STVR - Waikiki or Maui?

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We're just back from a few days scouting in Waikiki and are about to give up. A $500k 1 bedroom condo would generate approx. $40k/year, and after tax, PM, HOAs and loan, cashflow is negative. I know some of you are having much better luck in Maui. Is it because you purchased several years back? Would you do it in today's market? In Waikiki? In Maui? Am I missing something?

My knowledge is limited to Waikiki (Oahu), so can’t comment which is better.  But to expect an above-average success, you are in a better position with a better hand to start.

Example: self-manage experience (save PM fee), all-cash purchase (no loan payment) or enough income or asset to supplement your cash flow when you start out with first one with empty calendar.  All estimate and assumptions does not stay true forever.

There are condos in Waikiki popular with Airbnb but very few “sleeper”. You need to sort out what you are looking for and commit to your plan.

Be mindful for HOA increase, reserve and special assessment. Understand property tax rate and operate the best method that suit you. Best of luck!

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Aloha Peter,

Great question. If first trying to decide between Oahu and Maui, I point to this statistic to my clients who are having similar conversations: "Oahu sees 47% of visitation to Hawaii but only 28% of home and vacation rental activity according to JLL’s survey of visitors, which is deemed representative in that Oahu has the most established hotel stock of the islands." 

In other words, although Oahu gets nearly double the number of visitors of other islands, they trail in the number of VR rentals because of the heavy saturation of hotel options. That is not the case for Maui. Maui sees 27% of total state visitation with 28% staying in a VR. Not as much of a drop off as with Oahu.

To your second question about making money. It isn't easy, regardless of the island, to get a positive cash flow. That isn't to say its not possible because it is, even if you've gotten into the market the past six months. We have a lot of VR condo options; however, not all produce a decent positive cashflow, if at all. That being said, there are some complexes that actually do well. Need to identify the right places and, if need be, wait for the right opportunity.

Side note: Oahu is coming down on VRs so I'd look for options that are zoned correctly. I was looking at one in Waikiki that had proper zoning, which is rare. It didn't work out for me, but if you'd like I can PM you my agents info. She also has a property management company that can help manage if you need.

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I heard Maui just passed a requirement that properties be owned for 5 years prior to being eligible to even apply for the waiting line for one of 88 total permits available. That 88 is not per year... Total. Anyone else get that same info?

@Rob Hewitt Rob, the ordinance to which you are referring applies only to residential properties where a buyer wants to do legal short term/vacation rentals. The buyer now has to own the residential property for five years before then can apply for the permit.

Is has zero applicability to condos.

Aloha If your looking on Oahu check out Executive Center LH are about $200k with fee available for about $150k. Some of the units are managed by Aston Hotel don't have to deal with airbnb. They get a lot of business traffic so year round it stays booked. I was looking at these for a buyer to live in full time, It's better for investor in my opinion. PM me and I can send you the listing

@Misa Kataoka many thanks for your perspective. I agree self manage and all cash will work but still need local help for cleaning and maintenance, and I don't want burn precious cash and forego tax benefits. You are also very right that HOAs are on the way up, and that plumbing, for instance is often old and rusty, which means special assessments are potentially around the corner... nothing is easy but mucho adverse trade winds in Oahu I detect :)

@Account Closed ahaha I laughed at your "fake news". Not fake but probably beginners bad luck. I looked at the Ilikai for instance, ocean view units are listed around $700k. Probably looking in the wrong place. Other buildings 1BD units are still 400k$ to 600k$. What would a Hawaiian Monarch unit generate in top line revenue per annum according to you?

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@Account Closed These numbers are closer to making sense even with 14.75% tax plus property tax and relatively high HOAs at the Hawaiian Monarch (per sqft). I get conflicting info about occupancy rate. I suppose it varies greatly by price and value for money but the more expensive properties I have looked at (Ilikai) seem to get approx. 70%-75% occupancy (for city view, not ocean view). Re self managed AirBnB, I think it would be a challenge remotely. What is your experience? What do you call a co-host?

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It was a short term rental, i.e airbnb. I am no loner short term renting. 

You can A) hire a company to manage everything. From booking, greeting/ letting people in, arranging cleaning, maintenance, etc. They will even book chefs or yoga instructors if needed. They take 20% of the booking. You make sure that your day rate covers the 20% and tack on a cleaning fee. They also manage across sites; airbnb, vrbo, homeaway etc. Or B) you can use a co-host as stated above, which I believe is strictly airbnb (dont quote me on that). It all pretty much shakes out the same in terms of cost...  

I prefer management companies because its a one stop shop. They not only handle the bookings and ins and outs of the daily rental, but booking extra amenities, as well as handling the maintenance of the place. Whether an emergency plumber is needed or noticing that a window is cracked, they take the initiative to fix it. The company I worked with in HI would also give me a heads up if something would probably need to be or should be replaced in the next few months, which was nice. You can set a monetary limit as to which things they can just go ahead and repair and anything over they need your approval on before moving forward.

Im not sure what co-hosts do other than handle the process of a booking and emergancies. I looked them up a while back, but didn't go that way. 

You can always call management companies and ask what they take care of and what they charge. And everything is negotiable. 

Hope that helps.

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Hi Peter! My wife and I host and co-host Airbnb properties in Waikiki, and many of them do very well and provide a good return. My brother in law recently purchased a property for under 400k and it is on paces to bring in 45-55k a year (minus the expenses you mentioned). That’s a pretty good return for Hawaii, especially when considering the appreciation over time.

The 2 main things in my opinion is you have to know what buildings to look for (buildings that legally allow STRs, and have high occupancy rates), and you also have to know how to run your Airbnb business correctly to be capitalizing on your returns (attractive photos, great guest communication, proper amenities provided, and most important of all-5 star reviews)

When both these are done correctly, you can have a very high cash flow, a property that you can almost be sure will appreciate well over time, and a vacation spot in Waikiki for your family to enjoy! It’s a pretty sweet deal!

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