Changing restrictions impact on occupancy rates
My brother and I are looking to invest in a rental property in Waikiki. It’s a first property for both of us, and we’ve only recently started exploring the market. I’m looking for some advice from those who have been around this market a bit longer, particularly concerning expectations following recent regulatory changes. On one hand, I could see how funneling nearly all visitors to the island toward the Waikiki area could help rentals in the area. But I’m not sure if this could be a sign of further changes to come in an effort to funnel tourist traffic into the resorts. What is the general sentiment of those who have been around the market for awhile regarding the impact of these regulatory changes on long term rental outlook? Thanks in advance!
Short term or long term rental?
Short term!
I believe some of the legal shorter term rentals who have been able to make it work with 30-day shorter term rentals will find that their assets don't produce the income needed to pay for the expenses (HOA, debt, taxes, insurance) of holding the asset. The increased regulation might drive some of the illegal STRs out of the market as the risk/reward margin starts to narrow. I purchased a legal STR in Waikiki late last year with this in mind. So far so good but at the time I was able to finance the unit with a 15-year fixed @ 2.75% which would be impossible now. If you are looking for a legal STR there are a hand full of properties that may pencil out for you but be sure to check if the property requires in-house management and at what %. How the unit is managed can make or break the chances of the investment being profitable as a STR. For example, during the height of the pandemic there were some Trump Hotel units selling at a pretty steep discount but the management fees killed the deal - at least for me. Best of luck!