Hi! Most likely this question has been asked so if anyone can help with this:
- I'm looking to acquire a vacation rental condo on Maui, HI (specifically Kihei, HI) and it looks like that all of the recommended property management companies here are outrageously expensive charging 25 - 35% of gross rental. Self-management is a possibility here I'm from the mainland (Chicago area) and even with self-management you have to have someone here on the island to be accessible on call (so you hire either a person for that as an example $150/month fixed fee OR some Property management companies will do it for $7/day just to pick up a phone). So the question is: what other options are available? For me running the numbers and it seems like it won't make too much sense to buy a vacation condo with this very high fees OR I have to have a trusted face here to make sure that the work to manage the property is done correctly (if I choose a self-management option with that fixed fee kind of option).
Any ideas or help is really appreciated as we either withdraw from the offer or proceed with it!
The high property management fees are why many people end up selling their vacation rentals... but 25-35% of gross rental income is pretty standard for vacation rentals anywhere. Have you had a couple of management companies there run an analysis of what they think your property will rent for?
As you mentioned, the other option is to self manage... this is a great option if you have the time to communicate and coordinate things for you property (cleaner, maintenance if needed, guest interaction). That really comes down to if you are comfortable with self managing and if you think you can reach the revenue number you need.
I have five vacation rentals in Kihei, Maui and get asked the same question all the time. The truth is investing in the islands from out of state is really expensive. Property management is 20-50% of gross. I’ve seen cheaper but wouldn’t recommend. In fact I wouldn’t recommend any of them.
I manage my own and depending on the size of the unit and location (studio, 1/1, 2/2) I can keep occupancy rates between 93-98%. Most management companies will get you in the 80s. Really, they don’t have the incentive or resources to give yours the attention it needs to get the bookings. In addition it is required that any property managers have real estate brokers licenses as well, which means you can’t just have a buddy on island help you out.
If you need to remodel your unit you’ll have to hire contractors at $150+ /hour. If you are on island you can do the work yourself or be the point man (owner/builder status) and hire handymen to help you out at $40-70/hour.
You can certainly self manage from out of state, though it will be tough from Chicago since you will be responding to guests late into the night (we are 5 hours behind you right now) and guests contact us about issues until about 10pm on a semi regular basis.
You will need good cleaners (very difficult to find) and a handyman who is solid and able to make your units a priority should something go wrong.
To be honest, I wouldn’t own a vacation rental in Hawaii unless I was able to live here and self manage, OR if I was able to purchase with cash and be ok with 80% occupancy rates and paying 30% management fees. It’s steep for sure, but if you’re cash heavy you’ll still cash flow and grow equity.
I know the Kihei vacation rental market as well as anyone and if you want me to look at your numbers and give you a real honest assessment of what your returns could look like let me know. Just shoot me a dm.
Sorry for all the bad news, but I think you should know exactly what you’re getting into before you drop the kind of money a vacation rental costs in this area.
Thanks you all for your helpful and honest replies and it was exactly what I was looking for!
Aloha. Mike provided a very accurate an unbiased assessment of our current market. I just spent all last week showing investors around Kihei looking at every single viable option every price point. And to be honest, none of them penciled out well unless you self manage. It’s just the way out market is right now. Price appreciation has outpaced rent growth and the cap rates have gotten squeezed to a point where returns are slim to none.
Unless you are buying strictly for the appreciation or can find a great buy off-market. The timing just isn’t great right now.