Fourteen Kukui’ula homesites sold in four months, with eleven under contract is the headline. Kukui’ula’s location in one of two certified Kauai Opportunity Zones is the story.
Kaulu Neighborhood Homesite A view. The $1,950,000 Homesite A is currently under contract.
The Kaulu Neighborhood is the established 85-homesite neighborhood where homeowners are permitted to offer their properties as 7-day vacation rental homes.
In the past four months, six Kaulu Homesites sold from $575,000 to $875,000 with six homesites currently under contract.
Three Kaulu homesites are currently listed for sale from $625,000 to $895,000. Kaulu Homesite 61, listed for $895,000, includes community design review approved plans.
Kaulu Homesite 61 listed for sale for $895,000 includes design review approved plans
The Kahalawai Neighborhood features panoramic ocean, golf course, and orchard views. Each Kahalawai orchard homesite features a 7-day renting privilege. All other Kahalawai homesites feature a 30-day renting privilege.
Eight Kahalawai homesites sold from $675,000 to $950,000, with five homesites under contract.
Three Kahalawai homesites are currently listed for sale from $895,000 to $1,450,000. Homesite 28, listed for $895,000, is the neighborhood’s nearest property to the Kukui’ula Club facilities.
View from the Kahalawai Neighborhood
Kula Makai Neighborhood
The Kula Makai Neighborhood is the exclusive 19-homesite oceanside community within Kukui’ula. Two Kula Makai homesites have sold, and the one-acre Homesite N is currently listed for sale for $10,500,000.
Noho Kai Neighborhood COMING SOON
Twelve oceanview homesites are planned for the new Noho Kai Neighborhood, located on the mauka side of the new private road to the Kula Makai Neighborhood, will feature 7-day renting privilege, and are coming to market in the summer of 2019.
Kukui’ula’s Location in Kauai Opportunity Zone
According to the IRS, over 8,700 certified Opportunity Zones in all 50 states were added to the US tax code as an economic development tool, designed to spur economic growth and job creation in those communities nominated by state governors and certified by the Secretary of the U.S. Treasury. On Kauai, one Opportunity Zone is located on the island’s South Shore and includes Kukui’ula property. The second Opportunity Zone is located on the island’s North Shore and includes property in Hanalei and Ha’ena.
Incentives for Economic Development
The Tax Cuts and Jobs Act (TCJA), passed in December 2017, added the Opportunity Zones to the tax code, as well as 26 USC section 1400Z-2 to provide certain benefits for taxpayers investing in Opportunity Zone property.
The Opportunity Zones program is designed to spur economic development by providing three tax incentives to taxpayers:
- A taxpayer may defer paying tax on any prior gains invested in a Qualified Opportunity Fund until the earlier of 1) the date the investment is sold or exchanged, or 2) December 31, 2026.
- If the Opportunity Fund investment is held longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the exclusion is 15%.
- If the taxpayer holds the investment in the Opportunity Fund for at least 10 years, the taxpayer is eligible for an increase in basis of the Opportunity Fund investment equal to its fair market value on the date that Opportunity Fund investment is sold or exchanged.
Opportunity Zone Real Estate Investments
It is my understanding real estate investments must include substantial rehabilitation, doubling the basis within 30 months. The improved property must then be used in an active conduct of business, for example, renting of the property. Kukui’ula currently offers a variety of vacant homesites with 7-day, 30-day, and 6-month rental home privileges, depending on the neighborhood.
It will be interesting to follow the IRS publications as the department interprets 26 USC section 1400Z-2 applications developed by tax specialists. Please contact your tax specialist to determine how these new tax incentives may possibly work for you.
Looking for Opportunity Zone property on Kauai? Contact me — Lori Decker, Kauai Opportunity Zone specialist.