Where to start

[Todd Rector]

Hello, I'm wondering if anyone can give me some insite on purchasing a STR in Maui?

[Mike Neubauer]

Aloha @Todd Rector,

I started as a short term rental investor here on Maui while being a firefighter on island.  My wife is an investor and agent here and the one that represents probably a lot of people you know.  I tell you this to share that 1) I know where the bodies are buried (so-to-speak) in the different condo complexes here on Maui and 2) to establish credibility.

There's a few things you need to understand before investing on Maui.  This is not to scare you away, but just to shed light on the market out here, as it is much different than any of the other areas we invest in. 

1) Forget SFHs. You won't get a permit to rent a single family as an Airbnb, and anything rented for less than 180 days is considered a short term rental on Maui. So that leaves condos. Not all condos are zoned equally or allow for STRs. Some allow for it but are zoned apartment. Others allow for it and are zoned Hotel. There's a big difference, and while unlikely, those zoned apartment could get their ability to STR taken away. To know which ones are which, you want an investor friendly realtor or someone who really knows the market. A lot of agents haven't been here long enough to know how to pronounce the cities they live in. Finding a good one is harder than it seems. I say this because I've worked with a lot of them. Many are nice, but most aren't investors and don't know how to look at numbers like an investor does. Of course, I recommend my wife as she grew up here, was an investor before she was a realtor and is (in my humble opinion) the best out there, but there are a few others that I can recommend as well.

2) Be prepared to put down 30% or more.  That might not sound enticing, but that's reality.  You'll hear of people saying you can do it with less down.  Not likely.  Most condo complexes that are STR zoned are considered Condo-tels.  It's like a cross between a condo complex and a hotel, they have amenities and banks hate them because they aren't able to sell those loans.  Because of that they require more down payment to keep them on their books.  30% is going rate.  If you want to cash flow, you may be looking at closer to 50% or more.  Sorry, that's the harsh truth. 

3) Sounds terrible, right?  So, why would anyone invest here?  Appreciation.  Maui is a mess right now and most investors should probably avoid investing here.  However, if you are cash heavy, don't need to rely on cash flow, are looking for more of a lifestyle play, and have a long term vision and runway, the appreciation we've seen here is incredible. And they're not building any more short term rentals. It won't happen.  So, if you were to buy a hotel zoned short term rental condo and have the cash to drop $350k or more on a down payment, potentially lose money each month but are able to wait it out 5-10 years, you could be looking at insane returns.  I sold a property last year for 3x what I paid for it 6 years before.  The market has shifted out here now though. It is definitely a buyers market and there's only a few properties I'd be interested in. 

The vast majority of investors aren't going to be able to make the numbers on Maui work. I'm not sharing all this to scare you away, it's to give you a real picture of life on the ground here.  If you're still reading this and are not scared away, if you have healthy enough reserves and if you are willing to play the long game, then DM me, and I'll help guide you to get a great place.

Aloha!