Do you own an investment property in Maui? If so, I am interested in hearing about your experience with property managers, as well as rental income. I am considering 1031 exchanging a townhome I own in Southern Cailfornia for a condo in Maui which would be rented out as a vrbo. The research I have done so far indicates I could double my monthly cash flow doing this and have a free place to stay when I go on vacation in Maui and be able to write off any travel expenses incurred to 'check on' the condo. Sounds almost too good to be true - what am I missing? Thanks in advance. :)
@Gloria R Lowen It seems like the biggest barrier to success is the HOA fees in Hawaii. Not uncommon to see $1,500 + per month. Varies depending on property type/location.
What types of HOA dues are you coming across in Maui on the deals your looking at?
Yes I have noticed that HOA fees are extremely high. In the ROI projections I ran, I put in $1200/month. It seems to depend on the amenities in the complex. I am seeing HOA fees running from $500 up to $1600/month. In a lot of cases the fees include everything except phone (which isn't necessary anymore) and in some cases cable. And even with the fees that high my calculations are still showing decent passive income cash flow.
@Gloria R Lowen You can do very well with a vacation rental property on the island. As @Alex Bekeza stated, HOA fees are high but it is what it is, you cannot avoid them. You can still do very well even after taking them into consideration. Like everything in real estate, location is critical. There are some areas that will have a lower average nightly rate and occupancy rate because they are farther away from the local amenities. But the price point is also lower.
Also, when doing your research, steer clear of leasehold properties. They will is a significant monthly expense on top of your HOA fees.
Decide if you want to manage the rentals or if you are going to hire a local property manager. When doing analysis for my clients, I use a conservative estimate of 25%. You can get close to 20% but any lower and you run the risk of sacrificing service for a few dollars, and that results in bad reviews.
It is possible to cash flow positive on a property here but you have to really look at the numbers. It is a strong sellers market for vacation rental condos due to lack of inventory. That being said, I have clients who continue to be buyers because they can still make the numbers work well.
@Mark Waite Are there any condominium complexes over there that are being run more like hotel resorts with one manager for the entire complex but offering investors the opportunity to buy a single unit? (Such as "The Grove" in Orlando)? I find the idea intriguing and Hawaii more appealing.
@Jacqueline Gardiner Yes, we call them condotels. They have a front desk, like a hotel, run by the the on-premise property manager, where guests check in. Each individual condo owner can choose to have them manage their property or go with an outside third party property manager. In any case, state law requires you to have an on-island emergency contact (e.g., the property manager).
The plus is that the front desk is less confusing to your guests and they have on-premise support for emergency situations. The bad is that the tend to charge a lot more than an off-site manager (usually in excess of 35%). You have to decide which is more preferable to you.
There are some high end luxury resorts, such as the Ritz, Montage and Andaz, that require you to use their property management services. But, by and large, you can buy an individual condo in a complex and hire a property manager of your choosing.
Hope this helps!
Thank you Alex Bekeza, Mark Waite and Jacqueline Gardiner for your posts on this thread. There are a lot of considerations to owning a vrbo in Maui while staying on the mainland. As has been pointed out, property management fees are running from 25% - 36%. That's a lot of the net going to someone else, and yet it is necessary in order to keep the rental unit close to full occupancy and generate the needed revenue.
Great info here. Also looking at Maui or Oahu for a STR property.
Aloha @gloria r lowen! I own two vacation rentals on Maui. I manage them myself, as well as managing another one for a client. PM me with any questions.
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