All Forum Posts by: Mike Neubauer

 Unless you already have a TVR permit, don't bother trying to get one.  There's a lot of restrictions and the county has all but said they aren't giving out any more short term rental permits.  The only option you might be able to get is a B&B permit. It's a little different than a TVR permit.  I think you need to live on property and be able to provide breakfast to your guests on the daily.  That one might be possible, but even still super tricky to actually get. 

Aloha Matt! 

Unfortunately, I don't know of any meetups this week. If I hear of something though, I'll reach out.  Aloha!

100% agree, @Nathan Gesner

Yep, all valid points @Nathan Gesner And those are all reasons why I usually don't recommend investing here for people unless they're already diversified enough and liquid enough that they can take the hits that will come in Hawaii. It's also why we have personally diversified from our main holdings in the STR space and into SFHs, MFs, Syndications, etc. There's a lot of people investing here that are over leveraging and over paying for things who probably shouldn't be... Aloha!

Thanks for your thoughts, @Nathan Gesner  I live on Maui and have done quite well with STRs over here.  Those restrictions and laws you're referencing are certainly not the full picture.  Hawai'i is the most restrictive state in the country and Maui is probably the most restrictive county in the state when it comes to short term rentals.  There are certainly reasons for this, which you've touched on.  I'm going to speak on behalf of Maui where I've lived most my life, but the other islands have similar issues.  For example:

The reason STRs are frowned upon are two fold.  One being the hotel industry in Hawaii has been so powerful for so long and they've got deep pockets.  They don't want their revenue to walk away.  They're very good at pushing the political landscape and blame Airbnbs for a lot.  That's fair, I get it.  I wouldn't want more competition either.  Two, we have a very desirable place to live.  Everyone wants to be here.  This is getting more pronounced as people are able to work from home easier and live where they want to live.  This of course pushes home prices up.  Our average home price is well over $1m right now.  WELL OVER.  Look at our job market.  We have no high paying jobs.  Our residents work at Starbucks, Snorkel Bob's, Walmart, etc.  The hotels pay OK, but not enough for a lender to approve a loan on a $1m house unless you are a director or GM.

My point here is that the desire for real estate in Hawaii is stronger than most other markets.  But unlike most other markets, we don't have a household income to match the home prices.  Right now you can't really buy anything for under $500,000.  Studio apartments sell for more than that. This leads to more and more locals complaining that they can't afford to live here.  After generations of their families living in Hawai'i they no longer can afford the costs associated with it and are being forced out.  They're frustrated. I get it. Locals reach out to the local government and the council members propose all kinds of bills and regulations in the hopes of making the locals happy.

Essentially what has happened here, is that in order to get a permit on a single family home for STR use, you need to meet a few criteria. One is you have to have owned the house for at least 5 years. This law went into effect about 4 years ago if I remember right. Next you'd have to apply for a Transient Vacation Rental permit. In order to get said permit you have to show that you have reached out to all your neighbors within 500 yards of your property (I might be wrong on the distance, I can't remember), tell them what you want to do and get approval from at least 70% of them. Then there has to be a permit available for you. The county here has broken down each area (Kihei, Wailea, Makena, Haiku, Lahaina, etc) and put aside a set amount of permits for each area. These permits are pretty much all gone, and are non transferable if you were to sell. Then if you are able to get through that gauntlet and a permit IS available you still need the county council to approve it. Good luck.

The short of that, is you're not going to get a permit on a single family home for STR purposes. It's just not going to happen. Has this slowed the pricing increase of SFH? Maybe a little. Not enough for the locals. So that leaves you with condos. That's your only real option if you want to STR a property on Maui. Of those condos, technically they're supposed to be in hotel zoned areas for use as a short term rental. However, most condos here are zoned apartment or multifamily. It's their HOAs that allow for short term rentals. There has been a bill that came to council to remove non-hotel zoned condos from being allowed to short term rent, but that got tabled.

If that were to have been approved, that would've shut down probably 70% of all Airbnbs on Maui.  The amount of taxes brought in from Airbnbs is ridiculous.  We pay 17.25% in hotel taxes here on Maui plus MUCH higher property taxes than an owner occupied home. If that bill would have passed the county would've probably gone bankrupt.  That bill will never pass, in my opinion.

So what does that leave us with? STR approved condos aren't going anywhere. What does Short term mean in Maui? Anything less than 180 days. A 2 bedroom STR condo in Maui right now will sell for around $1m. It's a steep price tag. However, I buy them. I'm a full time real estate investor, and I'm doing just fine. So can it be done? Yes, absolutely. Are there a lot of downsides here? YEP. Tread carefully. What's the upside? Well, appreciation is better than just about anywhere in the country. Nightly rents continue to rise. It's not a market for beginner investors, that's for sure. It's a sophisticated market for investors that maybe don't need the cash flow right now, but over time they will grow their net worth significantly.

Sorry for the long post, but I thought maybe you'd want to hear a local perspective and a few more reasons why things are the way they are. Have a great day, and if anyone out there does own a Maui STR condo and is ready to sell, reach out to me. I'm still buying... ;-)

Aloha!

Aloha @Jason Gilmore,

Reach out when you get on Maui. We tend to do a lot of last minute stuff out here, and May is a LONG time away.. hahaha... I see you're from Gilbert, I have a SFR there as well and am always looking for more in that area. Let's connect!

I'm flying back in Monday afternoon, I'm going to try to make it!  Thanks Zasha!

Aloha Chris,

Welcome to Maui.  We have quite a few people from Maui on here.  Iʻll keep your info on hand and would love to connect with you further as well.  Good luck on the real estate license.  Aloha!

 Aloha Ron,

These are very good questions, and as a local investor and resident of Maui for most of my life, the challenges are real.  Cash flow is still possible with STRs, but it is a lot more compressed.  LTRs forget it.  If cash flow is your objective, this is not the market.  Hawaii is a market for sophisticated investors who aren't dependent on cash flow.  Like California, Phoenix, Boise, Salt Lake, etc. we have massive appreciation.  For example, a condo I bought for $500k in 2018 is now selling at $1.2m.  Cash flow is the cherry on top, but a lot of investors are buying it because of the incredible appreciation that these properties historically have achieved.  There was a time when they cash flowed really well too, but those days are mostly behind us.  They can still cash flow if you are willing to self manage, but if you go the traditional route of having a property management company, you'll likely be negative every month.  Typical property management companies take about 25% for STRs.  Some more, some less, but if you do it yourself and you are committed to it, you can most of the time get better nightly rates and occupancy and therefore cash flow.

If you are interested in talking more, shoot me a DM, I'm happy to share what I know.  

Good luck and Aloha @Ron Singh

For sure, @Scott Austin.  I get it man. There are some big considerations when moving out here to Maui.  If you are wanting a house with an 'ohana, there are a couple areas you can look at.  North Kihei will be cheaper than South Kihei, but you'll be looking at probably around $1m or more and it won't likely be very big or very nice. South Kihei (south of Alanui ke Ali'i) with an 'ohana you'll be looking at $1.5m+.  The best bang for your buck would likely be Makawao, Pukalani, Haiku or maybe Kula, Kahului or Wailuku.  

When you're looking at schools though, it'll depend on the age of your children and if they're going to go to public or private schools.  Kihei has been waiting on their high school for 30+ years.  They just broke ground on it, but it'll likely be another 5-10 years before it's even ready.  Right now a lot of Kihei kids go to Kihei Charter which is in a new building and is a pretty good school.  Others go to Maui High which is OK, but the better option would likely be Baldwin.  Kids from Kihei can get an exception to go to Baldwin if they're into drama and you'd need to get a GE (geographical exemption).  Baldwin is pretty good.  Upcountry there is King Kekeaulike HS which is pretty good too, and services all of upcountry areas, I believe. 

Again, if you want to wala'au (talk story), I'm happy to jump on a call with you and go over some pros and cons to each of the areas and some things you might want to consider.