: --different ways to skin a cat. So you know--.
Kellie: But I do like to do the caveat, Clint if I may interrupt you.
Clint: Go for it.
Kellie: There is Creative Financial. And then there's Illegal Financial.
Clint: You're not illegal. No.
Kellie: We are not Illegal Financial. There's a very thin line. And so what we do under Creative which I try to explain to people is we don't just ask the standard questions. I'll dig deeper into your lifestyle, your situation. I might dig deeper into--.
Clint: Local assets [crosstalk].
Kellie: Yeah, local assets. Even like your credit report, I won't just glance at it. I'll dig deeper like. Well, when did this loan start? Well, how far are you with the payments? How many payments--? And we'll really just dig in and we start to reveal things that wouldn't have normally surfaced without the digging and then with this new information, we can actually strategize and structure the loan properly so that maybe at a glance somebody would've been like, No, you're not qualified but actually you are qualified. And there was this teeny little things that we noticed that made a big difference. And those are sometimes missed.
Clint: And then again, another reason I like to go with you guys because when you get a package to an underwriter, it's going to go through. Why else would you make that package in the first place? And I've noticed in a lot of other people even the same banks that same you know package would be going to, they [pull turn] it down because they just simply don't understand what they're reading. And that's again one of the most important reasons I like to work with you and refer Canadian clients to you because you understand those Canadian financials. Your people do. And you know it just kind of surprises me the spreadsheets aren't too different. I mean--.
Kellie: So I have to admit, I'm a numbers geek. Math has been kind of my thing. And so when I see complicated tax returns maybe a client that might have multiple properties and tens of deductions. I mean people don't want to throw on these formulas and do these spreadsheets that take hours to try to figure out does he qualify for one more property. Sometimes, they kind of go blank or the loan officer may pick up the documents and all.
Clint: I've seen that a lot.
Kellie: And pass it to someone else let them do the work and then they don't really check the work. And if that person goes, No, it didn't work. And I'm going to tell you. It's me. I'm the chef. I'm the one that's doing the grocery shopping. I'm cutting the vegetables and I'm tasting and making the stew.
Clint: All right.
Kellie: So I get those tax returns myself and I dive in deep and I cut and slice it and create and I validate the numbers and [like] even had packages go to the banks and they disagree with me and the underwriter might say, "No, Kelly" you know "We're off and I'm going to suspend the loan," "I need you for the clarification." And I go back and I said, "Get me on the phone", "Let's go through this together".
Clint: Yeah, line by line.
Kellie: Because we have to go human error. This is sometimes an aspect and when we're done, they thank me for my patience and my gratitude and they say, "You know, you were accurate in these areas will make our change." So it just shows you that even underwriters are human and can make mistakes.
Clint: Absolutely.
Kellie: Sometimes, I make mistakes too. But then we find a solution around it and so I don't mind. I like them, the numbers and so.
Clint: So let's talk about a few more differences for Canadians when they're coming over here. You know obviously they don't what HARPTA/FIRPTA is and that's a deferment when they actually go to sell the property. So it's pretty ridiculously high now. It's twenty-two and a half percent. So HARPTA which is for people outside of the State of Hawaii, they're going to hold seven and a quarter percent. I believe so that when you go to sell the property unless you've been a registered Hawaii corporation or LLC, they're going to make it so you pulled that money to pay your taxes. But if you show and have a history, you can avoid that. That goes for Canadians, Americans. It doesn't matter. You have a registered company and show those local taxes being paid a locally formed business, corporation or whatnot. You can definitely avoid this. And then FIRPTA, it gets even stiffer. You're going to be having an additional 15%, so twenty-two and a half. So that's something that Canadians aren't particularly used to.
Kellie: That's right.
Clint: There are also some other things [crosstalk]--.
Kellie: And all things I was going to say is all things which with FIRPTA and HARPTA. Those are things you really want to start before you decide even to list it.
Clint: Everytime--
Kellie: I mean honestly, yeah.
Clint: --I'm talking to a Canadian buyer eat well before--.
Kellie: Well, before you want to list.
Clint: You know--. And by the time it comes to sell the home or condo--.
Kellie: You know.
Clint: --I'm like, okay. Remember HARPTA/FIRPTA. Of course, when it was at 12%, come back.
Kellie: It wasn't that big of deal.
Clint: Yeah. And now, it's you know twenty-two and a half. They still don't even remember that such a thing exists and I'm actually starting to get to the point where I'm doing a listing presentation and I actually have them sign additional paperwork understanding that this thing exists--.
Kellie: Good.
Clint: --because I've definitely had people you know come to the point where the withholding happens and they're like, oh what this. You know what? Is this a tax? And they freak out.
Kellie: Oh, yes.
Clint: Of course, it's not a tax. It's just a withholding. They're making sure you pay your tax--.
Kellie: That's a good clarification. Another one that they kind of forget about is like you talked about earlier, the exchange rate. Sometimes, they're paying attention to the exchange rate. Sometimes, they're not because they're just going to the loan process. And so we always-- we do emails to our escrow officers because we like to work with them as a team as well. And we just kind of remind them that for our files we like them to reach out to the clients and minimal two weeks prior to closing because it takes about 7 to 10 days to liquidate any funds that might be in stocks and bonds mutual funds.
Clint: Season-- [crosstalk].
Kellie: And then once it's liquidated then, it takes another 48 hours to get it to the bank and then another--.
Clint: Oh, come.
Kellie: --24 hours to get it over to escrow. And so if escrow or because they handle the funds we don't like to get in the way. We like to remind them that please reach out to our clients prior to the two-week mark of closing because sometimes if they're busy and that is missed, we're a week out of closing. Now, they reach out to how will the funds going to come over and then the buyers, the Canadian buyers, are like, oh, I haven't liquidated yet and now, we get extended--.
Clint: Hell, no.
Kellie: --for another week. And so we tried again. Be proactive. And Canadians have to remember that their liquidation process also depends on that exchange rate. And so if they're not paying attention definitely--.
Clint: It fluctuates.
Kellie: on day one of the escrow. You know you watch it. You won't really wait to the end to liquidate and then you're forced to liquidate at a lower exchange rate. You want to start watching that upfront. So we try to give the-- I've a little hand out of do's and don'ts and we try to put that on there if things to consider which really don't have anything to do with our lending portion. But it's sort of a professional courtesy to our buyers. These are all little things that you may not have thought about in working good with well with our partners. We do that. So that's something that Canadians [should know].
Clint: Anything else in Canadians that you notice when I mean it just surprises or different you know. For my wife and I, we still find differences every single day. You know like, what's gyprock? You know which is drywall. We don't have the word gyprock, garburators. Simple things like that. But did you find little language differences that a--?
Kellie: Well, not so we-- so far in the lending, we haven't found language differences but the timeline again as we mentioned the beginning is hugely because they make a couple emails. They go into their attorney five days later. Signed docs, they're done.
Clint: It's a continual process here in the United States.
Kellie: Yeah, on day one, we say this is all of the steps we go through. And it's like a bullet point. So they know we're going from A to B to C to D all the way to technically Z and they kind of have a bullet point. And so--.
Clint: See, that's Zed in Canada, Zed--.
Kellie: That's right, Zed. Okay. And then on Friday, what we do is we send them a Friday update and we cross out the bullet point list so they kind of always know where we were, where we're going, and what's coming up next week. And so it is much more intensive than what they're used to but at least it helps them transition from what they're used to to kind of what what to expect. And again, we feel like communication upfront is the best. So that's kind of really the biggest for Canadians.
Clint: And one of the things, you know, they might not realize, this is not extra steps. There's a few little extra steps. It's the same thing that we're all going through here in the US.
Kellie: It's exactly the same.
Clint: But it's not something what they're used to.
Kellie: It's just not his--.
Clint: It's just that it's a difference. So coming here and say you have an American first-time homebuyer that lives on Maui looking to buy their first place. Have you worked with anybody by [glance] totally out of left field? How about any individuals that are getting one of those grants from the county? Have you gotten a few of those yet?
Kellie: Oh, yeah.
Clint: Oh, how was the process? Because I know we got to wait for the release. You got additional paperwork to go through. You know.
Kellie: So--.
Clint: It's another loan. I mean that's one of the things that underwriter has to understand. There's just-- when you get that from the county while it is a grant--.
Kellie: It looks like lean.
Clint: It's a lean on the property.
Kellie: It sure is.
Clint: You're going to make sure those rates are--.
Kellie: So only because I've been working closely with Maui County Housing Human Concerns Department for the last 20 years with their department and helping them establish the funds and helping them.
Clint: Thank you by the way.
Kellie: They pulled me. Will Spence that pulled me in sort of [--] and all the past directors pulled me in to help you know help them figure out the language for this. So I was a part of that. I was able to contribute. I knew it well and I will tell you, Jessica, who's sort of the person assigned for the grant program right now. She's done a fabulous job and they have it all set up. They give you what the deed will look like, the agreement recordation like they'll give you all of that pre-recorded so you can send that into your bank with the submission file on day one. So we are able to streamline it a little bit more. But like you said there's all these extra steps now with it and Fannie Mae allows them but some banks we call them overlays. So Fannie Mae says, Okay, we'll allow this stuff and they had this big portal. But then a bank whatever bank - let's say Bank A that you are working with if you're just working with one bank. They [say], Take the whole portal and they go, Okay, that's cool but we'll do this and they'll close the portal and and maybe not offer 25%. They'll only offer 75% of what Fannie Mae offers. So as a consumer, if you just go to one bank, you don't know if that bank is allowing all 100% services of Fannie Mae or just 75% or 50%.
Clint: Because they're trying to maintain their profitability. Limit their risk.
Kellie: In risk. Yeah, they're limiting their risk. And so the benefit of working with a broker is I would have like 50 banks on my saleable line and I know which banks offer 100% services to Fannie Mae and which ones offer 75, 50, 25, and so depending on what you need, the specifics of your file, I'm not going to take you to a conservative bank. You need it all. You need everything. You need the MCC mortgage tax. [You're] certificate credit to boost that income and to reduce your federal withholding from your payroll. You need the grant. You need this. You need that. You need you know this concession. And so I'm going to go with a saleable lender with no overlays that offers 100% available services and benefits through Fannie Mae and I'll be able to tell when I meet you but you don't know what you need. And the one bank you choose may not offer that.
Clint: And that's one of the beauties of working with--.
Kellie: So it's a [--].
Clint: --broker as opposed to a specific bank because there's a lot of different sources that you can come from. And that's one of the things I've really loved about Kellie is the fact that she's been willing to you know refer other people in the rare instance that she actually can't loan. So thank you so much. I mean we had a situation where you know I had a client-- Fortunately, by the way, everything's working out. All good. But their loved one who's in charge of all the banking and everything was just immediately struck and ill and into the hospital. No access to any other funds or anything you know. So they were really concerned. It's like what am I going to do. I'm like there's things like reverse mortgages that you can get. But the problem is a lot of them are based off of cash flows and if that person's on disability or not able to be the one providing the income for the household. Then they're not going to be able to pull that line. You know that's a-- So you've got to you know really think outside the box and sometimes, only hard money is an option you know especially when let's just say you have somebody that goes and makes a big write off. And a lot of times people you know they have their accountant or their tax attorney and they're you know coming in and and making the smart decision so they can minimize their taxes. But at the end of the day, you need to show a taxable income in order to provide and make one of these loans happen.
Kellie: So I like to call that like one-track-minded or maybe not looking at all the windows in the house. You've got a house with 30 windows but you're looking through one. And so while we want to save money on taxes, we all do legitimately. Who doesn't? We don't know how that might hurt you for then potentially refinancing or getting a new loan later. And so when your tax accountant is working with you, you want to make sure you were being a visionary about what the purpose of the tax filing is. It's not just to file taxes. It's also used to calculate and prove your income, usable income for qualifying for any new loan whether it's a car, a business, a home, a commercial property whatever it is. And so you want to make sure, step one: if you're taking notes when you do your taxes every year, you don't know if that year, you're going to be looking to buy a home or refinance or someone got [crosstalk].
Clint: Two years really you might be looking down the line.
Kellie: Two or even five if you could.
Clint: And it's fine. Tax write-offs are great. It's an important part but you know now that we have the ability to write everything off all at once. That's kind of some dangerous territory and people don't realize if you show a 0, 1 year.
Kellie: Your income is zero.
Clint: You're showing a zero. You may have had cash flow but the fact that you made a decision to do all those write-offs immediately or your tax attorney. You might think that it's great that you didn't have to pay tax that year. But the truth is. You could have deferred that to a more longer scale.
Kellie: That's right. So just create a plan. You always have to do a plan that's going to suit your needs for that immediate need but also for the several years and going back to just being honest about you know other banks and brokers. I just want to say that I think there's a lot of great professionals here in Maui that do what I do. I love to just say that and just be proud to say that. And also, I don't believe that we need to steal loans. If the loan is in process somewhere else as you may have experience and someone comes to me because there's a glitch just because I have the answer it doesn't mean I'm going to ask you to bring your client to me so I can get another deal.
Clint: You give them answer.
Kellie: I'm like I give them the answer because they're already there. They're invested. The appraisal was a cost. My goal is to make sure whether it's my client or not that everybody gets what they need and they can move forward without being harmed. And so sometimes taking the file and me starting from day one could harm the seller, could harm the buyer. We don't know and so yeah, we're friendly broker. I like to say, Creative Financial is a friendly broker, will give the answer to that loan person or that broker. I had a client that called and they had I guess drawn up their escrow for three months. It was a Hawaiian home's purchase and that was another layer of complication because you have to get the approval of [crosstalk]. Yep. But they were just like done. The person they felt wasn't communicating. They stopped returning calls and we need to bring the loan to you and I was like, let me call them. Give them-- give me permission to talk to your loan officer. Let me give them a call before we make a hasty decision. And I was able to get her on the phone. I looked that she trusted me with her [DE] findings and we went through it and I was able to create a really simple solution for that loan officer and she was able to turnaround and four weeks later finally close a loan that had just been rolling for months. And I didn't have to take the loan. And of course, my assistant she's so cute and she's my-- my assistant is my niece. So her last name is Pali. They think she's my daughter, same last name. But I'm like, No, she's my niece and she says, "Auntie, you know, why did you do that?". And I said because first of all, I'm from here. My roots are from here. I am part Kanaka like this is my homeland. And we are part of a community and it's not about making money. It's about creating relationships. I said I tell you what. Who do you think that homeowner is going to refer the next time someone needs a mortgage?
Clint: It's going to be you.
Kellie: It's probably going to be me and that's not necessarily why I did it but it's more about just lasting relationships.
Clint: Well, the karma, right?
Kellie: Lasting relationships. We're in a small commu--. We're going to see our kids like our kid's ballet together, right?
Clint: Yeah, that's right.
Kellie: And play soccer and we're going to go grocery shopping together. So we just need to just all contribute no matter who really gets to sort of make the revenue because in the end, that's not our main goal. So be a good business partner.
Clint: Yeah. And I really appreciate that. That's again one of the reasons I love working with you guys down there. Oh, man. Total brain fart. I forgot where I was getting to. So getting back to the county grant--
Kellie: Oh, yes. County grant.
Clint: --associated in the additional land.
Kellie: Let's do that
Clint: You know people that are going to be purchasing out here. One of the things I don't think that they realize when they're going to go bee hunting for a property, these grants get released usually in a batch. So that means that particular point of the market that price range is flooded with all of a sudden on allotment of buyers and there's so little to choose from right now in that price range which is really unfortunate and it doesn't apply to new construction. You know it's one of those things that you have to find something ready, willing, and able to be moved into right away. You know not something that has a tenant in it. You know you got to be able to purchase a property. You know that's near move-in ready by the time you close.
Kellie: So what happened in January? It was the 2nd time they did the lottery. They picked 61 people and in January 17th. They went to 18th. I want to say. They gave them-- they got selected. Within two weeks, they received a letter official letter. You are officially getting this grant up to 5% of the purchase price or 30,000 whichever is more because they max it at 30 and they basically sent 61 buyers into the market and because you have a housing income limit then that actually limits and sort of--.
Clint: Shoves the bottom of the market right up to the middle.
Kellie: Right. So you're basically-- they're all looking for condos or like homes at about a 400,000 purchase price or less. And so they basically flooded the market in a six month period of 61 buyers. And what the department in all fairness to them they may not have realized by [crosstalk] doing that is buyer of these 61 buyers. So they, you know, Buyer 1 puts in an offer for 285 on let's say, South Point. But Buyer 2 can pay 295 on that same condo. But Buyer 6 is like, oh, I'm pre-approved for 325. I want that condo and that created a fight for these first-time homebuyers. And now, they're overpaying are forced to overpay because they're trying to beat each other out because--.
Clint: And that eats up that $30,000 really quick.
Kellie: We didn't have 61 products, homes on the market at that time to accommodate the people.
Clint: And it hurts to see that one. It just disappeared.
Kellie: It was awful. I like wanted to pull my hair out. So working with the department now and educating them on that's what happened whether they realize it, I believe and I hope that they recognize at some point that when you get the grant in the past, it should be a full year. You have 12 months to take your time to you know find the property or whatever it is 12 months is fair.
Clint: It's growing pains though. I mean--
Kellie: It is.
Clint: --it's great that this is available but I think it has to be like a multifaceted approach to affordable homes because now, we got to deal with the supply side of it you know not just the ability for people to--.
Kellie: Release it when the housing-- affordable housing projects are ready for market.
Clint: Exactly.
Kellie: You know like yeah.
Clint: But of course, they're not really releasing anything like blows my mind where you have a chunk of land that says, workforce housing and then you get this up you know fast track process. It goes to it. That's workforce housing. And then they go before and it goes, nope shutdown, cannot, you know. I'm like, Wow, is that possible? And you know there's a-- to me, it's astonishing that I see that happen. But one of the things I've been imagining lately is there's going to be a variety of vehicles and you know one of the things that's very unique about Hawaii is we have a booming, booming industry here. One of the most healthy economies. But like almost every single economy across the United States, it's not diversified. We all have our specialties and our specialty is the low hanging fruit of selling our beautiful island and places to stay and things to do. Tourism is easy, easy, easy money and figuring out a way to catalyze it to make affordable housing is really important. So I mean I've always had this envisionment of having the county give a financial tool to developers where they can lower their costs to make it up where they build these homes. They build these affordable condos and then let's just say okay three years, four years, you can rent these out-vacation rental. You use that but you have a price ceiling in which you can list this home. So it's like--.
Kellie: This is-- keep talking. This is exciting. Okay.
Clint: Let's say you're at a 1000 square feet two-bedroom or three-bedroom place. You know you're going to come up. Normally something like that's going to be like 650,000, you know. That really should be 450,000, 425,000 or you know a home a standalone home that's going to be right now like 750, 799. Really? It should be like closer to 500,000. If they're going to be doing a vacation rental for you know however many you know three years, that's going to be able to generate 150,000 in gross incomes. They're going to net 60 or so after like management costs and cleaning and all that jazz depreciation of the property. You use that to cut those costs and then you have those price ceilings on the property. So that it goes in the market and then you [kind of back] the buyers who are looking for right now property for those grants. They're going to get a better option and all those capital gains aren't just going to the developer. I mean it's helping the developer make him more you know attractive product but at the same time, that money that it's generating is really going into the pockets of the buyer of that affordable home because that's the equity that's there. I mean obviously, it should be a [crosstalk] system.
Kellie: I'm going to go layman's terms on you. So I'm going to recap. Correct me if I'm corr-- correct me if I'm repeating properly. So potentially an idea would be that if a developer develop this piece of property and use it as an income source to help drive the costs down of the original development cost.
Clint: Correct.
Kellie: And so they can profit three, four, five years let's say. And now, they can-- and they would go into this mutual agreement ahead of time and then when they're making enough money to help them offset that huge infrastructure costs and development costs and maybe even profit, now, they can turn around and say, Okay, we got to reap this harvest for five years. Now on that first day of the sixth year, we now sell all the homes at a crazy affordable price because we don't need to have the buyer help us support the cost--.
Clint: Correct.
Kellie: --because the cost has already been supported by the vacation rentals because it was more of a business model initially--.
Clint: Precisely.
Kellie: --nd now turned into a beautiful affordable home.
Clint: Public partnership is--.
Kellie: Is that what we're talking about?
Clint: Yeah.
Kellie: Wow.
Clint: It has to happen somehow.
Kellie: That's last time I've heard that.
Clint: Well--.
Kellie: That idea. Holy cow.
Clint: I mentioned it once previously when--.
Kellie: Did you?
Clint: --I was talking to Paul Brubaker.
Kellie: That's aggresive and that's--
Clint: And you know--.
Kellie: --that's a visionary stuff right there.
Clint: It's a good idea because I mean like I said this breakational rental company or vacation rental company-- this vacation rental business here in Hawaii is the lowest hanging fruit. People want to be a part of the community. I mean they want to come and stay in home. You know they want to get to know Hawaii for what it is. And obviously, the best way to do that is to stay in a bed and breakfast. And the second-best way is to stay in like a home you know nearby in our communities. And you know people get to know the true Hawaii. But really what I want to see is more affordable pricing for people who live and work here already. And if you incentivize and create tools for developers you know and county is going to be the one that is going to release those tools. There has got to be obviously a review period to find out what those fair price ceilings are, how the developers himself are going to profit. I imagine you know there's going to be costs to reduction of course costs themselves like the management.
Kellie: Of course.
Clint: You know they're probably going to create a management company. You would-- one of the rules would be capping the rate for those management fees.
Kellie: Sure.
Clint: Let's just say 25% because that's typically a good competitive rate. So they're benefitting that 25%. That 75% of the revenue is going to be for running the rental and reducing the price.
Kellie: Right.
Clint: And all that capital gain is going to be going to the buyer into the property and gives us affordable homes on Hawaii.
Kellie: Right.
Clint: I mean it's kind of a joke to say you know a $500,000 house is affordable but compared to what we're paying right now it opens the envelope for a huge number of people too. I mean like you said 61 buyers are having the hardest time and they're literally [giving]--.
Kellie: So here's what happened--.
Clint: Grant.
Kellie: So because that was in January. All of the buyer-- so if you got on the list even though you were 1 through 61 because they did a poll for numbers, they still gave everyone a number. So the guy that was number 62 and 63 and you know even one of my clients was 383. You know they all got a number because as these people couldn't find it. Then they were just trying to pass that to the next person. And I believe they may have gone through the whole list. I believe. And what happened was because they had a limited time, they still had extra funds that were not used [crosstalk] because it didn't happen.
Clint: It's amazing.
Kellie: And they--.
Clint: Funds they couldn't use.
Kellie: Right because the buyers they didn't understand the full problem that was happening.
Clint: And you've got to hit it hard. I mean you know when you get one of these grants, you're got to be the first [crosstalk].
Kellie: I got close 2. I got to close 2 clients out of the 61 within that time period but then what happened is you saw in the paper in July, Oh, we've got this extra money that wasn't spent because those 61 people didn't close. And so they did a new lottery. And so the deadline I believe was August 18th or something or maybe it was August 30.
Clint: Yeah, it's just about to poll.
Kellie: Yeah. They just had that deadline and now they're going to poll again. So the question is because now in the beginning of the fiscal year, are they going to give that just six months? So we're going to have the same problem or they at least going to give it to the end of the year. You know so I have to work with Jessica. I haven't had a chance the call her. It's been a little hectic with low rates and you know crazy stuff happening in real estate but I'm-- yeah. So I love that I do. So you know I did not see you. There was a lunch last week in Hawaii community. What is a foundation Hawaii community? Shoots. I'm so sorry. This group the very viable group for the state of Hawaii that apparently gets a lot of private-public partnership funds had [an] affordable Task Force luncheon.
Clint: Oh. No, I missed that.
Kellie: And they invited certain people and I'm a very-- I mean as honest as I can be. I mean I may not tell you certain things about like my weight but I'll be honest I actually was not invited.
Clint: Oh, well.
Kellie: However, because I consider--.
Clint: Specially with your, yeah--.
Kellie: I've been fighting affordable housing since 2003 with just--.
Clint: Fighting for. Fighting for.
Kellie: For. For. Fighting for not with and so I was on commission. I'm on the Maui Planning Commission and I was on commission that day. It was Tuesday last week and two of the commissioners were invited. And so we got off early off the floor and one of them said, Hey, I got to rush off to this affordable housing thinker tank or something like that. And my ears went, What? Where are you going? I wasn't invited. What do you mean? And so I ask because I'm you know me. I'm kind of bold and a little bold for a local girl.
Clint: Can I take a [crosstalk]?
Kellie: I'm like, Can I be your plus one? And of course, my fellow commissioner was like, Sure. So I get there and they have like-- and the mayor was there and like all the people that had been fighting for and with and for affordable housing were all there. All the same people you know for some reason I was missed. It's fine. And they had all these like printed name tags.
Clint: Oh, no, not that Kellie girl. How did you find out?
Kellie: And it was like a seeded plate, right? So I walk in. And so they had their name tags and so she asked me my name and I'm like Oh, Kellie Pali. And then I kind of cutely humbly said, "Oh, you don't have me because I wasn't technically invited but I begged my commissioner, my fellow commissioner, to let me." She was like, Oh, no we've got three extra seats in--. So she put me on a table and each table was tasked to identify the problems of what we're dealing with affordable housing and then solutions and then we had to stand up at the end to present our ideas and we got to hear them. Now, we have what's called a [tig], a couple years back. Do you remember under [Arakawa]? There was a task force set up a [crosstalk].
Clint: Oh, yes. Okay, yeah.
Kellie: [--]. We did a [tig] where we were doing that for many months and I didn't get to be part of the beginning part of the [tig] which was a task force. But I was at towards the end and very same thing, we identified the problems and then we wrote a letter to the mayor and said, here are the problems, here are solutions, do something about it, right? And so that was very similar to last week. And all of the 10 tables by the way that were there I did not hear that idea you just offered--.
Clint: Oh, well, and it's something that only kind of came up in the last few weeks.
Kellie: And that was really exciting to hear. I know I think it's an amazing idea.
Clint: It seems--.
Kellie: Thinking outside the box.
Clint: It is and you know one of the things that my family did is we helped found Na Hale O Maui.
Kellie: I didn't remember.
Clint: which it's really been kicking butt right now. I mean they own a number of homes--.
Kellie: Steady. It's just been real steady.
Clint: And it's affordable in perpetuity. What I'm talking about is not affordable in perpetuity. It's not something that's going to be a continual affordability because it's going to-- that equity is going to go directly to the buyer. And when they come time to sell the property - let's just say you can put a limit - they can sell it in five, eight years whatever. They're going to get the fruits and the capital that has been paid by the-- you know a vacation or coming to Maui. So they're going to be you know really fortunate to get one of these affordable homes. Now, Na Hale O Maui is great because it's a wonderful tool that teaches people how to you know own a property because it's shared ownership between Na Hale O Maui LLC and as well as you know the buyer themselves. There's classes that they have to take. And the most important part 60% of them buy into the regular market anyways.
Kellie: Isn't that awesome?
Clint: So it's--.
Kellie: It just stabilizes them.
Clint: And it's working.
Kellie: It gets them-- it's like practice, right? It's like [crosstalk] homeownership practice, right? You get into Na Hale O Maui. You get the feel, the peace of mind of having a home. You get the comfortableness and the steadiness of the budget and being consistent with your budget. And actually learning-- I call it self-control like when we're out there, we have to have self-control. We can't buy everything we want. We're going to get in credit card debt and we're not going to-- we going to be priced out, right?
Clint: And did you work--.
Kellie: So all of that.
Clint: --directly with banks and stuff--.
Kellie: Yeah, all of that.
Clint: --[you know] they'll purchase a couple of foreclosures altogether so when--. And so it's good because they have extra opportunities and meet allotments for banks and their write off. So they're incentivized to work with Na Hale O Maui and it's-- I'm just really glad that it's working you know.
Kellie: But you said it earlier diversified. So Na Hale O Maui is one model. It's not a fit all model.
Clint: Oh, no. And it never will be but it works for [crosstalk]--.
Kellie: But it's a very important model. So.
Clint: --well. They definitely need to you know have quite a number of more homes to meet the demand in that section of the market and how they're able to benefit and teach people ownership. But this is on whole another model.
Kellie: It's amazing.
Clint: And this would be the next step.
Kellie: So the model you're talking about is almost I feel like the other balance so that like--.
Clint: And that--.
Kellie: You got really conservative. And you got really aggressive in somewhere in between like I love that. I love the ideas.
Clint: I think what needs to happen you know because it's [designed] to be a financial incentive. You know it's not supposed to be a regulation because the more you regulate things the more [money].
Kellie: Okay, say that again. It's design--. It should be, what?
Clint: It's designed to facilitate the process.
Kellie: Designed to be as incentive.
Clint: Incentive, yeah.
Kellie: That is my [model]. Everytime I go to the county council to testify, I'm like, I do not like to be a punisher. I don't want us to take the role that we're punishing people. Let's create the law so that we're remotivating people to do the right thing. Let's give incentives for the people who do the right thing instead of going around and assuming everybody's a lawbreaker and writing the rules for the people that are breaking them and in punishing them. I don't like that. I love that. Thank you for--.
Clint: And I mean the whole way-- the whole thing I look obviously, I want to diversify the economy here as much as possible. I'm a realtor. You know I obviously think in real estate terms. I have businesses as well. I started Maui paintball and it's really more of a passion business. You know it's-- And the funny thing is I've been actually talking about selling it for a little while. The problem is I love that business way too much.
Kellie: I can't, yeah. I can't see that.
Clint: It's so much fun to go out there, right? We just had our big Hawaiian Legends game. We had 150 people come.
Kellie: The community loves you. They love that property.
Clint: It's a blast and we donate so much to 501c3s and that's probably part of the reason we don't make a lot of money there. But you know it's really just it's what I love to do.
Kellie: It's your feel good, you know.
Clint: And there's so many other things that I'd like to see happen on the island. But even you know paintball, that's an activity. That's in the tourism industry, you know. A large amount of the income that our manufacturers make whether they're producing food stems from the real-- the tourism industry. You know the Maui Brewing is one of the few companies that actually exports but still a large percentage of their profits are coming directly from Hawaii and people that are vacationing here you know because we're providing a specific service or product that is consumed here by the people that are visiting. So you know figuring out a way to diversify, we've tried a number of things. You know to some success, some you know [unsuccess] like the supercomputer and you know and it's great. And we should still continue to work towards [our] plans. But you know the low hanging fruit of vacation rentals is so easy and it really goes to benefit-- you got to figure ways to have it benefit the local economy and the best way to do that. And I am one of the people who unfortunate as it is you know it's great to have a financial instrument where your vacation renting a home. Great. But really bed and breakfasts are the best way to do that. Because I mean it's a family. They live here.
Kellie: So we like bread and breakfast at Maui Planning Commission just so you know.
Clint: Most people don't realize that now with the new rule if you get a vacation rental license, you better have owned that property for five years. And I'm surprised because every time I show one of my own homes or I'm showing you know a client of mine. And they're more than aware that you have to own a property for five years before you can apply for a vacation rental license and they're not really doing that anyway. If they're going to be wanting that I've shown condos because that's the-- what they're there for.
Kellie: That's where their zone, yeah.
Clint: And you know for the bed and breakfast though you know people who live in Maui and it's a wonderful ability for them to go through a process and reinvest that money into themselves and the local market. You know as opposed to going outside corporations.
Kellie: Totally.
Clint: And again, it's the easy money of where we live.
Kellie: Right.
Clint: And it helps Maui's people. So I want to see more ways to do that. And I think this vacation rental program for developers--.
Kellie: I like it.
Clint: --is a good way. As long as it's regulated appropriately.
Kellie: Yeah, I think it's there could be some good pieces there that could be teased out. On the note of the bed and breakfast, I would just like to add that the Maui Planning Commission that's intact now with the current commissioners. They're pretty agreeable and supportive of the bed and breakfast model. They like it because like you said, the person living in the home is the owner. So they're a resident of Maui County so they're personally benefiting. So they can have affordability to live here and because they're in the home then they're actually and firmly responsible for any noise or safety concerns--.
Clint: Precisely.
Kellie: --because they're managing it within the-- under their own roof in their own their household. The vacation rentals are tougher market because the person is not around and sometimes if you hire someone supposedly the community feels that maybe they're not as responsive. Sb those are a little bit more strict but definitely, bed and breakfast is-- are pretty welcome from the community and kind of accepted and so from what we hear at least that planning floor. The people like that.
Clint: As long as it's done appropriately. I mean obviously, you got to meet the appropriate rules and zoning. And you're not going to be renting out a plastic shack on your property. You've got to make sure that it's permitted correctly and within the allotment of those rules. If you don't, you're going to get slapped and they're going to take away your license and just as they should. It's kind of a tough process to go through obviously, to make it a legal vacation rental. But there's you know certainly enough of an incentive to do it. But a lot of people don't realize. It is a ton of work. I mean you're running a little hotel. The thing I really like about it though is most people that come and they stay in a hotel here or anything like that they're not really getting the full understanding of what it means to be living in Hawaii. But you know you get a much better or more complete picture of what it is when you're actually in a home of a local person that lives here you know.
Kellie: So and I do that. I'm going to admit right now. When I go out of the country, [crosstalk].
Clint: You're staying in a B&B.
Kellie: Brazil. I've been to Japan three times this past year.
Clint: I'm so jealous.
Kellie: On Mexico.
Clint: I'm taking my daughter out there.
Kellie: Oh are you? I can. We need to have coffee and I'll help you. Give me the rope. But I don't. I want to-- so if you go into a hotel, that hotel technically could have been picked up and placed anywhere in the world and you wouldn't know where you were because you're in the hotel.
Clint: Yeah, it's a [crosstalk].
Kellie: And so I think tourists are now realizing. Even the younger generation, they want to know about the culture. They want to know about you know where they're at. And you get that by living in you know the resident's home. And so that's really a kind of a popular movement.
Clint: How does it go with loans? Just to bring it all back. So say you have a bed and breakfast and you have a loan on the property. Obviously, it depends if you're living there and the initial loan that you got then you're just going for a resident but if you're going in with the intent, I'm imagining that it would alter things. Obviously, yeah.
Kellie: It would because Fannie Mae is for residential and once you do kind of a bed and breakfast, it's borderline business.
Clint: What if it's like three years after you got your loan?
Kellie: Yeah. So if you get your loan, you're moving in, you realize, Oh, Maui allows for a bed and breakfast and I could potentially help pay my mortgage. And you turn it into the bed and breakfast after the fact. It doesn't matter as long as when you get the loan at that time your intention was primary. And so what we do after, so yeah, if you have a primary home, two years later you move to a different home. You don't have to refinance a loan and say it's now an investment. You can keep the primary loan financing terms on that home. You're not required to change it.
Clint: Oh, that's great. That's good to know.
Kellie: So you can just vacate it. Yes, the same would be in breakfast
Clint: The only thing that is flexible or moves around is your tax structure.
Kellie: Right. That's right.
Clint: So when you're going to be doing that--.
Kellie: That's right.
Clint: And of course, we're not tax attorneys were you know--.
Kellie: Of course.
Clint: --we're not accountants.
Kellie: So check with Maui County tax. Property tax [--].
Clint: But you know. Yeah. So you know it depends on your years. You know--.
Kellie: That's right.
Clint: --all properties base. Some people have a home office which allows him to get a discount. If you're going to be vacation renting it, you're going to better believe you're going to be paying the higher rate on that valued property.
Kellie: For sure.
Clint: So it's going to bump you know your tax basis. But the nice thing is in my experience, again, talk to your tax accountant. Is that it's dependent on the sections that you use. So if you're using 30% of your property and 30% of your assets is going to be taxed differently than the part that you live in.
Kellie: Right.
Clint: So it's fair.
Kellie: If you want more clarity, you could actually walk into the DMV over at the Maui Mall. The Maui County Property Tax Department utilizes the left backside of the DMV. So if you walk in, you'll see a black and white sign that says Maui Property Tax Department, go to the back--.
Clint: Oh, [I see].
Kellie: And you can follow it and you get in-person go there and ask the clerks all the questions you need if you get more clarity of classifications or tax rates and things like that.
Clint: Oh, that's great. So can you give your email address and website that you want to--.
Kellie: Yeah, so my company's Creative Financial and so it's would be www.creativefinancialhawaii.com because Clint, there's a Creative Financial in New York.
Clint: Oh.
Kellie: I did not know that. So we do creativefinancialhawaii.com and then my email is Kellie--.
Clint: Can they get loans here? No, I'm just kidding.
Kellie: I know they can't. And so my email is Kellie, K-E-L-L-I-E at creativefinancialhawaii.com.
Clint: All right.
Kellie: So it sounds long but easy to remember.
Clint: What's your number?
Kellie: Yeah, 808-891-9292.
Clint: All right. So and this is Clint Hansen with Maui Luxury Real Estate. The Hansen Ohana. Everybody knows us as the Hansen Ohana. My mom, dad, and we've all worked together forever. I've had my license 19 years. My dad had his 36 years. My mom has had hers for over 40. She doesn't like telling people that. But she's got a mountain of experience. And yeah, we're just a big happy family. Most people go to mauirealestate.net. I mean we're like the Facebook of you know except we're not taking all your data or information. We do have an option and just like those people that are looking for homes and they want to get those updates; you can create an account on our web page and you can search for those properties in price range. So as soon as it get on the market you know and you can throw it in because you've got to be timely when you know you're battling--.
Kellie: Quick.
Clint: --60 other people for these properties. So if you want to be the first to know it, that's why we have over 50,000 unique visitors using our website every single month [music] and you can always get this and all podcast at mauirealestateradio.com. Mahalo and Aloha. Thank you for coming in, Kelly.
Kellie: Aloha.

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