Palo Alto, CA · Member since 2015 · 3 posts · 1 vote
Hi - I'm located in the bay area and am interested in purchasing an investment property in Hawaii (Primarily interested in Kailua or Kahala on Oahu, though am also interested in other areas or opportunities in Hawaii) and am interested in understanding the various STR rules and regulations there. As I understand, there are very few STR licenses that are granted and regulations were recently tightened. Does anyone have experience investing in purchasing property in Oahu and running it as an Airbnb and are able to share their thoughts on the process? Thanks in advance!
On Oahu, there are licenses (called NUCs or non-conforming use certificates) for legal rentals outside the resort zones in Waikiki, Turtle Bay and Ko Olina. These allow for rentals of less than 30 days. You can look at the link below but as I recall there are only about 900-1000 or so of these, and maybe only 15%(?) or so outside of Waikiki. So very limited numbers. There will supposedly be new B&B licenses given out this year from October. These will be restricted to owners living in the dwelling and renting out space, as well as restrictions on where the property is located.
I am a realtor, and also own a legal STR. For a client looking for an investment property, I would have a discussion about what they want from the property and then help them evaluate their options based on their budget. For example, if they want a place they would frequently use, with resort amenities nearby but with rental income secondary, they might look at the resort area of Ko Olina (7- or 30-day rentals depending on the property). If they just want cash flow, then they might be better off to buy a true STR in a resort area of Waikiki. Both of these options would assume Hawaii tourism recovers in a reasonable amount of time so that the visitors return.
Message me if you would like to chat about those or the general market.
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
6y
Since you already know about the hardships of having a legal vacation rental in Hawaii why are you still interested? Rules will not likely loosen and could only get worse over time.
Palo Alto, CA · Member since 2015 · 3 posts · 1 vote
6y
@John Underwood We frequently visit Hawaii and would like the option to use it while we are there but would also like to have the opportunity to generate some income from it during the times when we aren't there
Real Estate Agent · Mililani, HI · Member since 2017 · 11 posts · 4 votes
6y
Aloha Tinwin Wang,
If you fallow the rules it's not a big deal. Yes there are few existing permitted locations and licenses. So you can buy a property with an existing license or buy a property in the Hotel Zones that allow. It all depends on your budget and ROI. In the Kailua or Kahala are you are looking at a multi million dollar property if it has an existing license. If you stay in the Waikiki area you can get condos fairly reasonable. The condo Waikiki market is saturated with inventory currently. There are no (very few) tourists currently due to the Governors 14 day quarantine, and many are trying to sell. If you can weather the storm (not sure how long it's going to be) there could be opurtinituty. You can direct message me if you like some more info.
If you fallow the rules it's not a big deal. Yes there are few existing permitted locations and licenses. So you can buy a property with an existing license or buy a property in the Hotel Zones that allow. It all depends on your budget and ROI. In the Kailua or Kahala are you are looking at a multi million dollar property if it has an existing license. If you stay in the Waikiki area you can get condos fairly reasonable. The condo Waikiki market is saturated with inventory currently. There are no (very few) tourists currently due to the Governors 14 day quarantine, and many are trying to sell. If you can weather the storm (not sure how long it's going to be) there could be opurtinituty. You can direct message me if you like some more info.
Looks like a good time to find a motivated seller!
Rental Property Investor · Campbell, CA · Member since 2017 · 419 posts · 499 votes
6y
@Tinwin Wang, the best returns will be found in Kauai. Kauai also has the simplest rules and as long as you buy in the VDA zone (basically the tourist area) you’re legally allowed to short term rent it without permits or other hurdles.
I own and self manage several and prior to covid they were all cash cows. Hawaii has basically shut the door to tourism so business isn’t good, but it creates a good buying opportunity as many people want to walk away from their investments. When things reopen we project a huge influx of demand from people waiting to visit, so we just need to get through the quarantine restrictions.
I never pulled the trigger on any other islands because they numbers are far inferior. If you’re interested in Kauai shoot me a message and we can chat
I buy in areas where the numbers make sense and Hawaii does not really work. It could work as a STR in Hawaii but due to COVID the state is very conservative in opening. Again this is why I don't invest this way. Plus the hotel industry really finds the AirBNB stuff.
On Oahu, there are licenses (called NUCs or non-conforming use certificates) for legal rentals outside the resort zones in Waikiki, Turtle Bay and Ko Olina. These allow for rentals of less than 30 days. You can look at the link below but as I recall there are only about 900-1000 or so of these, and maybe only 15%(?) or so outside of Waikiki. So very limited numbers. There will supposedly be new B&B licenses given out this year from October. These will be restricted to owners living in the dwelling and renting out space, as well as restrictions on where the property is located.
I am a realtor, and also own a legal STR. For a client looking for an investment property, I would have a discussion about what they want from the property and then help them evaluate their options based on their budget. For example, if they want a place they would frequently use, with resort amenities nearby but with rental income secondary, they might look at the resort area of Ko Olina (7- or 30-day rentals depending on the property). If they just want cash flow, then they might be better off to buy a true STR in a resort area of Waikiki. Both of these options would assume Hawaii tourism recovers in a reasonable amount of time so that the visitors return.
Message me if you would like to chat about those or the general market.
I found this thread when searching for STR licensing requirements on Maui. The property we are looking at is in the tourist area, it is a condo-tel and it is a "platinum" property, $1050-1200/nightly. Both STR management companies have an office on-site and charge 35%. With comprehensive spreadsheeting, it's still cash flow positive by $40k-60k each year, even after all of the expensive fees, HOA, etc.
We will ask for two years of rental data prior to closing. We've been interviewing the STR management companies for a tailored contract that suits the property and our needs. We recently stayed and other units were almost completely occupied. Spoke to other guests and they were often saying how they rent there yearly, so it seems to have a solid guest return rate.
Question for seasoned Hawaii STR owners and RE pros familiar with the market, what are we missing here? Also, as GET is a transactional tax, does the buyer pay this upon purchase on RE?
GET is not a consideration. Instead there is a conveyance tax that the Seller would pay unless you agreed to something differently.
You did not mention property taxes, but take a look at those. Honolulu county has some significantly higher property tax rates for properties in resort areas, and Maui may have something similar.
Rental Property Investor · Bay Area · Member since 2014 · 49 posts · 5 votes
5y
How are the condos in Waikiki area? I’m also in the Bay Are and looking to see if buying a vacation rental in Waikiki can have cash flow positive or break even with 1 month a year self occupancy. I saw some condo building 1 bed goes for $400-$500k and can be rented for $5k/month on vrbo or captaincook. That is almost $3k cash before expenses per month. Are there more hidden costs am I not seeing? How is the occupancy of those condos in Waikiki pre covid? Thanks
I currently live in Honolulu and have done several development projects here.
Short-term rentals are restricted to resort districts, mainly Ko Olina and Waikiki. In 2019 the city past an ordinance to begin stricter enforcement of STRs due to local outcry. This year the city actually partnered with Airbnb so the platform will no longer allow illegal rentals.
Waikiki is a great area for STRs though. I know several people who do it with good cash flow. One consideration is condo maintenance fees can be rather high. Typically on the order of 500 to 900 per month.
My recommendation would be going the multifamily route. There are two to four unit properties available that you could purchase, keep one for yourself and use the others as long-term rentals. The cash flow is lower than an STR but you have easier management, no condo maintenance fees, and have greater flexibility on location. You also would be owning your own building and land which will appreciate faster than a condo.
A lower cost option would be buying a flex unit condo. Many buildings have apartments that are divided, typically a two bedroom and a one bedroom each with their own kitchen, but legally the same condo unit. You can short-term or long-term rent one of the units and use the other for yourself.
I'm a licensed agent here and have helped others purchase similar properties as well as purchase some for myself. If you have any questions or I'd like to discuss things further, feel free to reach out.