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Fri June 22, 2012
The Downside To Owning Your Own Island
Originally published on Fri June 22, 2012 5:41 pm
Who hasn't dreamed of having their own coral-fringed island, lounging on its sandy beach, coconut daiquiri in hand?
So the news this week that Oracle CEO Larry Ellison just purchased almost the entire Hawaiian island of Lana'i (price tag reportedly $500 million) may make most of us more than a little jealous. It's good to be Larry — or Johnny (Depp) or Richard (Branson) or Celine (Dion), to name a few others in the elite club of island owners.
It's not difficult to envision the benefits of having your own piece of water-bound paradise. But what about the downside? We talked to Chris Krolow, the CEO of Private Islands, a Toronto-based company that sells 20 to 25 islands a year through its website, newsletter and magazine, Private Islands.
Location, Location, Location
The old adage that real estate is all about location is doubly true when it comes to buying an island, which by definition carries certain obstacles to access. In short, you're likely going to need a boat. Or perhaps a jet, which means your island had better be big enough to house a runway.
"Most people who want an island are avid boaters," Krolow says. Ellison, who has competed in numerous offshore sailing races and owns his own elite sailing team, certainly qualifies. But even the most ardent boater wants relatively easy access to their island idyll.
Krolow recalls showing one couple an island in the Bahamas recently. "We spent 13 hours getting to it by cigarette boat, and it was sort of obvious that the husband and wife thought that was too much," he says.
Then there was that $28,000 steal that sold not long ago in Nova Scotia — a very remote part of Nova Scotia.
"If your island is near an area that is supersaturated or superdeveloped, like parts of 'cottage country' near Toronto, chances are the islands are going to go for a premium," Krolow says. "The opposite is true in Nova Scotia, where locals would never buy an island — they don't want to deal with the hassles of getting there, the weather and the fog."
Weather can be an obvious problem. Paradise can seem anything but, if there's a hurricane or tropical storm with damaging winds and dangerous squalls bearing down.
Blue Skies And Red Tape
Islands typically have their own ecosystems, and in many locations, you'll need an environmental impact study before you can even begin to think about development.
In the Bahamas, where Private Islands does a lot of business, that's likely to cost a cool $50,000 or so, Krolow says. And in Ontario, any island you buy has to be a minimum of 1 acre in area or you won't get a permit to build on it.
There's also the possibility that someone else will claim it's their island, not yours.
"Every once in a while, there may be someone contesting a deed on the basis of squatter rights," Krolow says. "It's happened in the past in Central America, and that's caused the deal to fall through."
And what if someone demands to use the beach on your island?
A couple who bought Dobbins Island in the mouth of Maryland's Magothy River in 2003 found themselves embroiled in a years-long battle with boaters and environmentalists over public access and development on the 7-acre island. The legal fight still isn't over.
What About Indoor Plumbing?
To avoid these environmental and land-use restrictions, many island shoppers look for the sweet spot between developed and undeveloped, Krolow says. But they could be in for a rude awakening when it comes to some of the costs and concerns involved with development.
"The most sought-after islands are the ones that have some development, but it's not necessarily reflected in the price because it's dilapidated or whatnot," he says. "That's because you can usually replace whatever was there without too many restrictions, and that can save a lot of time and money."
You might get lucky and have a good freshwater source of water on your island, but getting power from the mainland is "a big, big bonus," Krolow says. Otherwise, you've got to generate it yourself.
And hauling a generator, not to mention other building materials should you want to build anything on your island, isn't easy or cheap.
King Of The Castle
So an island that's already developed can be good, but you'd better like what the previous owner did with it.
Krolow cites one particular island in the Bahamas with an asking price of $10 million.
"It had its own runway, a series of buildings, sandy beaches and even power from the mainland," he says. "But it stayed on the market for a very long time and, in my opinion, sold for way under price because there wasn't a lot of 'vision' left."
That's because buying an island is something of a mini-exercise in megalomania — many owners want to make their own kingdom, not one inherited from someone else. Of course, once you've created your island empire, the flip-flop is on the other foot once you want to sell.
Perhaps more than any other type of real estate, an island invites the owner to "make their mark," Krolow says. "So islands that are already overdeveloped — something where that vision is already pretty much done — those might stay on the market for longer."
A Question Of Privacy
An island might sound like the perfect place to get away from the stresses of life on the mainland, but too much privacy can be stifling for some people. Celebrities may have a different problem.
Most of us probably wouldn't have to worry about being stalked on our own private island. Not so if you're Johnny Depp.
"In this era of Google Earth, an island isn't the best hiding place," Krolow says.