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Kona Coffee Farm For Sale, Part 1
14 March 2011


Hammock Can you imagine yourself living on a Kona coffee farm in Hawaii?  Warm weather all winter long, sunny days with gentle ocean breezes.  After a hard day's work on the farm you finally have a chance to relax.  The tropical birds are chirping in the distance as you sit on the lanai, sipping your mai tai and watching the sunset.  Tomorrow morning you will wake to the smell of freshly brewed Kona coffee that you grew yourself.  It's near the end of the season so tomorrow's work load should be light.  A few chores in the morning then you can spend the afternoon at the beach, fishing on a friend's boat, golfing at one of the many local courses or maybe just enjoying your favorite hammock and a good book.

If you've read this blog for long, you'll know that Kona coffee farming isn't all beauty and relaxation.  Still, there are plenty of those moments.  Farming isn't exactly known as a high paying job but what is lost in potential income is often made up for in improved lifestyle.  For many, it's more than a fair trade.

A few years ago, finding a decent Kona coffee farm for sale was a challenge.  Prices were high and inventory was low.  Then the real estate market crashed.  Things quickly changed from a seller's market to a buyer's market.  Hawaii had its fair share of foreclosures and some of those foreclosures were auctioned off at ridiculously low prices.

Foreclosures
Last year I mentioned a neighboring Kona coffee farm for sale.  It had gone through foreclosure and was supposed to go up for auction.  That never happened.  Apparently the bank owns the property but it has been stuck in some kind of bureaucratic limbo.  The property has been sitting abandoned this Blue House entire time.

Abandoned property in the tropics doesn't do so well.  The coffee trees are overgrown with weeds and the house is not exactly well maintained.  We hear the occasional ruckus from that direction but there's nobody living there and nothing left to loot.  The house is home to spiders, geckos and the occasional nesting bird.

If the property ever does come onto the market, it's hard to guess what the price will be.  Even if the bank prices it below market value, it would still be a challenging investment.  I suppose it could be a good deal for the right person.  None of that matters though because that property is not currently for sale.

Awhile back we were driving up our road when we noticed an Open House sign with an arrow.  It led us to a beautiful million dollar "coffee plantation" that we never knew was there.  The house was huge and luxurious.  There was a swimming pool, koi ponds, fancy landscaping and a full sized putting green.  It think there was also a small decorative coffee "orchard" but I wouldn't exactly call it a coffee plantation.

I forget the stated value of the property, I think it was in the range of $1.5 million.  I heard a rumor that it sold for far less.  With the luxurious house and landscaping, it looked like it was worth far more.  It's possible the property sold for cheap but I doubt it was crazy cheap.  We are still in Hawaii and property around here just can't be found for ridiculously low prices.

Leasehold
That "coffee plantation" was leasehold which is the only reason it was valued at 1.5 million instead of three or four million.  Leasehold means the buyer would own the house and other improvements (ex: coffee trees) but not the land itself.  Leasehold property is fairly common here in Hawaii.  Much of the land, including our farm, is part of a huge land trust created by the last Hawaiian princess back in 1884.  That trust is managed by Kamehameha Schools / Bishop Estates (KSBE).

Bishop With their history of corruption, KSBE is not exactly known for being fair and honest.  A couple years ago many Kona coffee farmers were forced out of their existing lease and into new agricultural leases.  Kona Earth is fully planted and productive so we switched to the new ag lease with only minor issues and a few thousand dollars in unexpected costs.  The owners having a hard time switching leases are mostly the smaller "farmers" that are living on farm land but not really farming full-time.  That million dollar "coffee plantation" is the perfect example.  If their old lease had expired and they don't have approval for a new one, that would make the property a very difficult investment.

Fee Simple
Fee simple is the term for what we think of as normal real estate:  you purchase the land, all its improvements and full usage rights.  Fee simple land is usually far more expensive than leasehold land.  Here is an example of a $6,750,000 (2008) Kona coffee farm that is fee simple.

I have some personal experience with the coffee farm in the video.  It is indeed a beautiful place with fantastic ocean views.  The pictures in the video don't really do it justice, it's even more incredible when standing there enjoying the quiet in person.  As gorgeous as it is though, the property does have its share of issues.  It is steep, rocky and dry terrain which makes coffee farming a challenge, not unusual for lower elevation farms in Kona.  The various parcels were sold separately and last I heard, none of them were on the market any more.  Nice property never stays on the market for long.  Their farm equipment sold fast too.  I have several inside contacts but I wasn't fast enough to purchase the farm tractor they were selling.

Insider Information
Even when the real estate market was at its weakest, it was never easy to find a good deal on a Kona coffee farm.  Now that it's picking up again, it will get even tougher.  There are plenty of bad deals out there, they're easy to find.  It's the good deals that are more difficult to find.

One of our neighbors has decided to put her farm on the market.  Her farm is actually a coffee farm, not a pretend coffee plantation/vacation home.  It has a new 35 year agricultural lease and has no major issues that I'm aware of.  The farm has plenty of coffee and it is all organic.  The coffee won second place in the 2007 cupping competition.

I don't know if the property has been fully listed so I'm not going to discuss the details yet.  I will say that the asking price is $699,000 for 13.63 acres with a 2 bedroom, 2 bathroom, 1400 s.f. house.  I will also say that although the price may sound high, you get what you pay for.  If you are interested, and it is in your price range, then this property is definitely worth a closer look.  I can recommend a good real estate agent or two if you'd like.  I'll post some pictures and more details next week.

House



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