All Forum Posts by: Justin Sheley

I think a lot of this is market and property specific. Not that you don't want quality in every STR but you need to know where you fall on the spectrum of budget stays up to luxury housing.

Regardless with the growth in STR I think its important to theme and create spaces that can stop the scroll through photographs. If you don't have a clear vision for the property on how to do this, then a designer is probably well worth the investment.

On the more practical side, we have found it difficult to find quality sleeper sofas, and have decided to remove them when given the chance. Instead I would look to add additional sleeping options with either a murphy bed or built in bed nook, so you can accommodate full size mattresses. Much better guest experience than the pull our sofas in our opinion.

@Loren Clive I think that makes perfect sense and you've put into works what I've been thinking through with the LH potential. There seems to be a breaking point between the cost to acquire and run a LH compared to the acquisition cost of a fee simple.

For example there is currently a LH listed in Princeville, Kauai for $295k. There are 15 years left on the lease and there are fee simple condos at the same association selling for 1.2-1.8M.

I estimate this 2bd/2ba unit would bring in 109-120k gross per year.

With a down payment of 59k the monthly payment, including HOA, lease fee, insurance, and taxes would be roughly $7094/mo.

This would result in a net cashflow of 24-38k a year depending on how those nightly rates and occupancy pans out. So a cash on cash return of 41-66%.

I know there isn't a long term aspect and no appreciation, but am I missing something in the appeal of owning a operating a unit like this for the next 15 years?

Our 1 bedroom unit in Princeville is currently operating at 95% occupancy and is on track to outperform the projections based on airdna averages by 20k this year, so I also feel there is upside to performing even better than the numbers I laid out above, just feel like I may be looking at something in the wrong light.

 We certainly tried to brings different updated style to the island without totally abandoning what makes Kauai special. We ended up using a local artist to do a custom sign, mural, and hand painted wallpaper of local landmarks, so we really focused on some of the sights and colors you'd experience on the North Shore of the island.

@Anja Schaer When you referred to your marketing budget was this primarily to get your co-hosting business in front of owners or are you talking about marketing to guests?

@Jacob Moncur, What you mentioned about treating it like a business venture instead of a real estate investment is exactly how I've been trying to think of it. It does seem that even if the goal is strictly short term cashflow, its hard to come by with the lease fees on top of HOA and any financing.

Still just intriguing, I'm working on my second fee simple purchase, but we are also looking to create cashflow and build a small co-hosting business focusing on the island to supplement income. That's what lead me to the thought of acquiring a leasehold if I can keep the initial investment low, that way it could just be one more opportunity to grow our experience on the island, and also utilize as a personal use asset.

Has there been any talk at Kiahuna Plantation about the potential to purchase the fee simple down the road?

Wondering if anyone on here is successfully purchasing, managing, and profiting from leasehold properties in Hawaii, particularly Kauai. If so, how are you choosing to finance them? We have one fee simple property in Kauai and are working on closing on a second fee simple condo. But I'm continually intrigued by the value of the leasehold properties, but just have such a hard time wrapping my head around if it would be worth it to invest in a leasehold with 15-20 years left.

@Devin Dang Love the midcentury and natural tones throughout your property. I agree with you that it provides a different level of class to the space. We just made a similar decision with our rental in Kauai, when most properties were white and blue and "beach" themed, we really went with the moody color scheme and played off the natural wood tones and mountains greens. To me your design seems much more timeless and may potentially even attract a guest avatar that is more likely to take good care of your home. Congrats on the great property, love it!

We have found Hospitable very affordable and easy to use at a small scale. I definitely understand keeping costs low, but there certainly is some peace of mind of developing the systems early and growing into them. We were using Guesty lite for awhile, but when we established our direct booking site we were required to upgrade to Guesty Pro which was just way to expensive for us with just two properties at the moment.

I'd echo what has been previously mentioned, when we made our purchase in Kauai last year I found it necessary to go with a much higher down payment in order to cashflow. However, my perspective after 12 years as a LTR investor in a midwestern market (Rockford, IL), is that the decision to purchase in Hawaii is rarely about the ROI. If you want a slice of heaven on earth, benefit from the appreciation, and cash flow in the meantime it can definitely be accomplished. And to this point the high occupancy rates, and quality of guests make this a very desirable place to run an STR. I once bought a Rockford home for 11k, which just had insane margins on paper, but depending on where you are in your real estate journey I don't believe you'd ever regret investing on any of the islands. Just be smart about zoning, and build a good local team and you'll do well.

@David Marks 

I am also looking to break into the co-hosting space after 12 year of long term rental management. We own in Kauai and have found that we love the hospitality aspect of the STR space compared to LTR. I do find it interesting that the #1 and #2 discussion contributors immediately provided negative feedback about getting into the industry. I'm not sure what your aspirations are as far as size, but my impression of the hospitality industry that there is an opportunity for small operators to fill a need in the space and provide a more focused level of care without as much overhead, which allows the cost to stay reasonable. When I see management companies in Hawaii charging 55% of gross rent, its clear to me that these owners are not necessarily viewing these properties as investments as much as just secondary homes they want to offset the cost on and trust they are being taken care of. Since we are actively looking to buy in Kauai I've had the chance to look at alot of the performance numbers on these properties being ran by large vacation rental companies and across the board they are much lower than the privately ran homes. I'm hoping to ease the pain point of design and repair on the island while providing a level of care that I give to my own properties there. The current challenge is exactly how to get myself in front of these owners, and build the trust necessary to land them as clients.

How is your lead generation going, and are you finding a similar need for better management in your market?