hi all! super newb here but the husband and i are looking at ways to eventually move to oahu with two properties both paid for in cash, one to live in and one to rent out.
Situation: We currently have money from a previous home sale here in los angeles that we can use as a downpayment for a buy and hold property in waikiki that we can use for short term rental(airbnb,vrbo). the hope is that it can cashflow itself (for the most part) till paid off then we can sell our current property in los angeles to buy another property in oahu in cash.
The numbers: Our budget is around $185K with 20% down w/ maintenance (hoa) fee of max $1,000 per month w/ all utilities included. plus management fees and all other overhead cost that im really not familiar with in terms of purchasing a rental property in waikiki (taxes etc.)
My main question is, for those in the know, do you think we'll clear $2,000 a month enough to cover the mortgage plus maintenance fees? we make an ok enough income, no debt and frugal enough to cover any other overhead cost ( vacancies, maintenance, etc) that might arise. As always, i dont know what i dont know so any other information you can give me to paint a clearer picture would be greatly appreciated! Thanks so much!
I'm not familiar with the Hawaiian market, so take this with a shaker of salt, but if you're not grossing at least $2k a month the property isn't worth owning (as an STR). That's my rock-bottom cover-my-nut number in the slow season for my properties in the Smokies, and I hit it, no problem. That said, I'm not sure if you'll find anything worth owning (as an STR) in Waikiki for $185k.
Hopefully some of our Hawaii investors will chime in with some actual insight and tell me where to stuff my speculation. :)
thanks so much @Julie McCoy im looking at fee simple properties in waikiki on the hotel district, these are tiny units (250-350 sq ft) studios that are made for STR. they go anywhere from 150-200K at the bottom for the older buildings and obviously up from there. the killer is the maintenance fees..anywhere from $500-$1000 per month.
@Carmela Zaragoza After I responded to your post I went on Realtor.com to poke around a little bit, I see what you're referring to. Those maintenance fees are killer!!! It'd be worthwhile to go on AirBNB/HomeAway and seeing what similar units are renting for and how full their calendars are. Now is probably a good time to look, too, 'cause I imagine summer gets booked out reasonably far in advance, so hopefully that would give you a fairly decent idea of demand and price for those kinds of units. (and of course you'd want to see what they're asking for in the winter months, though you won't be able to get as good an idea of occupancy right now)
@Julie McCoy right? theyre insane, the only upside is they usually cover all utilities.but thats a great idea watching the airbnb rental trend in that vicinity specially now that summer is coming. thanks again!
Standard due diligence; I would find a realtor in your target market that kills it. They should be able to answer most of your questions. Then find a vacation rental manager that kills it in that market to confirm the average nightly rates, average occupancy you can expect, etc.
When you’re ready to talk to a lender call Darren Au at Primary lending. I’ve used many lenders, but since I was referred to Darren I’ll never use anyone else. Trust me. And let him know I referred you, he works with many of the local investors here.
If you are "super newb" then your first step is not finding something to buy. You need to thoroughly understand the many regulations and steps and processes extremely well to run something like this. And property managers are not necessarily the answer.
If HOA, do they even allow short-term rentals? Do the jurisdictions currently restricted? Could they restrict in the near future to like 30 day min? Owner-occupied only? Does that area allow short-term rentals? Is it near areas that strongly restrict short-term rentals that may impact the jurisdiction that you were planning to be in? What kind of competition do you have? Is the market saturated? Are lots of short-term rentals popping up there which may hurt you in the future?
You are asking the wrong questions.
@Carmela Zaragoza One thing to consider with buying STR is that lenders typically require at least 30% down. These tend to be higher risk loans, so they want more skin in the game. Also, another thing to factor in is the TAT and GET with STR.
I've represented a client who bought in this price range in Waikiki, so it's certainly possible to cashflow.
I’d kill for $500-$1000 maintenance fees. My cheapest is $1200 and my highest is twice that.
If I wasn’t making so much money I’d be upset. It’s the cost of doing business. Just put it in your expenses when you run the numbers and see if they work. I’d gladly pay $5000 a month if the returns more than cover them.
@Carmela Zaragoza - I have no experience in HI, but I would suspect that $2k/mo would be no problem in the that area, especially if you follow some STR best practices and put in the effort to get the listing started on the right foot.
Similar to what @Julie McCoy said, we have 4 STRs in Philadelphia and our tiny studio apartments gross $2k+ in the slow months without issue.
It sounds like you have some more research to do, but could be a great opportunity.
Good luck and keep us updated!
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