Maui vacation rental vs. long term rental

4 Replies

My wife and I are strongly considering buying a Maui rental property early next year. The areas I’ve been studying are Kihei and a few different resorts around Lahaina. I’ve spoken to a couple different realtors, but all I get from them is ,”this is a great buy.” I’d like to be connected with a numbers driven individual who could help steer us towards something that isn’t a cash flow disaster.

Questions I would have.

What’s the typical premium paid for a short term rental? Is the view worth the 100-200k?

Are we better of working through a local bank?

What complexes are known for having the best short term rental managers? How do you know if a unit has a special assessment looming? On and on.

I’m not new to real estate and helped my father buy and finance two properties on Oahu in the 2003 which he subsequently 1031k’d out of.

This post has been removed.

Well I guess my previous reply was taken down because I offered to discuss this with you further if you'd like.  Here is the info from my previous reply:

Aloha Brandon,

Honestly in our current market it is tough to find a good cash flowing short term rental if you plan on using a full service manager. There are deals out there but many of them are sold off market or you have to be very quick on the draw when one does pop up on the MLS. In our market you have MANY different management options and don't have to rely on the complex "in-house" managers, and I actually recommend against it. Their fees are higher and they often don't achieve higher revenues than the independent managers.

I'm not sure I understand your question: What’s the typical premium paid for a short term rental? Is the view worth the 100-200k?

Are we asking about the short term premium or the view? To give you an idea the entry level 2 bedroom Res condo's are trading around 350 currently. The 2 bedroom short term rentals are staring at 650. The additional cost for view is usually worth it as the guests primary criteria for booking is view and upgraded finishes.

For short term rental financing you almost have to work through a local bank. Many mainland banks will tell you they can finance them but when you get into the deal and they review the RR105C (condo data form) they end up falling apart.

There are some buying opportunities in the multi-unit long term rental market. Maui County recently passed a bill that increased the size and number of allowed accessory dwellings in several zoning districts.

Please let me know if you have any further questions.  Mahalo. 

@Patrick Franta

I appreciate your response. The info on using a local bank will certainly save us some time when we do take the plunge.

Since posting these questions I’ve looked at several pro formas and the numbers just aren’t rationale.

My question on the long term vs. short term was based on the cash flow proposition primarily. It appears short term rentals sell for a slight premium and would only make sense if the math did as well. We’re still looking, but I’m not interested in a “capital appreciation” investment that would bleed out 1k monthly.

The point on not using in house mgmt for rentals is interesting. I have much to learn about the short term mkt. Untill then, I’ll just keep chugging along in the Lafayette, Indiana mkt where the flow still makes sense.

Regards,

Originally posted by @Brandon Rollins :

@Patrick Franta

I appreciate your response. The info on using a local bank will certainly save us some time when we do take the plunge.

Since posting these questions I’ve looked at several pro formas and the numbers just aren’t rationale.

My question on the long term vs. short term was based on the cash flow proposition primarily. It appears short term rentals sell for a slight premium and would only make sense if the math did as well. We’re still looking, but I’m not interested in a “capital appreciation” investment that would bleed out 1k monthly.

The point on not using in house mgmt for rentals is interesting. I have much to learn about the short term mkt. Untill then, I’ll just keep chugging along in the Lafayette, Indiana mkt where the flow still makes sense.

Regards, 

Brandon, 

I'm an investor and wholesaler on Maui and have a couple off market vacation rentals available, as well as a couple residential properties that work as long term rentals. I believe all of them cash flow. They would be wholesale deals, so you'd have to be willing to do some rehab for most of them, but could have a couple hundred thousand in equity after rehab. 

I also know that Patrick Franta and Loren Clive are both excellent Realtors, so if you're looking for turn key you should talk to them. 

I'll send you a DM. 

 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here