STR Maui -Realist to make a profit?

Question

I’ve been interested in STR in Maui for quite some time. So many people have told me that it won’t cash flow and is incredibly hard to find one I can legally rent as a STR.

Has anyone been successful doing this? How is the market on Maui looking? I’m most interested in the Kihei/Wailea area.

I heard Brandon Turner say his makes $5k a month but not sure what the actual cash flow is after expenses. Does anyone have the link to his listing?

Mike Neubauer · Answer

Aloha @Carrie Giordano

I'm doing it full time, from here on Maui. They do very well for me, however there are some caveats. I can go over them in detail with you if you like, but essentially 1) You have to know where to buy. 2) You have to be very aggressive when something comes up that meets your buy box. 3) You have to play the long game.

The market is still red hot for STRs out here. At any given time there's only a dozen or so STR properties on the market that I would even look at. Of those there are usually between 0-3 that I would pull the trigger on (Usually closer to 0). I think right now there is one.

I have the link for Brandon's listing, but I'm not going to share that out of respect for his privacy. He doesn't manage his own listings anyway. If you have any more questions, I'm happy to share what I know. Just shoot me a DM. Mahalo!

Jessica Read · Answer

I was born and raised here. I originally had all long term condos and one single family home. After the 2nd or 3rd year filing taxes I realized I had a much bigger depreciation from the condos (purchased for 300-400K in 2018) than I had in my single family residence (purchased for 750K). My CPA explained that my condos had more depreciation because only the building itself can be depreciated -- not the land. (this is a much longer conversation).

Then, after reading rich dad poor dad, I realized breaking even was not a win. Cash flow was the win.

After this revelation (ha) I set off to sell all of my long term condos. I did 1031 exchanges and purchased short term rentals. I wasn't sure the first one would cash flow, but I was okay breaking even and having more depreciation on a much nicer condo(purchased for 962K). I got extremely lucky with the property manager I hired. He was a client of mine (I work in lighting) and I remembered how go getter he was when he came in to purchase lighting for his own short term rental condos. He is the reason my cashflow is so high.

Long story short, I now have 3 short term rental condos. 2 of which my property manager knew about before they hit the market -- this was key!! This gave me time to get my finances in order and an offer ready to send as soon as it hit the market.

Here is my breakdown after all expenses, cleaning, laundry, management fees, taxes, and mortgage (I put 30% down with 4% interest and paid cash for remodels)/HOA. Occupancy is 90-95% on all condos I own.

Condo purchased in 2021 for 962K + 200K remodel -- cashflow is 4K-5K a month (9-10K during high season DEC-MAR) Condo purchased in 2021 for 680K + 80K remodel -- cashflow is 2K-3K a month (6-7K during high season DEC-MAR)Condo purchased in 2022 (I have no mortgage on this one) for 950K + 200K remodel -- cashflow is 13-15K a month, but I only have 2 months of data on this one as I just launched in November

Hope this gives you some perspective!

Carson McGee · Answer

Hi Carrie,

There is some solid advice in this thread. I have bought six condos in Maui over the past few years and manage for other owners. We have been successful thus far but it does take patience and accurate underwriting (we strive for 15%-20% gross revenue vs price).

The zoning is relatively strict, if you narrow it down to the "condotel" resort-zoned complexes then you are fine. You have to account for the high HOA fees, potential assessments (especially if waterfront), and generally higher labor costs.

Our properties average 95% annual occupancy with strong ADR growth. The appreciation is very steady, as no new short-term rentals are being built on Maui. Ultimately you need to research the market and your buy box, the good deals require you to act fast.

Ryan Moyer · Answer

So you're saying Brandon's does $5k revenue per month?

I'm sure Brandon bought his place long ago at much lower prices and rates than are out there currently. I can't imagine that there's any STR-legal property for sale on Maui at current prices that would cash flow with $5k/month revenue, especially at current rates and with those big HOA fees.

I don't own anything there. I've heard from 3 separate investors in the area that 1br oceanfront condos are the sweet spot, and have done a lot of underwriting to try and make it work. Those condos are up around $1M - $1.2M to purchase now though. Occupancy rates are massive (up in the 90's) with nights rates getting as high as $400ish for the nicely renovated ones. You figure $330ish ADR for the whole year at that high occupancy and you're around $100k-$105k which is about what people are saying they get out of them. But again, at $1M+ purchase price with high rates and $800+/mo HOA fees and it's hard to make that pencil out. But on the plus side they'll probably keep appreciating in value forever as it's not like many more are being built.

Brian Weaver · Answer

Do you consider leasehold condos as STR purchase options, or is the risk of limited appreciation or of not getting your capital back when the land lease expires take leaseholds off the table? Do you focus on fee simple condos only as investments?

Erik Stenbakken · Answer

Though don't live there, I have family with property there and have watched that market CLOSELY for over a decade (daily listings for a few years). Take all that @Mike Neubauer says above VERY seriously.

Maui is very not-STR friendly. There are some spaces where it's still legal. But I've spoken to folks at the County many times and looked at the agenda on county board docket. When 9/10 items on the agenda are ANTI-short term rental items, that should tell you something. There are some protected areas (for now), and you'd better know where they are and don't stray from them.

And here's another fun fact: not everyone tells you WHY they buy there. I have it on good authority (first-hand) that some buy there to LOSE MONEY. Yep. If you are REPS status and lose money in one place (say, Maui) then that shelters income from somewhere else. Seems crazy right? But if you can lose money on paper AND have a place in Maui, it's a win-win. So know that some very savvy folks are in that market for reasons other than making positive cashflow. [none of this is commentary about Brandon Turner's place; it's not his investment I speak of].

Interview your agent carefully. This is not a market where you go to Zillow and call the listing agent (Metaphorically speaking. It IS possible a Zillow agent knows what's up). Point is, do your homework VERY CAREFULLY on Maui. There are other markets where the cashflow is way better. But then again, they are not Maui! ;-)

STR Maui -Realist to make a profit?

STR Maui -Realist to make a profit?

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