Vacation rental markets Hawaii versus Oregon

12 Replies

Hi, looking to get some insight on vacation rental markets. We have been looking in multiple areas, and have been looking into Hawaii versus Oregon coast . We were looking at Portland/Bend/San Diego but the prices are getting too high for us there.

Anyone have properties in these areas? As far as Hawaii we are looking at Big Island (Kona area) or Kauai. But mainly looking for an area with a good occupancy rate. Thanks all!

Do lots of research regarding Portland and Bend in regards to the vacation rental model. In Portland they are cracking the whip and have instituted some big changes that require you to live in the unit 9 months out of the year, as well as limiting you to one listing per host. The fines can be quite steep and the city really is going after people that are renting out SFRs as absentee vacation rental landlords.

I'm not as familiar with Bend but I think that they passed a vacation rental ordinance that only allows one per block. @Craig Jones is local to the area and may be able to chime in about those regulations.

Aloha @Christina Brown

For Hawaii vacation rentals, there are a few primary things to be aware of.

General Excise Tax (GET)

Transient Accommodation Tax (TAT)

Nonconforming Use Certificate

We have seen noticeable increases in tourism (arrivals and spending) since 2009/10, hitting new records recently.  Local economists are predicting mild growth over the next 2-3 years.

A safe assumption for current occupancy rates on Oahu is 80%, but a number of places are seeing more than that.  We have a client who recently purchased a vacation rental in Waikiki.  We touched bases with her three months after closing and she informed us that her unit was rented 27 days per month since closing.

There are other things to take into consideration as well.  Personal use, target clients, duration of ownership, etc.

Mr. Nau,  which building/unit size did your client in Waikiki purchase?  I have always been curious about getting into  that rental market but am unsure of the best approach.  Thank you

@Neal Collins I have heard about that, made me hesitant to invest there.  I would definitely need to look into that if we did decide to go with that area, which I do see us doing eventually.  The market seems pretty high right now though, but a great area.

@Isi Nau Thanks for the info. That is great occupancy! I would probably be looking more on the Big Island but places there seem to book up as well from what I have noticed.  It is definitely a place we are looking to hold for the long term, but it's good to hear that growth is still happening.

Hello @Christina Brown,

Sorry to be late to respond here, but wanted to chime in with a bit of a clarification based on  @Neal Collins comment.  In Bend they did revise the development code a couple years ago to limit vacation rentals to one per 250 foot radius unless you live in the home.  Bend does allow for higher densities in some specified areas, but the highly desirable, walk-able, close in neighborhoods are already pretty saturated and have become quite expensive.  We are looking for additional rental units and having a hard time finding anything that will pencil.

If Bend hits your radar again I'd be happy to share info about what I see in the marketplace at that time.

Best of luck to you!

@Isi Nau I know it's been a few years, but can an investor still make decent returns on Oahu with a vacation rental?  My wife and I just recently became interested in the idea and would like to learn more about it.  Some quick searches seem to indicate that the market in Oahu is somewhat unique (rules limiting short term rentals, lots of leaseholds, etc.).  Any insight you can provide is much appreciated.  What would be a reasonable price range for a 1-bedroom unit that allows STVRs?

Hey @Ben Lukes .  Right now our clients are lucky to squeeze out 50% occupancy.  Most of these bookings are 14+ days.  With all the uncertainty, visitors would almost have to plan on 14+ days just in case the State implements new travel restrictions. 

Local economists are projecting hotels to be at 50% occupancy by the end of 2021.  So I think STRs could be slightly better than that if their pricing is right.  2022 and 2023 should be much better.  We've seen some good improvements in the visitor industry so far (the last 40 days, when tourism opened back up).  If the US can make it through the Winter and the vaccine comes soon, I think the end of 2021, and definitely 2022-2023 will be good years.

Tourism opened Oct 15th.  In October we had 75K visitor arrivals.  10% of the number of arrivals in Oct. 2019.  But that's only 15 days in October.  And almost all of them came from the West coast of the US.  Japan has opened up, but less than 200 visitors came from there so far.  Hopefully Canada will open travel soon (another big market for Hawaii).  All that being said, there are still some major markets (pre-COVID) that haven't started arriving yet, which will be a big boost.

Yes, there are some unique aspects and regulations of the market in Hawaii, but nothing that can't be worked through.  If a property price seems way too low it is likely leasehold.  Unfortunately Zillow (and similar sites) don't do a good job of listing this information about a property.

75% of all 1 bedrooms in Waikiki will be between $375k and $500k. Most will come with one parking stall, which I would recommend. If the unit is a legal STR, it will definitely be in the $500k range.

Many people expected to see prices drop significantly after Aug 2019, when the City passed an ordinance allowing for better enforcement of illegal rentals.  We didn't see much in price drops.  We saw a lot of listings, but not a lot of price drops.  Even now with COVID, some units sell cheap, but not very many.  There's a ton of units on the market, but sellers aren't budging much on price.  Most of these owners had to put substantial down payments (many paid with cash) due to strict lending requirements.  Meaning these units aren't typically owned by average wage earners.  These are people with deep pockets, who can weather the storm pretty well.  For example, many units are being remodeled during this time since vacancies are low.  That is a strong indicator of the sellers' optimism towards the future of tourism, and also their financial health.

I hope this helps.  Please feel free to reach out.

@Christina Brown Feel free to DM me if you want to know persecutive for a local, born and raised here. Also probably able to be more candid in DM. I love my home State, but it had it's challenges for investors. I'm not a realtor, just happy to share info. I personally know a great Big Island Realtor that I can refer, Kauai I'd have to ask around but I have contacts.

@Isi Nau Very helpful, thank you.  Do you have any thoughts on which island is best from an investor's perspective?  I'll definitely keep you in mind if we start to get serious about buying a place.  Right now I think we'd be limited to paying around $300k for an investment property, so we might have to wait a bit.

@Ben Lukes sounds good!

The only investing we or our clients have done on the neighbor islands are single family homes (flips and long term rentals).  I'm not too sure about vacation rentals on the other islands.  Sorry about that!  But I'm sure there are good opportunities there.  It just comes down to preference, since most people plan to use their unit for personal use as well.