General Strategy

[Roger Lin]

I am an investor in D.C. I've been dreaming of moving to Hawaii for a few years. However, the reality is that my business is here, all of my business relationships are here, my kids go to school here and my family is here.

So, I thought the next best thing is to purchase a vacation rental, rent it out for most of the year and use it ourselves for a couple of weeks a year. I started looking into it. It seems that the prices are pretty high right now since I am not the only person trying to do this.

I was thinking that perhaps I should keep an eye out but just start saving up capacity and collect information on this and wait for the next recession to do this. Is this a sound strategy?

Another question, what types of financing options are there for vacation rentals?  Thanks!

[Dana R.]

I've owned two vacation rental condos in Waikiki since 2011. I decided to invest in Waikiki for a couple of reasons-- One, Oahu gets the most visitors out of all the Hawaiian islands and when people come to Oahu, they generally stay in Waikiki; two, Waikiki is a very international destination so if the US economy isn't doing well, then I'm not too worried since I get visitors from all over the world staying in my units. 

Once I narrowed in on Waikiki and a few buildings that I liked, I watched the MLS every day for a year before I bought my first condo. When it came on the market, I snapped it up because I knew it was a good deal.

So, I think you're smart to not jump in to the market until you know more about it and know what's a good deal and what isn't.

As for financing, in Hawaii anyway, condos are treated the same whether they are vacation rentals or not. The bank just sees property as a condo, not as a business venture. Since your condo would be an investment and not a personal residence, you'd probably have to put 25%-30% down.