Investor Friendly RE Agent in Hawaii
I am starting to look into a vacation home in HI that I can use for a few weeks a year but rent out for the rest of the year. I really don't know much about the market there except an awesome two week vacation in Maui two years ago.
I have 8 years of real estate investment under my belt and I am looking for a decent return, perhaps around 7% Cap or more in a desirable location. Not sure if that is achievable. Can anyone recommend a realtor who is also an investor?
Thanks!
Roger
Alright, I was crazy to look for those returns... Started crunching numbers and that just does not seem realistic. Experienced VR operators, what is your return?
Thanks!
Roger
Hi @Roger Lin . We have a vacation rental condo in Kihei, Maui and bring in an average of $374/month after all expenses, including the mortgage. Your right, with the current prices in Maui, it will be difficult to get anywhere near a 7% cap on any vacation rental. We were very lucky and purchased our condo in 2012 and have seen prices really take off since, which has prevented us from buying another property there so far.
Median sales price for condos in Maui is at a 5yr high at $415K this last yr. The Kihei area has the most condos sold on the island and the mean there is $320K. The % of foreclosure and short sales were at 8% for condos last yr, compared to 34% in 2011.
As you may know the great thing that Maui does have that most places in the US will not have is really no "down" season. We currently live in CO (really thinking of moving to Maui as we actually think it can be easier to grow our investment business there than in CO...I can go more into detail w/ that later if you like), and have thought about buying a condo in the mountain ski areas, yet they are tough to fill in the non-ski months.
We've been consistently in the mid 80% range in terms of occupancy rates, and that's counting our 2-3 weeks we stay there each year as empty. So the occupancy rate in Maui can be amongst the best, if not the best in the US. However, costs are much higher, HOA fees are high, electricity costs, materials cost, etc... are much higher than the rest of the country. Also, you need to factor in the cost of replacing furniture, linens, and other supplies each year that you normally wouldn't factor in with a long term rental property.
Investing in a vacation rental in Maui is great, and we've been very happy with ours and would do it all over again in a heartbeat. However, you may just need to curb expectations when it comes to a decent cap rate/ cash-on-cash return. Then again, there are other reasons to invest in a vacation rental condo in Maui besides just the return on money, as it could be a place you plan to retire or use for a vacation every year. Factor in these variables and even if you don't gain the return you normally would on a basic long term rental home, it still may be a great investment for you.
By no means do we feel we are experts at this, but I hope this info helps out and I'll be happy to answer any questions you may have and share our experience with you.
