How I survived the Airbnb Wipeout in Hawai’i

When a friend tells you they are living in their car, you never expect your eyes are about to be opened to a thriving business venture.

Instead of me offering sage advice - I had my notebook out and I began frantically taking notes.

So, as it turns out, my friend was subletting his apartment a couple of nights a week. Mind you, we lived in Hawai’i and his apartment was in the popular tourist attraction of Waikiki and making $250+ a week!

Alas, all good things come to an end, after 18 months, his landlord found out and he was kicked out. It wasn’t the most honest way to make a buck but it definitely took some balls!

This was right before AirBnb took off.  But, my mind was already racing. How can I emulate what he did, legally? If I don’t act now, would I regret it and miss a great opportunity?

Not long after, I hired a realtor and we started searching for condos that were zoned for vacation rentals. There were not a lot out there, and it was tough getting any bank to lend me money for this type of investment. So I decided to take the cash route. While Waikiki was my first choice, I really liked a condo in downtown. So I bought it cash for $335k.

I was excited to get my first Airbnb up and running. This building already had a hotel operating in it. It had security, a pool, and a parking space. It was in a prime location within walking distance to everything in the city. So I knew if it wasn't a tourist staying there, it would be a business traveler or worst case a long-term tenant. I set up my entire profile with my photos, description, bank info, etc. I followed all my buddies advice on how to make this thing a money machine.

I also hired a cleaner off of Craigslist and charged her fee over to the guest for $75. If something broke, I hired a contractor or did the work myself. Not even 48 hours passed before I got an alert on my phone for my first booking. Boom! Just like that, I was making money. I really couldn't believe how easy it was. I set my prices competitively for the first year at $80/night just to build my reputation and become a Superhost. Eventually I upped it to $120-$140 per night depending on the demand and season. This gave me a nice $40k per year average passive gross income.

Things were great for 4 1/2 years, but just as all waves come crashing down, so too did AirBnB’s heyday in the islands.

In August of 2019, without any decent forewarning, the Governor suddenly announced that Airbnb's are no longer legal unless they meet a list of very strict conditions. That was a sudden surprise!

Almost overnight, my investment strategy changed. My short-term rental morphed into an extended stay rental just to avoid the $10k per day penalty. Throwing more gas in the fire, COVID hit months later and basically put the tourist industry on life support. Hotels were at 20% occupancy and vacation hosts were scrambling just to survive. 

Like many in the hosting business - we learned a harsh reality - while cashing in on innovation is key in real estate - so is diversification and adaptation. I’m fortunate to have struck gold once, and I’m still learning to be self-sustaining in this ever evolving business. After moving to New England for more opportunity, I've realized that you don't have to stick to just one thing when it comes to real estate. Having purchased a longterm hold multi-family and starting a venture in flipping, there is never a shortage of opportunities. Like Bruce Lee once said, water takes shape of whatever it encounters. So be like water, my friends.