Anyone have advice about buying and short term renting a condo or apartment from a building? I see some deals that look decent and wondered if it's worth it and if the laws make it possible or a pain to short term rent these sort of units?
It sounds like it could work in an "resort area??"
Aloha @Sam Booth
I wanted to chime in as you have been getting some misinformation from other members though @Mark Waite provided good advice. Personally, I have and currently work with many investors looking for legal STR's and some of my clients are also looking for opportunities on Maui and Big Island. In the past 40 days, I've had 2 clients close on STR properties in Waikiki where the numbers looked quite attractive. For O'ahu, it is completely possible to buy a legal nightly rental building and be cash flow positive. Below is some key info it is best you are aware of.
* STR's can legally operate in Waikiki, Turtle Bay, Ko'olina and Makaha if the property is in the hotel/resort district AND the AOAO allows for short term rentals.
* If you need financing, best you work with a local lender that is familiar with STR units. However, most conventional lenders will not finance a unit that does not have a stove/oven. If you are interested in a unit that only has a kitchenette, I do have relationships with lenders who will finance it but the rate is considerably higher. You will need at least a 25% down payment.
* I have a relationship with a highly rated STR property management company. They charge 20% for full service and handle all marketing, cleaning, maintenance and will pay the GET, TAT, and OTAT tax on your behalf.
* GET, TAT, and OTAT taxes are paid by the guest.
* I recently had a client buy a beautiful 2 BR for $715k at Waikiki Sunset. This building was approved for STR's in Bill 41. A quality STR management company thinks it will gross $7-$9k/mo in current market.
* I also had another client buy a STR at Ilikai for $575K. It is expected to gross $4200-$5500/mo in current market.
* In currently market, you can buy a well maintained 1 BR in $550-$650k range and it will likely gross $5-$6k. To get an idea of units and highly rates, I recommend you visit Alii Beach Rental website.
* I have clients who live on the mainland but are self managing their property to avoid paying a PM fee. Obviously this greatly reducing operating expenses.
* VERY IMPORTANT: The STR market is in a period of uncertainty. Bill 41 is scheduled to go into effect Oct 23rd, 2023. Due to this bill, STR owners are supposed to register their units with the Department of Planning and Permitting (DPP) to obtain a registration number in order to legally operate their STR. At this time, it looks like the DPP will not have the registration process in place by Oct 23rd. There is uncertainty what will happen then. For this reason, I'm advising my clients to wait to buy an STR here until we see how this all plays out - unless they have high risk tolerance.
Happy to answer any questions you have - I am here to serve you.
Anyone have advice about buying and short term renting a condo or apartment from a building? I see some deals that look decent and wondered if it's worth it and if the laws make it possible or a pain to short term rent these sort of units?
It sounds like it could work in an "resort area??"
Hey @Sam Booth, with all the regs in Hawaii it is something that I have avoided. The pandemic restrictions nearly killed off a bunch of STR owners. Politics aside, you have to buy in the right place as there are so many restrictions that change from complex to complex to neighborhood it can get pretty boggling.
You first step is to get a STR knowledgeable real estate agent local to get started. They will know much more about the in's and out's.
Assuming you mean Honolulu?
Do your homework. Lots of it. Hawaii is cool for lots of things, but there are MANY challenges to owning there. The tide is definitely against short term rentals in many areas. Really, really, REALLY dig before you buy. Every county there is different, so what works on the Big Island will not work on Maui, will be different on Oahu. Tread carefully. There are also different types of deeds (not all are fee simple). Know what you're doing there before you do it.
As @Michael Baum said, you need a REALLY knowledgeable agent. Not just any agent.
My husband and I just came back from Maui for a week-long vacation. We rented a one-bedroom condo right on the beach (older building, but comfortable, and literally 100 yards from the ocean). For 7 nights, the entire bill was $1500 (including cleaning and other fees). After subtracting the fees and PM commission, the owner is probably getting $700 i.e. $100 a night. After subtracting overhead like utility, tax, insurance, the net income is probably $75 a night. The unit would sell for about $1M according to Zillow. I don't know how the owner possibly makes a profit. They either bought it back in the 1980s for $100k, or they use it themselves and only count on the rental income to offset some of the expenses.
Aloha Sam,
I run a brokerage in Hawaii with agents on the various islands, and this is a question we hear a lot. Each island has their own set of rules regarding short term rentals, and it’s critical that you understand the rules, or have an agent who knows them well.
In addition to the rules, there are other factors that may explain why one property is priced differently than another. Condition, location and ownership type will impact the price.
Happy to discuss further offline if you want.
Mark Waite
My husband and I just came back from Maui for a week-long vacation. We rented a one-bedroom condo right on the beach (older building, but comfortable, and literally 100 yards from the ocean). For 7 nights, the entire bill was $1500 (including cleaning and other fees). After subtracting the fees and PM commission, the owner is probably getting $700 i.e. $100 a night. After subtracting overhead like utility, tax, insurance, the net income is probably $75 a night. The unit would sell for about $1M according to Zillow. I don't know how the owner possibly makes a profit. They either bought it back in the 1980s for $100k, or they use it themselves and only count on the rental income to offset some of the expenses.
Aloha @Sam Booth
I wanted to chime in as you have been getting some misinformation from other members though @Mark Waite provided good advice. Personally, I have and currently work with many investors looking for legal STR's and some of my clients are also looking for opportunities on Maui and Big Island. In the past 40 days, I've had 2 clients close on STR properties in Waikiki where the numbers looked quite attractive. For O'ahu, it is completely possible to buy a legal nightly rental building and be cash flow positive. Below is some key info it is best you are aware of.
* STR's can legally operate in Waikiki, Turtle Bay, Ko'olina and Makaha if the property is in the hotel/resort district AND the AOAO allows for short term rentals.
* If you need financing, best you work with a local lender that is familiar with STR units. However, most conventional lenders will not finance a unit that does not have a stove/oven. If you are interested in a unit that only has a kitchenette, I do have relationships with lenders who will finance it but the rate is considerably higher. You will need at least a 25% down payment.
* I have a relationship with a highly rated STR property management company. They charge 20% for full service and handle all marketing, cleaning, maintenance and will pay the GET, TAT, and OTAT tax on your behalf.
* GET, TAT, and OTAT taxes are paid by the guest.
* I recently had a client buy a beautiful 2 BR for $715k at Waikiki Sunset. This building was approved for STR's in Bill 41. A quality STR management company thinks it will gross $7-$9k/mo in current market.
* I also had another client buy a STR at Ilikai for $575K. It is expected to gross $4200-$5500/mo in current market.
* In currently market, you can buy a well maintained 1 BR in $550-$650k range and it will likely gross $5-$6k. To get an idea of units and highly rates, I recommend you visit Alii Beach Rental website.
* I have clients who live on the mainland but are self managing their property to avoid paying a PM fee. Obviously this greatly reducing operating expenses.
* VERY IMPORTANT: The STR market is in a period of uncertainty. Bill 41 is scheduled to go into effect Oct 23rd, 2023. Due to this bill, STR owners are supposed to register their units with the Department of Planning and Permitting (DPP) to obtain a registration number in order to legally operate their STR. At this time, it looks like the DPP will not have the registration process in place by Oct 23rd. There is uncertainty what will happen then. For this reason, I'm advising my clients to wait to buy an STR here until we see how this all plays out - unless they have high risk tolerance.
Happy to answer any questions you have - I am here to serve you.
Hey @Bryan Vukelich, on those properties you listed, what are the expenses on that gross?
call these guys. I get their newletter all the time. They seem current with str and ltr legislation, which seems to change on a whim.
Hey @Sam Booth!
I would advise you to tread carefully when buying condos or apartments. If you are planning to use it as a short-term rental make sure the building has at least a couple of years in its books of allowing people to operate legally and reasonably without major fines. A simple call to the building manager can answer this question quickly for you!
Hope this helps and don't hesitate to reach out if you ever need anything!
For Waikiki Sunset, monthly AOAO fee is about $950 and covers: AC Central, Electricity, Hot Water, Sewer, Water and property tax is about $180/mo.
For Ilikai, monthly AOAO fee is about $575 and covers: Cable TV, Hot Water, Sewer, Water and property tax is about $750/mo.
Property insurance is under $1k annually and marketing expenses depend on whether you self manage or on the management company. Hotel operators usually bill owners for marketing costs, while some 3rd party management companies charge that to the guest.
Happy to answer any other questions you have.
Thanks @Bryan Vukelich. Not terrible on return. There is only one place for sale at that place at 640k. 1/1. Thanks!
My pleasure @Michael Baum - and yes, inventory for STR's on O'ahu is very tight right now and still a lot of interest from buyers.
I have clients making good returns on Condos on the Big Island. Rules for STVRs are pretty clear here, either you buy in the resort zone, a grandfathered Permit or do Hosted rentals. We are also seeing good return on 30+ day rentals. With Properties starting at $300k the Big Island can be a good place to get into the Hawaii Market. Also have to be sure you include the person use for you, friends and Family in your returns. Owning something is Hawaii is Magical.
I am a realtor on Oahu and have worked with vacation rentals for years. Recently the government banned STR's for owners on most areas of the island, but there are a few options for legal vacation rentals on different parts of the island. 1. On the north shore, the Kulima Estates and Ocean Villas are legally permitted to be STR's. 2. In Honolulu, the Illikai Hotel and Luxury Suites are legally permitted to be STR's. 3.In Ko'olina, near the disney aulani resort, the Ko'olina beach villas, Marriot's Ko'olina Beach Club, and Makaha Shores are legally permitted to be STR's. In all of these areas there is definitely some really good investments to be found, especially now that there is less competition.
Aloha Sam,
I run a brokerage in Hawaii with agents on the various islands, and this is a question we hear a lot. Each island has their own set of rules regarding short term rentals, and it’s critical that you understand the rules, or have an agent who knows them well.
In addition to the rules, there are other factors that may explain why one property is priced differently than another. Condition, location and ownership type will impact the price.
Happy to discuss further offline if you want.
Mark Waite
Your response to this post really helps me see where I want to invest and how. Thank you so much. I had previously considered short term a little but was always more focused on long term. I am grateful to be reading this because I can see that I don't want to get into that arena.
I'm also new to investing in Hawaii and would love to connect with and learn from you how I can add value to the market here.
I have clients making good returns on Condos on the Big Island. Rules for STVRs are pretty clear here, either you buy in the resort zone, a grandfathered Permit or do Hosted rentals. We are also seeing good return on 30+ day rentals. With Properties starting at $300k the Big Island can be a good place to get into the Hawaii Market. Also have to be sure you include the person use for you, friends and Family in your returns. Owning something is Hawaii is Magical.
Once again, I see that YOU are the guy I need to connect with. I'm learning so much from reading your responses and I really appreciate it. I'm grateful for you sharing your knowledge and really looking forward to getting into the Hawaii market.
My husband and I just came back from Maui for a week-long vacation. We rented a one-bedroom condo right on the beach (older building, but comfortable, and literally 100 yards from the ocean). For 7 nights, the entire bill was $1500 (including cleaning and other fees). After subtracting the fees and PM commission, the owner is probably getting $700 i.e. $100 a night. After subtracting overhead like utility, tax, insurance, the net income is probably $75 a night. The unit would sell for about $1M according to Zillow. I don't know how the owner possibly makes a profit. They either bought it back in the 1980s for $100k, or they use it themselves and only count on the rental income to offset some of the expenses.
Had you not posted this, I wouldn't have learned the crucial information you shared here. Thank you for sharing your experience and knowledge here. I'm actually most focused on BRRR with multi family and single family homes for LTR. I've really narrowed my perspective over the last couple days reading from good folks like you. Thank you!
Hey @Bryan Vukelich, on those properties you listed, what are the expenses on that gross?
I'm also VERY interested in this. Thank you for asking.
Anyone have advice about buying and short term renting a condo or apartment from a building? I see some deals that look decent and wondered if it's worth it and if the laws make it possible or a pain to short term rent these sort of units?
It sounds like it could work in an "resort area??"
I am one of that STVR buyers. But every island and town is very different.
I have run the STVR for a few months and I love it, not because of the financial part ; but because finally I can WFH and retire in Hawaii with a manageable cost.
I have to say I'm emotionally attached to Big Island and Maui only though.
The next factor is the HOA fee and FS/Leasehold.
Aloha @Sam Booth
I wanted to chime in as you have been getting some misinformation from other members though @Mark Waite provided good advice. Personally, I have and currently work with many investors looking for legal STR's and some of my clients are also looking for opportunities on Maui and Big Island. In the past 40 days, I've had 2 clients close on STR properties in Waikiki where the numbers looked quite attractive. For O'ahu, it is completely possible to buy a legal nightly rental building and be cash flow positive. Below is some key info it is best you are aware of.
* STR's can legally operate in Waikiki, Turtle Bay, Ko'olina and Makaha if the property is in the hotel/resort district AND the AOAO allows for short term rentals.
* If you need financing, best you work with a local lender that is familiar with STR units. However, most conventional lenders will not finance a unit that does not have a stove/oven. If you are interested in a unit that only has a kitchenette, I do have relationships with lenders who will finance it but the rate is considerably higher. You will need at least a 25% down payment.
* I have a relationship with a highly rated STR property management company. They charge 20% for full service and handle all marketing, cleaning, maintenance and will pay the GET, TAT, and OTAT tax on your behalf.
* GET, TAT, and OTAT taxes are paid by the guest.
* I recently had a client buy a beautiful 2 BR for $715k at Waikiki Sunset. This building was approved for STR's in Bill 41. A quality STR management company thinks it will gross $7-$9k/mo in current market.
* I also had another client buy a STR at Ilikai for $575K. It is expected to gross $4200-$5500/mo in current market.
* In currently market, you can buy a well maintained 1 BR in $550-$650k range and it will likely gross $5-$6k. To get an idea of units and highly rates, I recommend you visit Alii Beach Rental website.
* I have clients who live on the mainland but are self managing their property to avoid paying a PM fee. Obviously this greatly reducing operating expenses.
* VERY IMPORTANT: The STR market is in a period of uncertainty. Bill 41 is scheduled to go into effect Oct 23rd, 2023. Due to this bill, STR owners are supposed to register their units with the Department of Planning and Permitting (DPP) to obtain a registration number in order to legally operate their STR. At this time, it looks like the DPP will not have the registration process in place by Oct 23rd. There is uncertainty what will happen then. For this reason, I'm advising my clients to wait to buy an STR here until we see how this all plays out - unless they have high risk tolerance.
Happy to answer any questions you have - I am here to serve you.
Hi @Eduardo Bilbao - I just want to clarify that the STR situation on O'ahu has cleared up significantly and things have turned out quite well. Department of Planning and Permitting opened up the STR registration on October 24th, 2022 and once you submit the required documentation and pay the fee, you will receive authorization to do nightly rentals. Key thing is that your building has to be recognized as vacation rental building and the building association has to allows STR's. Clients have told me it the entire process went smoothly for them.
So at this point, I see no reason not to invest in an STR on O'ahu if it fulfills your real estate goals.
Aloha,
Hi @Eduardo Bilbao - I just want to clarify that the STR situation on O'ahu has cleared up significantly and things have turned out quite well. Department of Planning and Permitting opened up the STR registration on October 24th, 2022 and once you submit the required documentation and pay the fee, you will receive authorization to do nightly rentals. Key thing is that your building has to be recognized as vacation rental building and the building association has to allows STR's. Clients have told me it the entire process went smoothly for them.
So at this point, I see no reason not to invest in an STR on O'ahu if it fulfills your real estate goals.
Aloha,
Yes I am aware that part of the law was halted. I am very happy for that but it was only halted was not removed. Also there are other sections on the Bill that many people were unhappy about. I personally was not willing to make a $3M+ investment to operate just fine for 6 months and then they revert the law back or come back with some other BS. But this is just me being risk averse.