'If' I have the opportunity to work remotely for a year, can I buy a Primary residence in Hawaii with a future goal of turning it into a Vacation home and/or STR? Why/why not?
Real Estate Agent · Fort Walton Beach, FL · Member since 2018 · 143 posts · 114 votes
5y
Aloha from Oahu! Cashflow is a really tough goal to have on the islands, especially Oahu. However, it is definitely still possible. Of course, it's always going to depend on your mortgage which varies greatly depending on how the property was financed, but your best bet is probably going to be a property with multiple units, or a property with an "Ohana Unit" as we call them here in Hawaii. Think of these as "mother-in-law" units. Using a real current example on one of my investments, the home in the ~$750K range leaves me with an average mortgage of about~$3500. The 3/1 main home and has a 2/1 Ohana unit downstairs, renting for $2750 and $2000 respectively, cash flowing this property after all expenses are paid. To be fair, these kinds of deals have been much more difficult to come by in the last year and a half with the recent increase in demand. Nonetheless - you CAN cashflow on Oahu, you just have to be creative! Shoot me a DM if you'd like to discuss more.
Real Estate Agent · Fort Walton Beach, FL · Member since 2018 · 143 posts · 114 votes
5y
Aloha from Oahu! Cashflow is a really tough goal to have on the islands, especially Oahu. However, it is definitely still possible. Of course, it's always going to depend on your mortgage which varies greatly depending on how the property was financed, but your best bet is probably going to be a property with multiple units, or a property with an "Ohana Unit" as we call them here in Hawaii. Think of these as "mother-in-law" units. Using a real current example on one of my investments, the home in the ~$750K range leaves me with an average mortgage of about~$3500. The 3/1 main home and has a 2/1 Ohana unit downstairs, renting for $2750 and $2000 respectively, cash flowing this property after all expenses are paid. To be fair, these kinds of deals have been much more difficult to come by in the last year and a half with the recent increase in demand. Nonetheless - you CAN cashflow on Oahu, you just have to be creative! Shoot me a DM if you'd like to discuss more.
Real Estate Broker · Kaneohe, HI · Member since 2020 · 193 posts · 163 votes
5y
Hi Prashanth, I agree with Lake's answer but wanted to contribute some about STR's - my answer deals mainly with Oahu as each county in Hawaii differs somewhat on how they handle STR's.
For O'ahu, vast majority of legal STR's are in the hotel district of Waikiki. These are legal due to the zoning. There are properties outside of Waikiki that can be legally used at STR's and these properties have non-conforming use permits (NUC's). Last I checked there were about 800 NUCs on O'ahu. NUC's are transferable and have to be renewed county every 2 years. If they are not renewed, they expire and it is impossible to reactivate.
For Waikiki condo STR's, it is possible for them to cash flow but the returns usually aren't very good. It usually makes the most sense for an owner who wants to offset some of their costs while owning real estate in Hawaii.
Also, there is a somewhat "workaround" to the STR regulations, and that is doing 30 day rentals which can be quite lucrative. I have client who recently bought an oceanfront home on the Windward side of O'ahu for $916K. They will starting doing rentals next month and the property manager expects them to gross $7-9K a month. This property manager also manages a home in Kailua area - walking distance to the beach and 30 day rate is $12k. Lease rates have skyrocketed this year as there is very strong demand - obviously no guarantee if rates will stay high but some people are making money right now.
If you have any other questions, I'm happy to answer them.
Rehabber · San Diego, CA · Member since 2010 · 500 posts · 208 votes
5y
See if you can buy something on favorable terms - my friend and I are purchasing a condo downtown on an 11-year note. It's not something you'd consider a vacation home, but creative financing is one way to help make properties cash flow in an otherwise expensive market.