Investing in Hawaii

20 Replies

I am new and learning real estate. Can anyone tell me if you have invested in the state of Hawaiii? I found a condo unit in Maui, for sale by motivated owner, and it seems like a great deal.

Appreciate advise

Hi, Sylvia. I'm based in Honolulu - there are definitely people investing in Hawaii. Of course, "investing" means different things to different people.

What's the story of the condo in Maui? Current value vs asking price? And, more importantly, what's your exit strategy if you acquire it? Buy and hold? Flip?

Aloha Sylvia! We live in Denver and own a condo in Kihei, Maui. We bought ours in 2012 and have been very happy with the results. We rent ours out as a short term vacation rental. If you have any questions, please feel free to ask and I'll be happy to share our experiences with you.

@Jeremy Baker - I'd like to hear some details regarding your condo in Kihei. What was your purchase price, what are your HOA dues, do you rent it solely as a vacation rental, what's your NOI? I'm interested to hear more, if you don't mind :)

No problem @Vangie Gal , I'll be happy to share. We bought our condo in the Kihe Kai Nani complex in Kihei, right across the street from Kamaole II beach. We were lucky as prices were down and the couple we bought from was going through a divorce so they were very motivated to sell. We got the condo for $215K and didn't have to put any more $ into it immediately. Since then we've made some minor upgrades, paint, furniture, etc...

We do rent only as a vacation rental and have been 89 - 91% occupancy rate since we've own it. The first year we were just under $2K cash flow and last year we were just under $3K positive cash flow.

HOA dues are high there and ours is a shade under $500/month and includes everything but electric and phone. Our HOA is great and has a great track record.

We would love to invest in another vacation rental there, but prices have really jumped and would be tough to be cash flow positive unless you put down a large down payment or paid cash which we are not looking to do.

Feel free to ask anymore questions and I'll be happy to help any way I can.

@Jeremy Baker So after debt service, HOA (ouch $500! I recall having one in Oahu and it was creeping up also) and expenses, you're roughly getting $250 a month in positive cash flow?

If you don't mind me asking, how much are you renting your unit for? Are you renting it by the day/week/month, short term lease or combination? How are you getting your renters (VRBO, leasing agents, craigslist, marketing on your own)?

Who does the turnover cleaning, renting, check-in/check-out etc?

I'm assuming you also use the condo yourself? 89%-91% occupancy isn't bad.

@Vangie Gal , we rent our condo for $85/nt during the regular season (April - Nov.) and $125/nt during the high season (Dec - March). We rent short term, with 3 days being the shortest term. Most book about 10 - 14 days and we get a couple a yr that book a whole month.

We use VRBO and book 99% of our guests. We have an onsite property management that now has done two bookings for us. I'm not sure if we are just better at reaching renters or faster. They take care of everything else for us and are a great asset even though we do just about all of our bookings.

We have a housekeeper that cleans in between bookings and the property management does her scheduling.

We do use the condo ourselves and we go once a yr for 17-18 days and I count these days as vacant since we are not bringing in any rent these days. For tax reasons, we only use the condo this much.

This was more of a emotional purchase for us since we really love Maui and wanted a place there. Our goal was to rent it enough to pay half the mortgage. However, from day one we ran it like a business and is probably the reason why we have had the success we've experienced.

We may not be cash positive this year and if we are it will be thin. We got a new water heater and a new sleeper sofa which will eat into the cash flow this year, even though we will beat last year's occupancy rate.

Aloha & Welcome Sylvia! I am over on the island of Kauai. :)

Thank you all for your reply.

The listed property is actually a time share. It sells for $11,400 K, Marriott - Maui ocean club (by motivated seller). The owner rents at $850.00 a day , and up to 3,500 a week. 2 ba, 2 bd, 1200 sq ft. Transaction is done by independent timeshare company; buyer pays all closing and title fees. The owner pays 1,100 annual fees, which includes property management and maintenance fees. It seems that in such a beautiful place, there should be no problem with renting it throughout the year, although as Jeremy Baker mentions, there are the high and low seasons.

@Michael borger, thanks! I am interested in flipping property. Although, something like a condo, I would like to buy for emotional reasons as well as profitable to pay debt.

@ Ivy Takenaka, thank you! I will consider this.

Thank you!

@Sylvia Randal I did mention "high" and "low" seasons, but with Maui and most of Hawaii, there really is no "low" season. From Dec - March, there is more demand than compared to the rest of the year. Thus, nightly rent rates are higher Dec - March. It's also humpback whale season during that time which also is a huge attraction for Maui visitors.

Also, even though the weather is typically "better" in Maui during the summer (less rain), people typically want to visit Maui when their weather is worse where they live (winter).

We've had no issues booking "low" season months, but the "high" season months typically have more demand and book quicker. We've had all of the 2015 "high" season months booked since December!

You should have no problem booking your place at the Marriott and I'm assuming it's the one in Ka'anapali. I don't know how the time share split works, but that Marriott is new and really, really nice.

@jermey baker, That is good info. Thank you for sharing. Like I said, this is a motivated seller. Its seems like a good deal. My concern is also renting it out during the year, but seems like that will not be a problem.

I will do my due diligence on this property.

Thank you

@Jeremy Baker very exited and happy reading your successful story. Thanks for shearing.

Have a great day.

@Janie Suarez  , thank you and please feel free to ask me any questions that you may have.  We don't consider ourselves experts in any way, but we are always happy to share our experiences with others. 

@Jeremy Baker  

sounds like you have a hawaii success story! Congrats. I looked into hawaii last year and prices were just wayyy to high. Also it would be our first rental property and we assumed managing from the mainland would be tough (at least we think).

We do vacation there at least once or twice a year and though we could at least write off part of our trips, but the cash flow is so illusive there. Lots of speculators who bank on appreciation buy there.

If anyone who is currently looking at property in Hawaii ever come up with a deal I would be really interested in finding out more. Keep me in mind!

Hi @Tutti Patel, we have had success (well, success to us at least) with our condo and much of that I just have to chalk up to luck because we were very fortunate to buy our condo in 2012 from a couple that was very motivated to sell.  2014 was another great year for us, but since we had to replace a water heater, got a new sleeper sofa, and a couple of other small fixes, we will be just a little in the red this year.  

We knew going into this investment that it would be tough to bring in solid cash flow each year.  The thing about investing in Maui, and the rest of Hawaii, there are other ways to look at your investment then your normal buy and hold property in other places.  

We get to use this condo a couple weeks each year, so considering how much we paid before we bought this place, it's saving us over $2,000/yr just in Maui hotel accommodations.  This also may be the condo we retire to when that time comes, so by renting it out, it is basically is paying for itself.  These are two things we could never factor into a rental property here in Denver, so when we were looking at this condo to purchase, we used an entirely different set of guidelines than we would looking for positive cash flow properties here in Denver (which is currently no picnic either!).

Managing the property from the mainland is not as difficult as one would think and similar to any other out of area property on the mainland.  We have a great onsite PM company and we really love our housekeeper.  I'm a real hands on type person and don't like giving up control, so I can't say it's been 100% without any issues, but they do a great job for us and one of the main reasons why we have been successful with our Maui investment.  

Please feel free to send any questions my way and I'll be happy to answer them or go into more detail about our experience with the Maui market!

What are the numbers on it?

sure @Ali Boone  , be happy to share the #s.  Since we charge different monthly rates for Dec-March than we do the rest of the yr and since our electric bill really fluctuates depending on how our guests use the a/c (seriously, can be $57 or $167!), I'll put up our 2014 totals from last yr:

Mortgage: $12,288

HOA ($500/mth) $6,000

Utilities (electric and phone) $1881 (internet, water, etc.. covered by HOA)

Housekeeping $2660

Property Management $1,143

Maintenance $495

Items for the condo (biggest part was new sleeper sofa & new water heater) $2,234

VRBO subscription $349

CC Payment Transaction Fees $942 (lots of Canadian guests so we get dinged extra for those)

Insurance $312 (HOA covers insurance, we added H06, liability, flood and umbrella)

Prop Tax = $2,191 (HI actually has fairly low property tax!)

Total Expenses: $30,495

Rental Fee Income: $31,186

I was certain with the new water heater and pull out couch this yr it would eat our profits, but we did raise our rates $10/nt so maybe that help counteract those two large purchases some.  I'm sure I'm probably forgetting something on the expense list, but this is what I pulled from my accounting software so this should be very close.  

Now, we are lucky w/ our PM because they only charge us a small monthly office fee ($10) and only $5/nt for every booking we do ourselves and we do all of our own bookings through VRBO.  If our PM does a booking for us, and they've only done one in the last 3 yrs, they charge 22%.  

As you can see, even though we have a great occupancy rate, expenses add up very fast (we already have a $700 HOA special assessment this yr!) so it is very tough to get any positive cash flow in Maui, especially at current pricing unless you put down a very large down payment or go in all cash.

@Jeremy Baker

So you made $700 for the year? What was the purchase price?

@Sylvia Randal

What are the numbers on the one you found?

@Ali Boone you're correct, just about $700 profit total last year. We knew going into last year that we were getting a new sleeper sofa and water heater. Water heaters just don't last as long in that area and our PM and HOA both recommend replacing those every 5 yrs. The previous two years however, we profited just under $3K last year and just under $2K our first year which consisted of 8 1/2 months. With the special assessment ($700) this year, and using the past 3 yrs as a guide, we are forecasting (or hoping) to bring in $2,500 this year.

Our sales price on our 1bd/1bth condo was $215K in 2012 and we put down 20%.  Our condo is located in the Kihei Kai Nani complex in Kihei, Maui.  

I also should point out that we pay an extra $200/month on our mortgage payment (we pay bi-monthly so $100 each payment) and that's included in our mortgage payment # listed above.  We did this so that we can pay off the mortgage about 10 yrs early and save us a little over $57K in interest.  We are thinking about increasing this amount to try and pay it off in 10 yrs...or should I say have our guests pay it off in 10 years!

@Jeremy Baker

My favorite way to pay off a mortgage! :)

@Sylvia Randal  We'd be happy to help you and answer all our questions about investing in Hawaii! We have literally thousands of listings on all the islands. Call us today we can't wait to talk to you!

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